Global Tax News Julio 2018
Jul. 17, 2018
Asia Tour 2018
Stephen Hamlet visited Asian member firms ahead of this year’s Russell Bedford Asia-Pacific Meeting. He said: “To be greeted with such enthusiasm makes my travels so pleasurable and memorable. My second annual trip around our network’s firms in Asia confirmed again what great talent we have amongst our members!”
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U.S. and China fire first shots in $34bn trade war
The United States and China have introduced tariffs of $34bn on each other’s exports, with the White House announcing a 25% import tax on 818 products ranging from water boilers and lathes to industrial robots and electric cars, and Beijing responding in kind. Since the beginning of 2018, the U.S. and its trading partners have put tariffs, or will shortly, on a total of $165bn worth of imports, calculated Chad Bown, a trade expert at the Peterson Institute for International Economics. The U.S. tariffs announced so far would affect the equivalent of 0.6% of global trade and account for 0.1% of global GDP, according to Morgan Stanley.
Supreme Court in online sales tax ruling
The U.S. Supreme Court has ruled that U.S. states have the authority to force online retailers to collect sales taxes, overturning a precedent that had barred states from requiring businesses with no "physical presence" in that state to collect sales taxes. The case, South Dakota v. Wayfair, saw the justices vote 5-4 for the state, which passed a law in 2016 that required firms doing a certain amount of business in the state to collect sales tax from customers. The Supreme Court rejected a challenge to that law, overturning a 1992 Supreme Court decision that established the physical presence requirement. The ruling is likely to lead other states to try to collect sales tax on purchases from out-of-state online businesses more aggressively.
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Tax policy writers flock to K Street
A number of the staffers who worked on the creation of the Tax Cuts and Jobs Act have left the Trump administration to take up positions with lobby groups, the New York Times reports. More than a dozen people have already migrated this year, with more expected to follow as the midterm elections draw closer. Top names to have left for K Street include Shahira Knight, deputy director of the National Economic Council, and Drew Maloney, assistant secretary for legislative affairs, and the Treasury Department’s chief liaison with Congress. Ken Spain, a Republican consultant who works on financial and tax issues, explains: “Companies are looking to better understand the legislation and potentially affect future changes, which is why they are snatching up top talent.”
IRS nominee aims to rebuild trust
Chuck Rettig, President Donald Trump’s nominee to lead the IRS, pledged in his confirmation hearing to restore trust in the agency, contending that better relationships with Congress and the public are crucial to the smooth implementation of the new tax law. Speaking to the Senate Finance Committee, he also stressed that he would be “staunchly independent” of President Trump, and that he would resist interference from the White House. Under sustained questioning from the Democratic members of the panel, none of whom indicated they would attempt to block his appointment, he pledged to run the agency in an “impartial and unbiased manner,” and said the administration had not asked him to swear an oath of loyalty.
Canada unlikely to match U.S. tax cuts
Federal and provincial governments in Canada aren’t yet willing to give up the revenue needed to make the tax cuts manufacturers seek, tax policy observers have said, despite calls to make their frameworks more competitive. Kim Moody, director of U.S. tax advisory with Calgary-based Moodys Gartner Tax Law said that, although the Tax Cuts and Jobs Act is diverting capital that might otherwise have gone to Canada, provinces like Alberta and Ontario are already operating under deficit budgets, and would be hard pressed to absorb the impact of cuts to the combined federal and provincial tax rate of 20%. Toronto Tax lawyer Michael Colborne said he is worried that a lack of response to the changes “could mean a long, bumpy road for Canadian businesses.”
S&P 500 firms impacted by new rev-rec rules
New accounting rules are prompting some corporate finance chiefs to change how they do business, the Wall Street Journal notes, with over half of companies on the S&P 500 disclosing some impact on their accounting policies since the launch of a new revenue recognition standard last December. Approximately one in five public companies surveyed by PwC said they spent or expect to spend at least $1m on adopting the standard. Some companies expect the new rules to accelerate revenue, while others say the timing of when they can record revenue as earned will be delayed, even though their underlying business remains unchanged.
Tax glitch could harm multinationals
A provision in the Tax Cuts and Jobs Act has raised concerns among multinational companies such as Coca-Cola that their foreign entities could end up being taxed in the U.S. The issue arises from a change in the law that will result in more foreign entities being treated as controlled foreign corporations (CFCs) - defined as foreign corporations that are more than 50% owned by U.S. persons - which can subject U.S. shareholders of those entities to additional U.S. tax and new reporting requirements.
