RUSSELL BEDFORD NEWS
Business World September 2021 has just been released
Russell Bedford has released the September edition of its biannual magazine, Business World. Articles in the latest edition include an overview of doing business in Quebec; a look at why Northern Ireland is an interesting opportunity for international businesses; new EU e-commerce VAT schemes; ESG and its importance to the agricultural market; examples of possible impacts of COVID-19 on intercompany transactions; tax obligations for franchisees; and managing wealth with a Private Trust Company.
Shajani LLP joins Russell Bedford as a member firm in Alberta, Canada
Russell Bedford has announced the appointment of Shajani LLP as its member firm in Alberta, Canada. Operating from offices in Calgary, Edmonton and Red Deer, the firm serves some 750 clients, including families, private individuals and SMEs, and also multinational enterprises that have compliance requirements outside of Canada. Armando Iannuzzi, Russell Bedford global board director for North America, said: “I’m very pleased to welcome Shajani LLP as our new member firm in Alberta, Canada. This new addition is testament to the consistent efforts made towards advancing Russell Bedford’s coverage in North America, while enhancing the breadth of services available to clients of our collective firms throughout the region.”
Encinas joins Russell Bedford in Bolivia
Russell Bedford has announced the appointment of Encinas Auditores y Consultores as its member firm in Bolivia. The two-partner firm based in Santa Cruz, the largest city and the most important business centre in Bolivia, is ranked among the top four public accounting and audit firms in the South American country. Russell Bedford CEO, Stephen Hamlet, said: “The appointment of Encinas is a fantastic development for our Latin American region. A top four firm, Encinas brings an abundance of experience and expertise to the network, while bolstering Russell Bedford’s strengthening presence in the region.”
Nobel laureate Stiglitz says global tax plan should aim higher
Nobel economics prize laureate Joseph Stiglitz has praised international support for a global tax on corporations but said the minimum rate agreed by governments is too low. "It's a fantastic initiative," Stiglitz said on the sidelines of the Ambrosetti Forum, an economics conference next to Lake Como in Cernobbio, Italy, about the plan backed by over 130 countries to introduce a tax floor of at least 15% in order to discourage competition to attract multinational companies wanting to minimise their tax bills. "The system of multinationals' taxation, which is over 100 years old, is not suited for a 21st century globalised economy," he said, observing that 15% is "too low," and adding "I think it should be 25%, but politics is the art of compromise. I hope they do at least 20%." Meanwhile, France will do its best to reach a deal at the next G20 meeting on the technical parameters for global tax reform, French Finance Minister Bruno Le Maire has said. Asked whether he was confident that the new US administration could win the approval of Congress on the global tax reform in the short term, Mr. Le Maire said that USTreasury head Janet Yellen had showed optimism on the issue.
Business Times (Singapore) Reuters
OECD's Cormann says global corporate tax plan is progressing well
OECD Secretary-General Mathias Cormann, Australia’s former finance minister, has told the ANU Crawford Leadership Forum in Canberra that work on a global plan to make multinationals pay their fair share of tax is progressing and it is hoped to be presented to leaders at the G20 summit in Rome at the end of October. “It is very important we ensure that large multinational digital businesses - and all large businesses in fact - pay their fair share of tax in the markets in which they operate and generate their profits,” Mr Cormann said in a video message to the forum, noting that current outdated tax rules had allowed many large multinationals to “earn significant income in market jurisdictions around the world without having to pay any or very little corporate income tax there.”
Macron wants Ireland to join global deal on tax
French President Emmanuel Macron has said it would make sense for the Republic of Ireland to join a global deal on setting a minimum corporate tax. “What our ministers, our technicians and OECD teams managed to deliver makes sense,” Macron said at a press conference in Dublin. “It is up to us to build a common path and a smart move, which would make sense for Ireland, and for the euro-zone member states to deliver all together. So I’m confident, but I’m not putting pressure.” France is an advocate of the overhaul, but Ireland has so far resisted agreeing to a deal on a global minimum rate. Irish Prime Minister Micheal Martin, speaking alongside Macron, said: “There are significant challenges for us, in respect of this process, but be in no doubt that we will be engaging constructively in the process.”
Bloomberg Politico Irish Times
Telcos want exemption from proposed global tax rules
Lobby groups representing telecommunications operators say that their members should be exempt from planned global tax rules that seek to prevent multinational companies legally avoiding tax by conducting online activities in low-tax jurisdictions. The GSM Association, the London-headquartered industry organisation that represents the interests of mobile network operators worldwide, and the European Telecommunications Network Operators' Association, say the OECD proposals do not take into consideration what they contend are the special circumstances of telcos. "Over and above other infrastructure providers, the telecommunications industry pays extensive unilateral Telecommunications Service Taxes (TSTs) in many markets, in addition to corporation income taxes, VAT and spectrum license fees," the organisations' joint petition states, observing that while the OECD plan would remove digital services taxes, it does not propose removing TSTs.
Shipping trade groups release global carbon tax plan
The International Chamber of Shipping, which represents more than 80% of the world’s merchant fleet, has submitted a plan to the International Maritime Organization for a charge on carbon dioxide emitted by vessels. The proposed levy would be linked to CO2 emissions and based on mandatory contributions from ships exceeding 5,000 gross tonnage; it would be used to close the price gap between zero-carbon and conventional fuels, and would also be used to “deploy the bunkering infrastructure required in ports throughout the world to supply fuels such as hydrogen and ammonia.”
