Oct - Dec 2011
IRELAND - Despite the inevitability of higher taxes in Ireland for the next few years, tax experts have been keen to point out that a recent World Bank survey ranks Ireland as having one of the easiest tax regimes in the world, putting the country in fifth place overall in terms of tax compliance obligations and the total tax rate. The annual World Bank Doing Business report assesses regulations affecting domestic firms in 183 economies, ranking each on the basis of various criteria including ease of starting a business, insolvency resolution, cross-border trade and the complexities of paying taxes.
UK - The England & Wales Court of Appeal has ordered HM Revenue & Customs to grant the retailing group Marks & Spencer tax relief on losses it sustained in Germany, where the relief would have been granted on losses sustained in the UK.
MALTA - Malta and Saudi Arabia are to sign a double tax agreement. The agreement is significant as Saudi Arabia is the largest member of the Gulf Cooperation Council, and ten companies currently registered with the Malta Financial Services Authority have Saudi Arabian share holdings. The agreement will provide a significant boost to bilateral trade and investment flows, with Malta already experiencing a trade surplus with the nation, although trade levels remain low. In 2008, Malta exported EUR15.3m worth of goods to Saudi Arabia, while imports amounted to just EUR1.5m.
USA - Four American congressman have joined the long list of objectors to the Foreign Account Tax Compliance Act. They have warned US Treasury Secretary Tim Geithner that FATCA's disclosure provisions will seriously damage US security markets. FATCA, enacted last year as part of the HIRE Act, requires all foreign financial institutions to discover whether they have American clients, and to report those clients' financial affairs to the Internal Revenue Service, starting in 2013. Banks that refuse to cooperate will have a 30 per cent withholding tax deducted from interest payments.
SWITZERLAND - Switzerland has begun a public consultation on draft legislation to implement its new withholding tax agreements with Germany and the UK.
EU - The Fourth AML Directive is in the pipeline. While the Third European Anti-Money Laundering Directive was implemented in 2007, member states were fairly slow in the implementation of national legislation to fully implement the law at a regional level. Now the EU is working on the Fourth AML Directive. The proposal is expected in 2013.
UK & SWITZERLAND - The withholding tax agreement between Switzerland and the UK has been formally signed by both countries' finance ministers. The full text of the agreement is now available.
UK - The UK has one of the lowest corporate tax burdens among the G8 countries, bettered only by Russia, according to research by accountants UHY Hacker Young. For small businesses, Britain's corporate tax burden is 16th highest out of 21 rival countries.
UK - Britain's HM Revenue & Customs is about to send warning letters to UK residents and organisations suspected of holding undeclared bank accounts at HSBC Geneva. It is acting on private information held on a disk stolen by a crooked HSBC employee and sold to the French tax authorities, who then passed it on to other countries. HMRC it has already begun 500 criminal investigations based on the stolen data.
OECD - The Turks & Caicos Islands and British Virgin Islands - both of which failed their recent OECD tax transparency examinations - have now made sufficient progress to gain approval, it was announced at a general meeting of the OECD's Global Forum on Tax Transparency. Brunei, Uruguay and Vanuatu failed to qualify. OECD secretary-general Angel Gurria told the meeting that the organisation's campaign for tax information exchange has yielded Euro14 billion in additional tax revenues from 100,000 wealthy individuals who had hidden assets offshore.
MALTA – Malta and China have signed a new Agreement for the Avoidance of Double Taxation (DTA). This Agreement, which will replace the existing DTA between Malta and China signed on February 2, 1993, will provide investors from both countries with more attractive conditions for investment in Malta or China. The provisions of this DTA are in line with the Organization for Economic Cooperation and Development Model Tax Convention on Income and Capital and recent tax treaties concluded by both countries. The withholding tax rate for dividends for a holding of at least 25% of the company paying the dividends has been established at 5% as opposed to 10% under the existing treaty and the withholding tax rate for certain royalties has been reduced effectively from 10% to 7%.
USA - U.S. authorities have widened their investigation to 17 Swiss banks under scrutiny for possibly helping wealthy Americans dodge taxes, a Swiss newspaper reported, citing several financial sector sources. Strict secrecy has helped Switzerland build up a $2 trillion offshore financial sector, and in recent years the country has faced an international campaign against tax evasion as cash-strapped governments seek to boost revenue. Credit Suisse is the formal target of an investigation in the United States and Julius Baer is also being probed. UBS, Switzerland's biggest bank, has already paid a big fine and was forced to reveal the names of some 4000 clients to U.S. authorities.
MALTA - Hong Kong and Malta today signed an agreement for the avoidance of double taxation and the prevention of income tax evasion. Without the agreement, income earned by Malta residents in Hong Kong is subject to both Hong Kong and Malta income tax. Profits of Maltese companies doing business through a branch in Hong Kong are fully taxed in both places. Under the agreement, tax paid in Hong Kong will be allowed as a credit against tax payable in Malta.
SWITZERLAND - The Swiss Federal Council has approved a new law to ensure that American owners of Swiss accounts are told of US government demands for their banking records, even if the administrative assistance request does not name the accountholder but is based merely on 'patterns of behaviour'. The amendment will enable unidentified Credit Suisse clients to object to disclosure of their private banking information, which is currently being sought by the US authorities.