French finance minister pushes for harmonised corporate tax rules
Bruno Le Maire, the French finance minister, has reiterated his desire for EU countries to sign up to a common consolidated corporate tax base (CCCTB). He said he wanted the harmonised corporate tax rules in place by mid-2019. The commission proposed a voluntary CCCTB in 2011, but it ran into opposition from Britain and Ireland. Seamus Coffey, chairman of the Irish Fiscal Advisory Council, said that it was “hard to imagine any reform posing a greater threat” to Ireland’s success in attracting multinationals than the introduction of a shared EU tax base. The European Commission has also proposed introducing a 3% levy on digital companies’ revenues, a move that would cost Ireland an estimated €250m in lost tax revenue.
Ireland named as world’s biggest tax haven
Ireland is the biggest “tax haven” in the world used by multinationals to shelter profits, according to a new study by economists from the University of California, Berkeley and the University of Copenhagen. The research estimates that foreign multinationals shifted $106bn (€90bn) of corporate profits to Ireland in 2015. The research paper estimates that $1.7tn (€1.45tn) of foreign profits were made by multinationals, primarily from the U.S., in 2015 and that almost 40% of this total was shifted to tax havens. It also claims U.S. companies declare $8 of profit in the Republic for every $1 spent there on wages.
IFS chief says UK faces 20 years of tax rises
The head of the Institute for Fiscal Studies has said UK taxpayers should brace themselves for long-term tax hikes to maintain health and social care spending over the next twenty years. Paul Johnson said the pledge from the government to boost NHS spending by £20bn will have to come from taxation, as relying on long-term borrowing would not be sustainable for government finances. He added that tax rises would have to be brought in over the next two decades and services restricted unless economic growth and productivity levels pick up considerably. Mr Johnson also said the tax gap cannot be funded, as Labour has proposed, purely from “extremely rich people and Google.”
Government misses out on £33bn in tax
The UK government failed to collect £33bn of tax last year - £1bn higher than the previous year but unchanged at 5.7% of all tax liabilities. The shortfall is caused by a combination of legitimate errors, crime, illegal tax evasion and legal tax avoidance. The tax gap has fallen sharply since it was first estimated in 2005-06, when it amounted to 7.3% of receipts, suggesting that the government’s decade-long crackdown on tax avoidance has been successful. The figures show the amount of tax lost to avoidance fell from £4.9bn in 2005-06 to £1.7bn last year. Small businesses, which include self-employed workers who have incorporated themselves, were to blame for the bulk of the tax gap, at £13.7bn, while big business failed to pay £7bn. Losses on personal taxes, such as income tax, national insurance and CGT, were £13.5bn.
HMRC sets sights on overseas income
HM Revenue & Customs is targeting people with homes or bank accounts abroad it suspects of hiding income or capital gains. New penalties for avoiding tax come into force at the end of the September and will see those failing to declare tax due on offshore interests facing substantially increased fines and back taxes. The new rules apply to all income, such as interest on savings or rental earnings overseas before April 6th, 2017, in addition to capital gains. Income earned or capital gains made after this date can be filed by the January 2019 deadline as usual. Under the new rules, people will face penalties of 200% of the tax owed on undeclared overseas income.
Massive German tax evasion probe looms
Bloomberg reports that German prosecutors are preparing their first indictments in a tax evasion probe that has cost the German treasury billions of euros, according to people familiar with the matter. The investigation will consider the role of many banks, brokerages, accounting companies, and law firms in transactions involving hundreds of individuals, said the people, who added that deals handled by firms including Barclays, Goldman Sachs, Bank of America, Macquarie, and BNP Paribas will be included in the undertaking. Initial indictments could be soon as this year, they say.
German tax probe for Porsche
Volkswagen’s Porsche sports car unit is under investigation by the Stuttgart tax office over the way it accounted for marketing and catering expenses during the past eight years. The expenses amount to as much as €1bn ($1.2bn). Any penalty levied is likely to be small, as the probe is related to an administrative offence, rather than a criminal one.
Islamic finance firms call for tax reform
Firms involved in Islamic finance are lobbying the UK government for tax reforms, arguing that the treatment of some sharia-compliant structures is hindering their growth. More than 20 firms, including Gatehouse Bank, Bank of London and The Middle East, Abu Dhabi Islamic Bank and Qatar Islamic Bank, offer Islamic financial products in Britain.