House Democrats float 26.5% corporate tax rate
Senior House Democrats are coalescing around a draft plan that could raise as much as $2.9tn to pay for most of President Joe Biden’s sweeping expansion of the social safety net by increasing taxes on the wealthiest corporations and individuals. The preliminary proposal would see the corporate rate rise to 26.5%, with the top rate for individuals boosted to 39.6%, a 3% surtax on people making more than $5m, and the top capital gains rate lifted to 28.8% from 23.8%. The plans, aimed for a Ways and Means Committee vote later this week, will face challenges as Democrats try to determine how far they are willing to go in reversing the 2017 tax cuts and imposing stiffer burdens on corporations and high-income households. Some Senate Democrats, including Joe Manchin of West Virginia and Mark Warner of Virginia, have said they don’t want to raise the corporate tax rate above 25% from its current 21%. The Biden administration’s capital-gains plan has been facing sustained opposition from rural Democrats. The administration plan would impose taxes on unrealized gains at death, with a $1m per-person exemption and special rules to protect farms and family owned businesses.
New York Times Politico Reuters Wall Street Journal
Retail group backs minimum corporate tax
The Retail Industry Leaders Association (RILA) has urged Democratic lawmakers to implement a minimum corporate tax and boost tax enforcement in their proposed $3.5tn spending plan. The trade association, which represents retail giants such as Target, Home Depot and Walgreens, has written to congressional leaders urging them “to ensure that all companies pay at least a minimum tax before an increase in the corporate tax rate is considered.” The group also asked lawmakers to provide the IRS with more resources to go after tax evaders. “The Biden-Harris agenda spoke a lot about tax fairness and making sure that everybody pays their fair share. A corporate tax increase alone doesn’t achieve that,” said Hana Greenberg, RILA’s recently hired vice president of tax. “There’s corporations that, no matter what you make the corporate tax rate, will not pay taxes, and there needs to be something to make sure that everybody is contributing what they need to for our country to run,” she added. The National Retail Federation, another lobbying group representing retailers, has declined to endorse tax changes, reiterating its opposition to Democrats’ spending package.
Hedge fund execs to pay billions in tax settlement
Current and former executives at a New York hedge fund will personally pay as much as $7bn in back taxes, interest and penalties to settle a long-running dispute with the IRS - a tax settlement that may be the largest in history. Among those in the settlement are Renaissance Technologies founder and quantitative investing pioneer James Simons, and Robert Mercer, a former Renaissance executive whose advocacy for conservative causes included helping to found Cambridge Analytica, the firm found to have harvested Facebook data without user consent to assist political campaigns. The dispute relates to moves the firm’s key Medallion fund took between 2005 and 2015 to convert short-term trading gains into long-term profits. Instead of buying thousands of stocks, Medallion purchased an option representing the returns of those same shares. The firm directed the banks how to trade those underlying shares. The basket options provided a number of benefits, such as allowing Medallion to borrow huge amounts of money to invest in the market. However, they also effectively converted short-term gains from the stocks in question into long-term profits, which the IRS argued should be taxed at a higher rate.
New York Times US News and World Report Wall Street Journal
Warren to propose minimum tax on nation's richest firms
Sen. Elizabeth Warren (D-MA) is planning to put forward a minimum tax on the profits of the nation’s richest companies, regardless of what they say they owe the government, as part of Democrats’ $3.5tn economic and social-policy package. The Real Corporate Profits Tax Act would require the most profitable companies to pay a 7% tax on the earnings they report to investors, known as their annual book value, above $100m. By taxing the earnings reported to investors, rather than the IRS, Democrats would be hitting earnings that companies like to maximize, not the earnings they try hard to diminish for tax purposes. An economic analysis from Gabriel Zucman and Emmanuel Saez, economic professors at the University of California, Berkeley, estimated that about 1,300 public corporations would be impacted by the policy, generating close to $700bn between 2023 and 2032.
Business Insider New York Times Washington Times
New York widens scope of tax audits targeting remote workers
New York tax authorities are targeting individuals who claim to have left the state during the COVID-19 pandemic, part of an unprecedented effort to recoup lost income-tax revenue. State tax authorities have sent more than 149,000 audit notices, including automatically computerized letters known as desk audits, to taxpayers since January 1st according to the New York Tax and Finance Department. “The state is being very aggressive in going after people who are claiming to have moved out of New York,” said Alan Goldenberg, a state and local tax principal at Anchin, Block & Anchin, who has been receiving “multiple notices daily” from clients who are getting letters. “It’s amazing the volume of letters we’ve been receiving.” The triggering events for such audits appear to be if a taxpayer indicated they only lived in the state part of the year, or allocated less income to New York than prior years. James Gazzale, a spokesman for the New York Tax Department, declined to comment on the state’s current audit strategy but said the volume of letters being deployed by state authorities is consistent on year-over-year basis.