EU - The European Commission is formulating a proposal under which all EU member states will adopt a single EU policy regarding 'uncooperative jurisdictions'. The first step could be to vote as a block at the OECD global forum on exchange of tax information.
SWITZERLAND - There are reports that the Swiss withholding tax agreements signed by Germany and the UK this summer are in trouble. Germany's finance minister Wolfgang Schauble is said to be trying to renegotiate the deal to placate Social Democrat demands for more enforced Swiss co-operation. And Europolitics claims the European Commission will begin infringement proceedings against both Germany and the UK by the end of 2011 if they do not revise the treaties.
EU - The European Union demanded sweeping powers to override national budgets and proposed issuing joint eurozone bonds to help resolve and prevent a repeat of the debt crisis. The head of the executive EU arm, Barroso presented radical plans that would allow him and Economy Commissioner Olli Rehn to decide to intervene in national policymaking. European Commission wants states to set up independent councils using external forecasting to agree on spending, taxation and other budget-shaping reforms.
MALTA - Malta and Bermuda have signed a tax information exchange agreement on 25th November 2011 in the UK. The tax information exchange agreement (TIEA) allows for a full exchange of information between the two countries on tax matters. Bermuda Premier Paula Cox said this was evidence of the commitment Bermuda was showing towards being a responsible player in the global finance sector.
EU – The issue of harmonising tax rates across the EU has been put back on the table by members of the European Parliament when discussing proposed legislation on the consolidated corporate tax base. Ireland has been battling against efforts that would force it to raise its 12.5% tax on companies because it is one of the main means of attracting multinational corporations into the country, according to the Government. The EU's council of finance ministers (ECOFIN) has endorsed European Commission proposals for tax policy coordination through the so-called Euro Plus Pact concluded in March by 23 of the 27 member states. The report calls for avoidance of 'harmful' tax practices. Ministers also discussed the coming negotiations between Switzerland and the European Commission on application of the EU Code of Conduct principles. The report identifies the following issues to be addressed in the dialogue:
- avoidance of harmful practices;
- fight against fraud and tax evasion;
- exchange of best practices;
- international coordination.
EU - The European Union has published a limited blacklist of Iranian organisations and individuals whose assets are to be frozen by member countries. But the EU has refused to follow the USA and UK into banning all transactions with the country's banks.
ITALY - Italy's cabinet has adopted a package of tax hikes and pension reforms worth 24 billion euros in a rush to ease a crisis that is threatening the eurozone. The package increases taxes on housing and luxury items and raises value-added tax - which has already been raised by one percentage point this year - by two percentage points to 23 percent from the second quarter of 2012. The three-year package also includes a controversial pension reform that will increase the minimum pension age for women to 62 starting next year and fall into line with men by 2018, by which time both will retire at 66.
UK - The UK government has published draft legislation to amend the taxation of controlled foreign companies. It will no longer be the case that all profits of foreign subsidiaries will be charged unless an exemption is met.
MALTA - On the 5th December, the Maltese government announced an extension to its Reduction in Tax Penalties Scheme, one which allows taxpayers with outstanding tax balances for previous tax years to regularise their tax positions, as well as benefit from reduced penalties.
USA - The US Internal Revenue Service has promised not to penalise dual-nationality Americans who had reasonable cause for not declaring their overseas bank accounts, and who do not owe any US tax. But, under the new FATCA law, US taxpayers must now file an extra form disclosing offshore assets worth more than $50,000
BRITISH VIRGIN ISLANDS - At the annual meeting of the Overseas Territories Consultative Council (OTCC), the United Kingdom's Foreign and Commonwealth Office highlighted progress made in strengthening its relationship with its Overseas Territories. Discussions at the OTCC focused on the forthcoming White Paper on enhancing the UK's relationship with Overseas Territories, and on issues such as stimulating economic growth; strengthening the Overseas Territories' highly-successful international financial centres and taxation policy.
BAHAMAS - Bahamas has begun its new financial year with a positive first month, despite the weakness of the United States economy and the domestic disruptions caused by Hurricane Irene. Tax receipts have continued to rebound strongly, and the government was able to narrow the budget deficit last month.
PANAMA - The double taxation agreement (DTA) between Singapore and Panama, which was signed on October 18, 2010, entered into force on December 19 this year. The agreement is Singapore’s 68th DTA, and is aimed at encouraging and facilitating cross-border trade and investment between the two countries, by providing greater clarity on taxing rights and minimizing the scope of double taxation that may occur as a result of cross-border economic activities. Amongst other provisions, the DTA lowers withholding taxes, sets out permanent establishment rules for businesses, and provides for the exchange of information for tax purposes based on the internationally-agreed Organization for Economic Cooperation and Development’s standard.
IRELAND - The International Monetary Fund (IMF) has welcomed an improvement in Ireland's fiscal position following authorities' efforts to stabilize the banking system and achieve the 3% of Gross Domestic Product (GDP) deficit target by 2015. Approving a further disbursement of funds as part of the EUR85bn multi-partner financial assistance package agreed by the IMF and European Union member states, the IMF said Irish authorities had adopted a credible and ambitious fiscal policy to “restore confidence as part of the government’s strategy to put the economy on a path of sustainable growth, sound public finances, and job creation”. The IMF reported that Ireland is on track to achieve its 2011 fiscal targets, and said that the recently announced 2012 Budget, which includes EUR3.8bn in spending and revenue measures, will cut the deficit to 8.6% of GDP in 2012.