Employees offered salary in bitcoin
Israeli social media company Spot.IM is offering its employees a salary paid in bitcoin. Itay Brach, the company’s legal head, made clear that the bitcoin salary will be subject to relevant Israeli legislation. The firm is currently seeking requisite permissions from the Israel Tax Authority for the proposal and defining a framework for standard exchange rates. In February 2018, Israel announced all cryptocurrencies are assets and subject to a capital gains tax. The country charges 25% tax on all cryptocurrency profits, meaning if Spot.IM employees choose to hold their salary and gain profits they will incur a relatively hefty tax.
Egyptian Tax Authority eyes Uber, Careem
The Egyptian Tax Authority (ETA) wants ride-hailing apps Uber and Careem to provide the required documents on the volume of their businesses in Egypt since the introduction of the VAT law two years ago, and forecasts to collect nearly EGP6bn in tax revenues. Since the state-run agency's announcement, Bloomberg has reported that the two companies are engaged in exploratory talks to combine their Middle Eastern services.
Kuwait's cabinet vetoes plan to tax expats’ remittances
Kuwait's cabinet has rejected a proposal to impose fees on expatriates’ remittances. “The cabinet’s economic affairs committee argues that imposing fees on expats’ remittances would harm the economy, force specialized manpower out of Kuwait and scare away foreign investments,” sources explained. Separately, a new round of talks between governmental bodies and private sector representatives are to commence to determine the best way to impose the previously agreed 10% tax on local companies.
Uganda's tax on social media proves unpopular
Ugandans are unhappy about the imposition of a 200 Uganda shilling [$0.05, £0.04] tax on the use of social media and a lawsuit has been filed against the government by a group of petitioners. Parliament approved the tax in May in response to President Yoweri Museveni arguing that social media encouraged gossip. Frank Tumwebaze, Uganda's ICT minister, has defended the tax and said that the money raised will be used to "invest in more broadband infrastructure."
Tax inquiry in South Africa
An investigation into tax administration and governance has been launched in South Africa amid claims of misconduct by the suspended head of the South African Revenue Service (SARS) and the agency's failure to collect as much tax as expected in recent years. President Cyril Ramaphosa has said it is a priority to shore up the revenue collection agency. Suspended tax chief Tom Moyane has since called for the termination of the inquiries into the governance of SARS.
Mexico’s next president will target cooperative abuse
Mexico’s next president says he will fight tax evasion and boost revenue by targeting companies that abuse special rules for cooperatives to avoid paying tax, according to his choice for finance minister. Carlos Urzua said that the government of Andres Manuel Lopez Obrador will put an end to use of cooperatives by “unscrupulous people” who want to evade tax.
New Zealand to tax tourists
New Zealand plans to introduce a tourist tax to expand its infrastructure as visitors to the country grow in number. "Rapid growth [in tourist numbers] has impacted on the costs and availability of publicly-provided infrastructure . . . Many regions are struggling to cope and urgently need improved infrastructure, from toilet facilities to carparks," said tourism minister Kelvin Davis. A tax of NZ$25-35 (US$17-24) will be imposed on international visitors from the middle of next year and entry visas will become more expensive this November.
India proposes to raise tariffs on 30 U.S. products
India has submitted a revised list of 30 items - including motor cycles, certain iron and steel goods, boric acid and lentils - to the WTO on which it proposes to raise customs duty by up to 50%. It comes as duties hiked by the U.S. on certain steel and aluminium products would have implications of about $241m on India.
Five nation army
The leaders of tax enforcement agencies from the U.S., UK, Canada, Australia and the Netherlands have teamed up to form the Joint Chiefs of Global Tax Enforcement, or J5, to collaborate in the fight against international and transnational tax crimes and money laundering. The group, which met in Montreal to discuss intelligence sharing and possible joint operations, has been formed in response to a call to action issued by the Organization for Economic Cooperation and Development (OECD) in November 2017 for countries to crack down on professional facilitators of tax crime. Don Fort, chief of IRS Criminal Investigation, said: "The J5 aims to … build upon individual best practices, and become an operational group that is forward-thinking and can pressurize the global criminal community in ways we could not achieve on our own."
Larger, older companies pay less tax
A study by Sage of more than 3,000 companies across 11 countries found there was a negative correlation between a company’s size and age and the amount of tax they paid. The report found smaller and younger businesses paid more tax on their profits. Sage CEO Stephen Kelly said this was partly explained by the capacity of big companies for tax planning, which can reduce their bill, compared with smaller firms. The research also found that smaller companies spend more time on tax administration, with filing their returns taking up to 21 days of work at a cost of up to €30,000 for some.