White House withholds support for Democratic carbon border tax
The White House is withholding support for a Democratic proposal to impose a pollution tax on imports from China and other countries, casting doubt on whether Democrats will be able to deploy what environmentalists consider one of the greatest weapons to tackle global climate change in a massive spending bill this year. The White House is concerned the Democrats' proposal, spearheaded by Sen. Chris Coons (D-DE), will raise prices on a host of consumer goods, from cars to appliances, and conflict with President Biden's pledge not to tax any American earning less than $400,000 per year. In the US congressional proposal, companies that want to sell concrete, steel, aluminum or other commodities into the United States would be required to pay a tariff if their country imposes fewer carbon-cutting regulations than American companies. The White House's concerns about a carbon border tax hitting less wealthy Americans are valid if foreign companies raise prices in response to protect profits, said David Weisbach, a professor at the University of Chicago Law School and an expert in carbon border tariffs.
Pressure grows on Congress to regulate tax preparers
Some tax industry professionals are ramping up their calls for Congress to pass a bill in upcoming reconciliation legislation aimed at holding professional tax preparers to uniform standards. The bipartisan Taxpayer Protection and Preparer Proficiency Act was reintroduced last month by Reps. Jimmy Panetta (D-CA) and Tom Rice (R-SC) and, if enacted, would give the Treasury the authority to regulate paid tax return preparers. It would also authorize the IRS to revoke a person’s Preparer Tax Identification Number, or PTIN, for fraudulence or incompetence, and reinstitute a paid tax preparer regulatory program that the IRS put in place in 2011. “I think there’s a window here,” said Jeff Trinca, legislative counsel at the National Association of Enrolled Agents, of the reconciliation process. One reason for that is the Joint Committee on Taxation estimates that the bill could help save money, he said. Others argue that it would be of great benefit to consumers. Kathy Pickering, chief tax officer at H&R Block, said “The pandemic has catalyzed a new wave of fraud and scams and Americans need to know that they can trust the professionals that they’re working with.”
IRS chief: More transparent bank data can fight tax evasion
The head of the IRS has written to Sen. Elizabeth Warren (D-MA) to express his belief that more rigorous disclosures from the nation’s banks could help fix a yawning tax gap and recoup billions in owed revenues. Commissioner Charles Rettig argued that relying on banks to report basic information about their customers’ deposits and withdrawals could put a big dent in annual tax evasion. Specifically, he touted one provision in the American Families Plan that seeks to shrink the tax gap by requiring banks to report on their customers’ withdrawals and deposits instead of relying on the taxpayers themselves. Mr. Rettig noted that for every 1% improvement in tax compliance, federal annual revenues are projected to increase by about $30bn per year. Overall tax compliance, defined as, voluntary, accurate and on time, is estimated by the IRS to fall in the 82% to 84% range.
New Mexico settles tax dispute with $500m payment
Local governments will get a $50m boost to resolve a 2018 lawsuit that accused New Mexico of botching tax distributions to 44 counties and municipalities across the state. Albuquerque, Santa Fe, Las Cruces, Roswell and Farmington were among the major plaintiffs to the lawsuit that alleged the state has short changed them revenue that pays for law enforcement, fire protection and other services. In a statement, Taxation and Revenue Secretary Stephanie Schardin Clarke said that “local governments deserve to have confidence in how their tax revenues are handled, and we've been able to demonstrate to them that the system is working.” Her agency says it added a liaison to improve communications with local governments, rigorous monthly reviews of local tax distributions, more robust auditing and greater access to state financial reports.
US News and World Report
US service members’ tax penalties in Germany weren’t ‘on my radar,’ says Blinken
A US-Germany treaty dispute that has exposed large numbers of US service members and Defense Department support staff to tax penalties in the European country was not “on my radar,” Secretary of State Antony Blinken has said. The tax dispute centres on the interpretation of the NATO Status of Forces Agreement, which Blinken, as head of the US State Department, oversees. In some cases, US military personnel in Germany have been penalised as much as six figures, while still having to pay their US taxes. US military personnel can expose themselves to the German tax hit if they are viewed to be in Germany for reasons beyond their military service – such as being married to a German or owning German property. However, Americans serving elsewhere, such as Italy, Spain, Britain, Japan or South Korea, face no similar financial situation.
New taxes on banks and insurers in Canada would raise $8.6bn
New taxes on bank and insurance companies in Canada would raise C$10.8bn (US$8.6bn) over the next five years, according to documents released by Prime Minister Justin Trudeau’s Liberal Party. The sum includes C$5.3bn from higher income taxes on large banks’ and insurers’ profits between this year and 2026, and a further C$5.5bn from a temporary tax that the Party is calling the “Canada Recovery Dividend.”
Senate Dems consider taxes on stock buybacks, excess exec pay
Democratic lawmakers are discussing a range of tax proposals targeting corporations and the wealthy, including levies on stock buybacks, carbon emissions and executive compensation. Sources close to the Senate Finance Committee say that one idea under consideration is an excise tax on stock buybacks or treating them as taxable dividends to shareholders. Corporate deductions for executive pay could also be limited, and chief executive officers could face an excise tax if their pay exceeds that of an average company worker by a certain ratio. Assorted other proposals are in the mix and have previously been proposed by President Biden or by Senate Democrats, including raising the 21% corporate rate, increasing taxes on overseas company income and raising both the top individual income tax rate to 39.6% as well as the capital gains rate for high-income investors. The expanded menu of tax options would give Democrats more flexibility as they undertake thorny negotiations among themselves over how to pay for a proposed $3.5tn of long-term investments in child care, education and other social programs.
