January TaxPulse by Alliott Group
Chinese leaders promise tax cuts to boost flagging economic growth
China’s top economic policymakers promised more tax cuts and increased funding for infrastructure at a key annual planning meeting last month, as US tariffs and weakening domestic consumption added to downward pressure on growth. China’s economy slowed to 6.5% year-on-year growth in the third quarter of 2018. “The pro-active fiscal policy should enhance efficiency, implement larger-scale tax cuts and fee reductions, and substantially increase the size of local government special bonds,” state news agency Xinhua said in a translation provided by Reuters.
CNBC Financial Times South China Morning Post
Taiwan protesters call for tax reform
Inspired by France’s populist movement, thousands of people in Taiwan turned out for a third protest in December demanding tax reform. Wearing yellow vests, the demonstrators gathered outside the Ministry of Finance in Taipei, calling Taiwan’s tax collection policies illegal.
Japan begins collecting ¥1,000 departure tax
Japan has launched a departure tax for people leaving the country. The Japanese government will charge the new tax of 1,000 yen, or about nine dollars, to travellers leaving by air or sea. The levy will be collected from each traveller leaving Japan irrespective of nationality.
VAT lottery expands Mongolia’s tax base
Mongolia has grown its tax base by almost half since 2016, according to government statistics, partly by printing a lottery ticket on every retail receipt when the 10% value-added tax is paid.
India’s start-ups fear extinction from ‘angel tax’
Indian entrepreneurs and angel investors warn that substantive tax bills levied on start-ups pose a threat to the government’s efforts to remake India as an innovation hub.
Britain’s tax take at 30-year high
The UK’s tax burden is at a 30-year high as a share of GDP, according to the Organisation for Economic Co-operation and Development. Taxes amounted to one-third of GDP last year, the highest since 1988 and above average for the past 50 years, compared to the 34.2% average across the OECD’s 35-nation club of wealthy countries. Income taxes made up around £186bn of revenues for the Exchequer, around 9.1% of GDP. VAT brought in £139bn, while property taxes contributed £85bn. Meanwhile, a survey by PwC has found that Britain’s largest businesses paid £84bn in tax last year, up £1bn on the year before and 12% of the UK’s total receipts. The firm surveyed the “100 group” of FDs at 97 of the companies listed in the FTSE 100, as well as several large private businesses. But a Mail on Sunday analysis of the tax paid by 69 FTSE 100 companies indicates that nearly one in five paid no corporation tax in the UK last year. Thirteen of the firms which provided figures either paid no corporation tax in Britain or received a tax credit from HMRC. The paper notes that none of the companies assessed is accused of acting illegally, but adds that most have used tax laws to reduce their payments from the amount they might have been expected to pay.
The Daily Telegraph The Times
France’s digital tax
France has introduced its own tax on big technology firms after EU-wide efforts stalled. French Finance Minister Bruno Le Maire said he expected it to bring in €500m (£450m) in 2019. France has been pushing for a EU GAFA tax – named after Google, Apple, Facebook, Amazon – but other countries including Ireland had opposed the tax. Spain and Italy are also working on national versions of a digital tax, as are Singapore and India. Meanwhile, having failed to broker a deal on a digital tax during its European Union presidency, Austria has said it plans to introduce its own levy on tech companies including Facebook and Amazon while the bloc works on its plan. Finance Minister Hartwig Loeger is working on the proposal, which will be part of a tax reform next year, according to a statement. Details of the digital tax will be announced at a cabinet meeting on January 10th-11th. Austrian Chancellor Sebastian Kurz commented: “The aim is clear: taxation of companies that make large profits online but barely pay taxes – such as Facebook and Amazon.”
The Daily Telegraph Financial Times BBC News
French government cracks down on company executives’ tax affairs
The French government has said it will scrutinise the tax affairs of executives of companies listed in France to make sure they are paying their share. Budget Minister Gerald Darmanin’s comments follow President Emmanuel Macron’s intimation of a more robust stance on corporate tax affairs in a speech last month aimed at cooling weeks of protests that brought major disruption to the country. “As the president has said, the heads of companies listed in France, or which count the French state as a shareholder, must under all circumstances be tax residents in France,” Darmanin told the Journal du Dimanche.
EU Commission presses on with plan to end unanimity on tax
The Irish Times says Ireland is likely to be among countries expected to oppose the development by the European Commission of a plan to end national vetoes in some decisions on tax policy. The commission has asked for responses on a consultation on “how EU decision-making on certain tax issues could be streamlined by removing the need for unanimous agreement by all countries.”
Tax treaties create massive Dutch cash flow
Research based in part on information from the Dutch central bank suggests that a network of tax treaties and an intense focus on minimizing tax bills saw the Netherlands receive €4.6trn ($5.2trn) in foreign direct investment in 2017. Only a fifth of this amount stayed in the Dutch economy, with the equivalent of $4.2trn being immediately channelled away by various means.