US House bill would give tax credit for rare earth magnets
Lawmakers in the US House of Representatives introduced legislation on Tuesday extending tax credits to companies that domestically produce rare earth magnets. Rep. Eric Swalwell (D-CA) and Guy Reschenthaler (R-PA) introduced the Rare Earth Magnet Manufacturing Production Tax Credit Act, which sets up a $20 per kilogram credit for neodymium iron boron magnets made in the United States, with the credit growing to $30 per kilogram for magnets made with rare earths sourced from American mines. Rare earths are 17 metals that are difficult and costly to mine and process cleanly. MP Materials Corp's Mountain Pass mine in California is the only US rare earths mine, but that facility relies on Chinese processors. "These credits would be a boost to US manufacturing of rare earth permanent magnets essential to electric vehicles, as well as to US defense and industrial supply chains," said Pini Althaus, chief executive of USA Rare Earth, which is developing a rare earths project in Texas.
Peloton is sued for improperly charging sales tax
A group of Peloton subscribers has filed a proposed class action lawsuit accusing the home-fitness firm of improperly charging sales tax on memberships in New York, Virginia and Massachusetts. In a complaint filed in Manhattan, Brandon Skillern and Ryan Corken said Peloton should have treated its $39-a-month "All Access" and $12.99-a-month digital memberships as tax-exempt "digital goods" in the three states. They said Peloton has refused to reimburse them for the 6.3% or 8.9% "sales tax" it had collected before January 1st, when it changed its taxation practices. Millions of dollars nationwide may have been collected improperly, the plaintiffs said.
EU's planned carbon border tax will affect Russia the most
A joint study by two European climate think-tanks suggests that the European Union’s planned carbon border tax is likely to impact Russia the most but leave Chinese trade relatively untouched. The Carbon Border Adjustment Mechanism (CBAM), or CO2 tariff, on polluting goods, which will be introduced in 2023 at the earliest before becoming fully operational in 2026, will compel some companies importing into the EU to pay carbon costs at the border on carbon-intensive products such as steel and aluminium. The joint study by the Sandbag and E3G think-tanks forecasts that CBAM fees charged on imported Russian products - mainly steel, aluminium and fertiliser - would total €442m ($521.52m) by 2026 and €1.884bn in 2035, when free carbon emission allowances in the EU are reduced to zero. China, which is the world's biggest greenhouse gas emitter and the EU's biggest source of imports, is forecast to pay €484m by 2035, according to the study, which noted "The sectors covered by the current CBAM proposal represent 1.8% of Chinese exports to Europe in 2019, in value."
European banks are still booking profits in tax havens
The EU Tax Observatory says top European banks are still using tax havens to book profits despite country-by-country disclosures becoming mandatory in 2014. Disclosures from 36 major banks in Europe indicated they booked €20bn ($23.77bn) or about 14% of total profits, in tax havens, even though few were employed there, according to the independent research agency, which is co-financed by the European Union. Profits booked by banks in tax havens work out at around €238,000 per employee, compared with €65,000 in non-tax havens, the report said. “This suggests that the profits booked in tax havens are primarily shifted out of other countries where service production occurs . . . More ambitious initiatives — such as a global minimum tax with a 25% rate — may be necessary to curb the use of tax havens by the banking sector.”
Reuters The Guardian
Amazon accused of shifting £8.2bn of UK sales to Luxembourg
Analysis of Amazon’s US accounts indicates that the e-commerce giant had declared £13.7bn of UK sales in 2019. However, in filings for its UK-based companies, Amazon only reported £5.5bn in sales. Now, the Unite union is calling for a probe into why Amazon is being allowed to report £8.2bn of its UK sales in Luxembourg. Amazon strongly rejected the findings and said the discrepancy was because most of its sales to UK shoppers were booked by UK branches of one of its Luxembourg companies, and that the figures were reported to HMRC. Unite argues that the advantage Amazon gains through legally shifting profits to tax havens is a key factor in the company’s growing dominance. Labour MP and Treasury Committee member Emma Hardy described the findings as “very worrying” and backed Unite’s call for a public inquiry into Amazon’s “missing money,” adding “I don’t want a tax system that takes money from ordinary people to subsidise the growth of the world’s biggest anti-union company.”
UK tax authorities urged to delay reform programme
Professional bodies including the Chartered Institute of Taxation and the Institute of Chartered Accountants in England and Wales have called on the UK government to delay the introduction of tax reforms. In a letter sent to Treasury financial secretary Jesse Norman, representatives from five accounting and tax bodies said businesses and the self-employed needed more time to prepare for the new regimes and that implementing the changes too quickly would lead to costly mistakes which “risks undermining trust in the tax system.” Under the government’s new Making Tax Digital rules, an estimated 4.3m self-employed individuals and businesses will start reporting their income to HMRC on a quarterly basis from April 6th 2023. Additionally, so-called basis period rules are set to change meaning hundreds of thousands of partners and sole traders will have to change the 12-month period they use to calculate their profits. “The timetable being proposed will place enormous pressure on businesses and their advisers as well as on HMRC,” the letter states, adding: “Businesses in the UK have risen to the combined challenge of Brexit and the global pandemic and the tax profession continues to support them. At this time, we do not need the added complication of a multiplicity of fundamental changes to the tax rules in consecutive years.”
Financial Times City A.M.
France fines JPMorgan $29.6m in tax fraud settlement
JPMorgan has agreed to a €25m ($29.6m) fine in settlement of a tax fraud case. The case relates to allegations of tax fraud seen to benefit former managers at investment firm Wendel, top financial prosecutor Jean-François Bohnert said at a court hearing in Paris. The bank’s involvement revolves mainly over financing provided by its Paris branch to the managers in 2007 to restructure their holdings in Wendel. Thierry Marembert, a lawyer for JPMorgan, said the bank had “a very limited role” in the alleged fraud and wants to move on.
Denmark proposes raising taxes on the country’s richest
Denmark’s government is looking to raise taxes on the country’s richest individuals to fund initiatives designed to tackle growing labour shortages. Prime Minister Mette Frederiksen wants to increase taxes on capital gains as well as dividends, most of which are paid by the “wealthiest 1%,” to help fix the problem. “We are asking that you - at a time of quite high gains on the stock market - will pay a small amount extra in taxes if you have very big gains,” Finance Minister Nicolai Wammen said. The government estimates the measures would add about 10,500 people to the workforce. Danish citizens would have to pay 45% of gains on shares exceeding 56,500 kroner ($9,000) a year, instead of 42% now.
German minister receives abuse for tax-evasion whistleblower plan
A German regional official's plan to let authorities receive anonymous online tip-offs about potential tax evaders has prompted a flood of hate mail. Danyal Bayaz, the finance minister in southwestern Baden-Wuerttemberg state, announced this week that a new online portal will allow people to send anonymous tips to state tax inspectors. Although such tips could already be submitted by email, regular mail and phone, the latest move sparked outrage from political opponents and some media outlets in Germany. Mr. Bayaz defended the plan, noting that Germany loses about €50bn ($59bn) to tax evasion each year. He has received backing from the anti-corruption group Transparency International, which said uncovering tax evasion is in the public interest.
US News and World Report
US trade chief tells Turkey countries must remove digital services taxes
US Trade Representative Katherine Tai has told Turkey's trade minister it was critical that countries remove individual digital services taxes (DSTs) in connection with a broader multilateral agreement reached in talks led by the OECD. She discussed digital services taxes, improving access for US companies in Turkey and other issues with her Turkish counterpart, Mehmet Mus, during a virtual meeting, her office said in a statement. The US Trade Representative's office in June announced 25% tariffs on over $2bn worth of imports from six countries over their digital services taxes - including Turkey - but immediately suspended the duties to allow time for international tax negotiations to continue. The US government has concluded that such individual taxes would discriminate against US companies.
PM raises taxes to fund NHS and social care
UK Prime Minister Boris Johnson is going ahead with plans to increase National Insurance as his government seeks to reduce soaring NHS waiting lists and tackle the social care crisis. The tax will increase from April 2022 by 1.25% for both workers and employers. The pensions triple lock has been abandoned, meaning retirees will no longer see their state pensions increase by average earnings this year. Additionally, income from share dividends will also see a 1.25% tax rate increase and working pensioners will pay national insurance for the first time. The self-employed will also pay the new levy. The Institute of Fiscal Studies warned the plans would increase the UK's tax burden to its highest ever peacetime level.
Financial Times The Daily Telegraph The Times Daily Mail The Guardian
Big oil firms pay negative tax on North Sea operations
Official data published by the UK government-backed Extractive Industries Transparency Initiative show that some of the world’s biggest oil companies are currently paying negative tax on their fossil fuel extraction and production operations in the North Sea. In the 2019/20 tax year, ExxonMobil received £117m from HMRC, while Shell got £110m and BP received £39m. The report shows that a third of all significant energy companies operating in the North Sea paid negative tax last year. This is largely due to a tax policy that allows oil and gas companies to claim back money in order to help the UK progress towards its net zero carbon emissions targets.
Firms call for tax year reform
Businesses in the UK have backed calls for the tax year to fall in line with the calendar year in a move that would simplify the system and bring Britain into line with global peers. Ninety-one per cent of respondents in a poll of 500 SME leaders by BDO said they supported moving the date for filing tax documents, observing that while the switch would require careful planning, the inevitable short-term disruption would be worth it to deliver a tax system fit for the 21st century. The survey came after the Office of Tax Simplification revealed it was exploring shifting the end of the tax year from April 5th to either March 31st or December 31st. Paul Falvey, a tax partner at BDO, said: “Changing the tax year to December 31st is supported by businesses of all sizes and will be particularly helpful for those with international connections.” He also suggested that firms feel a rethink of the system could “help them to flourish” following the challenges delivered by the pandemic and Brexit.
Luxembourg and Belgium extend remote working agreement
Luxembourg Prime Minister Xavier Bettel and his Belgian counterpart Alexander de Croo have said that workers from either country can work for up to 34 days per year from their home without paying additional taxes from the start of 2022, extending the current period by 10 days. Belgian PM de Croo said the agreement, which will come into force at the start of 2022, was a "compromise" between both governments after Belgian media reported his government had sought a 48-day cap.