Google shifts billions with ‘Dutch Sandwich’
Google moved nearly €19.9bn to a subsidiary in Bermuda in 2017 as part of its “Dutch sandwich” tax avoidance manoeuvre. Documents filed at the Dutch Chamber of Commerce show the amount of cash channelled to the Caribbean haven through a Dutch subsidiary increased by about €4bn that year, according to accounts filed in the Netherlands. This helped Google to pay a corporation tax rate of just over 6% on its foreign earnings, compared with the 35% headline rate in effect in the US at the time.
Crown Dependencies to shake off EU ‘tax haven’ tag
Many of the 76,000 companies based in Britain’s Crown Dependencies will soon have to prove to the EU that their presence in Jersey, Guernsey and the Isle of Man is not merely a tax-dodging exercise. The laws were introduced after the European Union threatened the dependencies with inclusion on its 2019 tax blacklist, along with 62 other places. However, Jo Huxtable, a Guernsey-based tax partner at Deloitte, says there is little evidence the islands have been facilitating widespread profit shifting: “I think a lot of companies will find that they are able to meet these requirements,” she said.
Drugs group Perrigo hit with €1.64bn Irish back tax bill
Ireland has hit US-listed pharmaceutical group Perrigo with a tax claim for €1.64bn over a deal five years ago to sell a treatment for multiple sclerosis. The Dublin-based company said it would launch an immediate appeal against the ruling.
Bloomberg Financial Times
Prolonged federal shutdown will affect tax refund payments
Almost three weeks after the federal government went into a partial shutdown, agencies such as the IRS remain mostly closed – and with no immediate sign of the funding deadlock between President Donald Trump and Congressional negotiators being resolved, there is a genuine risk that tax refunds could be delayed this year. During the shutdown, the IRS can do many of its activities, such as protecting government property, process returns that come with payments, and conduct criminal investigations; however, it cannot conduct audits, respond to taxpayer questions outside the filing season, or pay refunds. Additionally, the agency is yet to announce a start date for the 2019 filing season. “We’re in uncharted territory as each day gets longer,” said Mark Steber, chief tax officer at Jackson Hewitt.
Wall Street Journal Fox Business Forbes
House passes year-end tax package
The House has passed a year-end tax package, on a 220-183 vote, that addresses several Republican priorities, in one of the GOP’s last acts as the majority party in the lower chamber. The bill, which adds around $99.2bn to the deficit over a decade, includes disaster relief in the tax code, technical corrections, retirement-savings incentives, and extensions of tax breaks for railroads and biodiesel producers that lapsed at the end of 2017, and also delays several health-related taxes, including the so-called Cadillac tax on high-end health insurance, and an excise tax on medical devices. House Ways and Means Committee Chairman Kevin Brady (R-TX) said the bill has “key, timely components, each of which will help our economy continue moving in the right direction and provide help to families and communities damaged by disaster.” Sen. Rob Portman (R-OH), a member of the Senate committee with jurisdiction over tax policy, when asked if the bill’s provisions might become law, said “I don’t think so from what I’ve heard.”
The Hill Wall Street Journal Washington Times Bloomberg Quint Washington Examiner
Congresswoman’s 70% tax call
Congresswoman Alexandria Ocasio-Cortez has suggested the introduction of a 60%-70% rate for Americans earning more than $10m a year. She told CBS there is “element where . . . people are going to have to start paying their fair share in taxes.” American households that earn more than $600,000 annually currently pay a 37% tax rate. Mark Mazur, a former Treasury Department official now at the Tax Policy Centre think tank, said the effect of introducing the higher rates would be hard to estimate, commenting: “You’d certainly see some people under that system change their behaviour to avoid the higher rate, which could significantly impact how much revenue it generates.”
CNBC CNN Politics Salt Lake Tribune
President Trump signs exec order for ‘opportunity zones’
President Donald Trump has signed an executive order directing federal agencies to steer spending toward “opportunity zones,” as part of a push to turn a tax break in last year’s Tax Cuts and Jobs Act into a broader effort to combat poverty and geographic inequality. The zones are urban, rural and suburban census tracts, designated by governors and approved by the Treasury Department, that either are high in poverty or border high-poverty areas, and in need of revitalisation. Investors who fund projects in areas deemed opportunity zones can reduce – and in certain cases eliminate – taxes on investment gains.
New York Times
US citizens abroad hope for tax relief
US citizens living in Canada and elsewhere around the world could face tax relief in the future if a new Bill passes into law. The Tax Fairness for Americans Abroad Act of 2018 would be a first step towards ending the country’s citizenship-based taxation by taxing only those individuals who are resident in the US or who have income that is connected to the US.
Canadians are about to start paying a carbon tax
Canada’s government is introducing a “backstop” price on provinces that don’t have their own levies on carbon emissions. Some major industries in five provinces will now see their emissions tracked and subject to a yet-to-be-finalized tax. Bloomberg says carbon tax is set to be a key political battleground of the 2019 election.