Uefa plans salary cap and ‘luxury tax’
European football confederation Uefa is to set out proposals to replace its Financial Fair Play rules with a salary cap and a ‘luxury tax,’ whereby the equivalent or more of any overspend on salaries would go into a pot for redistribution to rival teams. The Times says the proposal is considered to be fairer and more transparent than the existing Financial Fair Play rules and would allow some latitude for owners to spend beyond their club’s income, but only if they are willing to pay the luxury tax.
The Daily Telegraph The Times
Uber Australia continues to fill a Dutch 'cash pool'
ABC reports that Uber Australia has continued its longstanding practice of sending revenue to its head company in the Netherlands. In 2015, the ride-hailing and delivery platform told a Senate corporate tax avoidance inquiry that 25% of each transaction booked in Australia was delivered to a Dutch “cash pool.” Uber International Holding BV, the company's Netherlands-based wholly owned entity, then paid Uber Australia a fee for providing service support in Australia. Uber claims that it pays all taxes it owes in Australia. Meanwhile, ABC also reports that Uber’s latest accounts reveal further details about a payroll tax dispute with the New South Wales government. The accounts reveal that in September 2018, Revenue New South Wales issued a payroll tax audit against Uber, and in February this year issued tax bills against the group totalling $81.5m - amounts the state says Uber owes through June 30th, 2020 and which the company accounts note that "the Group has filed an objection to each of the assessments." TWU National Secretary Michael Kaine observed: "NSW taxpayers have joined rideshare drivers and delivery riders as the latest group Uber is prepared to rip off," and urged the NSW government to "listen to its own government department which says these are workers with rights, and finally call the Silicon Valley behemoth to heel."
Cairn agrees compromise to end India tax saga
Edinburgh-based oil and gas company Cairn Energy plans to return $700 (£500m) to investors to end a long-running tax dispute in India. Cairn was in line to receive $1.7bn after an international tribunal found in its favour in December but the company now says it is close to agreeing a compromise with New Delhi under which it will accept around $700m less than it stood to get. The dispute dates from 2014 when the Indian government seized assets held by Cairn in the country. In Cairn’s first public sign of willingness to settle the dispute, the company said it was "working with [the] government of India to expedite documentation and payment of refund," and was willing to forgo the additional $700m it is owed under the international award. Cairn CEO Simon Thomson said it was "certainly in our best interests to . . . accept this settlement and move on." The company said: “In accepting the terms of the new legislation in India, Cairn would be required to withdraw its international arbitration award claim, interest and costs and to end all legal enforcement actions in order to be eligible for the refund.” The dispute arose over a $1.4bn tax grab by India under rules introduced during 2012 on the reorganisation of Cairn’s assets in the country.
The Herald Livemint.com Financial Times
ATO accuses PwC of improper use of lawyers
The Australian Tax Office (ATO) has accused PwC of improperly using lawyers to provide tax advice to multinational clients for the sole purpose of invoking legal privilege to deny authorities access to documents during tax audits. The ATO is seeking to eradicate the “reckless” and “baseless” use of legal privilege in tax matters, as the legal and consulting industries become increasingly intertwined to provide multinational companies with packaged services, notes the Sydney Morning Herald. Dr Suzanne McNicol QC, acting for the ATO, told the Federal Court that legal privilege applied “a cloak” to the entirety of PwC's services, while “the purported lawyer has the baggage of a group of experts, beavering away in the background with complex tax consulting advice.” She said PwC partner Glenn Russell had been retained on matters that were outside of his expertise or not strictly legal in nature in order to shield the affairs of the firm’s client, international meat processor JBS, from authorities. Richard McHugh SC, acting for PwC, said complex tax advice required legal expertise and that JBS had engaged PwC for the primary purpose of legal advice. Any suggestion that Mr Russell's advice was irrelevant or used improperly was “baseless and should be withdrawn,” he said.
Sydney Morning Herald
Thailand to collect tax from foreign tech firms
Thailand is to start collecting value added tax (VAT) from overseas-based technology companies and expects to raise at least 5 billion baht (S$207.9m) annually in additional revenue each year, senior finance ministry official Ekniti Nitithanpraphas has said, adding that foreign platforms providing electronic services in Thailand will have to register for VAT payments. To date, 69 companies have registered from a target 100, according to Mr Ekniti. The companies are divided into five categories including platforms getting income from e-commerce and advertising like Facebook and Google, intermediaries such as ride-hailing app Grab, and streaming services such as Netflix. Companies with revenue of over 1.8 million baht will have pay VAT of 7%.
Business Times SG U.S. News & World Report
China probes tax evasion among high earners
Tax authorities in China are investigating high-earning individuals who concealed their incomes and evaded taxes. The State Taxation Administration has pledged to implement guidance on taxation reform issued by the State Council in March, which said China will strengthen tax supervision on high-income and high net-worth individuals. The official statement posted on WeChat comes amid China’s increasing push for “common prosperity” by narrowing the income gap and reducing inequality. President Xi Jinping recently convened a high-level meeting that vowed to better regulate high income and “reasonably adjust excessive income.” Meanwhile, Bloomberg also reports that seven Chinese billionaires have directed a record $5bn to charity so far this year, a sum that exceeds by 20% total national giving in 2020. Their pledges, whether through corporate interests, foundations or personal wealth, arrive in tandem with Xi’s campaign to close China’s wealth gap.
China seeks better BRI tax cooperation
Tax authorities in China are weighing digitalisation to optimize a cross-border mechanism for better coordination in tax administration and to offer tax-related consultation services to taxpayers in jurisdictions in the Belt and Road Initiative (BRI) footprint, a senior tax official has told China Daily. Wang Jun, head of the State Taxation Administration of China, said more opportunities for cooperation and tax-related knowledge-sharing among BRI jurisdictions would boost investor confidence in economic and trade exchanges and precipitate certainty in tax matters across BRI economies. China Daily notes that this year marks a breakthrough in the reform of tax collection and administration in China, observing that "Whole-process smart control, round-the-clock online service, wide-coverage customized service, and tax governance by data" were key phrases used by Wang to outline the features of the modern tax administration system.
Chinadaily US Edition
Taiwanese companies rush to bring their money held overseas back home
Taiwanese companies rushed to transfer overseas capital back home before the end of a two-year government tax break program, but total applications still fell well short of initial forecasts. The scheme lowered the tax rate on repatriated funds to 8% in the first year of the plan and 10% in the second year, from the original rate of 20%. “The main reasons the amount has surged recently is that the program is about to end and also that companies see the Covid-19 situation likely to improve in the coming year as vaccines and other medications are rolled out,” said Liu Chengyu, an economist at First Capital Management. “That made them more willing to speed up the decision to invest back here.”
India weighs substantive import tax cuts on electric vehicles
India is considering cutting import duties on electric vehicles (EVs) to as low as 40%, according to senior government officials. US carmaker Tesla has been lobbying the government in New Delhi, arguing that lowering import duties on EVs to 40% would make them more affordable and increase sales. The ensuing debate has polarised the local auto industry, with come carmakers saying such a move would be in conflict with a push to increase domestic manufacturing. "Reducing import duties is not a problem as not many EVs are imported in the country. But we need some economic gain out of that. We also have to balance the concerns of the domestic players," a government official told Reuters. Tesla CEO Elon Musk said on Twitter last month that a manufacturing plant in India was "quite likely" if the California-headquartered company was successful with vehicle imports but taxes on them are high.
Malaysia to weigh GST when time is right
Malaysian policymakers should consider the reintroduction of the goods and services tax (GST) at an appropriate time, according to comments made by Economy Minister Mustapa Mohamed. "While the government will always put the people first, when this crisis settles down and things normalise, we must begin to gradually set our economy back on a sustainable fiscal footing," said Mustapa in a speech at a briefing by the OECD, referencing a recommendation by the intergovernmental economic organisation that Malaysia brings back the consumption-based tax – repealed in 2018 - in the medium term to boost declining revenue. "Malaysia will deliberate on some of the OECD's recommendations, and where suitable, will incorporate them into our medium term and long term economic policies," Mustapa said.
Business Times (Singapore)
India's overseas listing rules for companies delayed due to tax concerns
India will take around six months to announce rules allowing companies to list overseas, longer than some expected, as the finance ministry finalizes issues related to taxation, two government officials and four industry sources have told Reuters. The delay is likely to dampen the hopes of investors including Tiger Global, Sequoia Capital, Lightspeed and some Indian start-ups who have called upon Prime Minister Narendra Modi to quickly announce rules governing foreign listings that were given the green light almost a year ago. A key concern is to ensure that big venture capital and foreign investors pay an equal long-term capital gains tax - roughly around 10% - even if they exit an Indian company listed on foreign bourses like Nasdaq, said sources familiar with the matter. A senior government official said: "We haven’t reached a final decision yet or decided the structure ... We would want to get the tax if any investor exits, does not matter where it is planning to list."
LATIN AMERICA & CARIBBEAN
El Salvador to exempt bitcoin profits from income tax
El Salvador has become the first country to adopt bitcoin as a national currency. President Nayib Bukele announced that his government has purchased another 200 bitcoins ahead of El Salvador's formal adoption of the currency, taking the country's total holdings to 400 bitcoins, worth nearly $21m at current trading levels. The law designating bitcoin as legal tender says that all "economic agents" shall accept the cryptocurrency as a form of payment. El Salvador will exempt profit on bitcoin price hikes from income tax in order to attract foreign investment in the cryptocurrency, according to a government official. "If a person has bitcoin as an asset and has a high profit, there will be no tax. This is obviously intended to encourage foreign investment," said the presidency's legal advisor Javier Argueta. "Neither capital gain, nor income, no tax will be paid. This is an advantage that has drawn much attention," he explained.
Mexico reduces Pemex's tax burden
The Mexican government has proposed a significant reduction to the tax burden of state-owned oil company Petroleos Mexicanos (Pemex). The finance ministry's 2022 draft budget laid out a profit sharing rate (DUC) – a levy paid to the government - of 40% for the oil giant. The DUC has been gradually reduced from 65% in 2019, to 58% in 2020, and 54% in 2021. Reuters notes that the reputation of President Andres Manuel Lopez Obrador largely rests on improved fortunes for Pemex, “which has been a powerful symbol of Mexican self-reliance since its creation in 1938.”
Brazil’s Congress passes basic income tax reform text
Brazil’s Congress approved the Income Tax reform bill on September 1st. After approval by the Chamber, the bill needs to be approved by the Senate before heading to president Jair Bolsonaro for enactment into law. The bill foresees a reduction in corporate income tax and the creation of a fee on dividends, among other changes.
Multichoice ordered to pay half of disputed $4.4bn tax bill
A tax tribunal in Nigeria says the local unit of South African pay TV company Multichoice must pay 50% of a disputed 1.8 trillion naira ($4.38bn) tax bill relating to previous years. Multichoice Nigeria, a division of the Randburg-headquartered entity, provides DSTV, a cable TV service that is popular in the West African country. The Federal Inland Revenue Service (FIRS) said the deposit of 50% of the sum was a condition that had to be fulfilled by Multichoice Nigeria Ltd before the tax tribunal could hear a full appeal on the matter. FIRS said in July that it had instructed banks to freeze the accounts of Multichoice because the company had refused to grant tax auditors access to its servers. Reuters notes that Multichoice is the latest South African company with a significant profile in Nigeria to face a multi-billion-dollar tax demand. In January 2020, Nigeria's attorney general withdrew a $2bn tax bill it wanted to levy on Johannesburg-based multinational mobile telecommunications company MTN. Investors said the protracted saga had damaged Nigeria's reputation as an investment destination.
Rwanda reaches tax transparency milestone
Rwanda has become the 23rd African country to sign the Mutual Administrative Assistance in Tax Matters (MAAC), joining 141 other countries around the world. The signing-up to the MAAC ensures that Rwanda complies with international standards from the EU and OECD. Nick Barigye, CEO of Rwanda Finance Limited (RFL), the agency mandated to promote the newly-created Kigali International Financial Centre (KIFC), which is positioning Rwanda as a preferred financial jurisdiction for investments into Africa, said the signing “is imperative in the positioning of KIFC as one of the leading financial centres in Africa, as the signing helps to improve our compliance rating, integrity, and transparency of our institutions. We are confident this will help Rwanda secure the benefits of the new cooperative tax environment.”
Nigeria’s poorer regions may lose out following court ruling
A court ruling in the oil-producing southern Rivers state of Nigeria is set to cost the federal government control of a major source of tax revenue to the detriment of the West African country’s poorer regions. A judge threw out an application by the Federal Inland Revenue Service (FIRS) to delay the execution of an order issued last month that allows the state government to collect value-added tax (VAT) within its territory. Data from the National Bureau of Statistics indicate that VAT accounted for 1.53 trillion naira ($3.7bn) of the federal government’s 4.95 trillion tax take last year. The kind of VAT that the nation’s 36 states could administer following the ruling would account for almost half that amount, notes Bloomberg. FIRS said it is appealing the ruling.
Egypt continues efforts to collect due taxes
Egypt’s finance ministry has stepped up efforts to integrate the country’s informal economic sector into the formal economy to increase tax revenues and achieve tax justice. Minister of Finance Mohamed Maait highlighted the importance of tax digitization projects to ensure the efficiency of tax collection, reduce tax evasion, and monitor the volume of commercial transactions, through the “electronic invoice” and “electronic receipt” projects. He also said that the e-platform of unified tax procedures contributes to strengthening the governance of the tax system, through which the Tax Authority is electronically linked with 74 government agencies, so enhancing efforts to combat tax evasion and stimulate investment.
Afghan president alleged to have left country with US tax dollars
Republicans on the House Oversight Committee have called for an investigation into allegations that Afghanistan President Mohammad Ashraf Ghani embezzled millions of US taxpayer funds before leaving the country, which is now controlled by the Taliban. Shortly after his departure, a Russian embassy spokesperson told the media that Mr. Ghani tried to fit as much as $169m in a helicopter, but left some of the cash on the tarmac because there wasn’t enough room. Some of the cash reportedly was stuffed into duffle bags. Reps. James Comer (R-KY) and Glenn Grothman (R-WI) have asked Attorney General Merrick Garland and Secretary of State Antony Blinken to brief them on whether the US is investigating these claims and whether the government will pursue criminal charges if the allegations are true. “President Ghani may have been self-dealing with US funds intended for the Afghan people, having fled the country with enormous sums of cash totaling well over a hundred million dollars. If true, this was not the dignified exit of a benevolent head of state, but that of a coward and grifter. The United States must do everything in its power to seize any illicitly gained funds that were corruptly embezzled by President Ghani,” they wrote.
Iran proposes to increase tax revenue to GDP ratio
Iranian Finance and Economic Affairs Minister Ehsan Khandouzi has been quoted as saying that “[Iran] should increase the tax revenue to GDP ratio up to 50 percent through smartening of tax collection process.” Speaking to senior managers of the country’s tax organisations, Khandouzi added that “achieving this goal is possible through smart and fair taxation," and further observing “We have suffered from both inefficient traditional tax collection methods and unfair tax methods that cause injustice to various social groups.”
Menafn.com Stuff NZ
Jordan's tax revenues increase in first eight months of 2021
Jordan’s revenues from income and sales taxes totalled JD3.573 billion in the first eight months of 2021, compared to JD3.126 billion collected in the same period of 2020, or growth of 14%, the Income and Sales Tax Department (ISTD) has said. The ISTD noted that income tax in the January-August period of 2021 reached JD994 million, up from JD921 million collected in the same period of last year, and the revenues collected from the sales tax in the first eight months of 2021 reached JD2.58 billion, up from JD2.205 billion in the same period of 2020. Tax reforms were in part responsible for the uplift, the department said.