A Mixed Bag of Swiss Rolls and VAT Selection Packs...
Kitty Miv, Editor
13 November, 2019
As election fever takes hold in the United Kingdom, with the odds reportedly narrowing slightly in favor of the governing Conservative Party returning to power (at least at the time of writing), and having at last taken something of an in-depth look at the tax situation in the United States in last week's column, this week, I want to look at what's been going on in the rest of the world recently.
And it's been a bit of a mixed bag, to be honest, with Switzerland, for example, occupying more space in the news than is customary, initially when it was cautioned by the OECD to pay attention to the needs of its aging population with regard to tax system design.
In its latest Economic Survey of Switzerland, the OECD called for a rebalancing of the country's tax mix, recommending shifting that mix towards more growth-friendly sources in order to help prepare the system for the impact of an anticipated wave of aging Swiss citizens.
The OECD observed that Switzerland "relies more on direct taxation and social security contributions than most other OECD countries, at two-thirds of revenues."
It went on to suggest that government plans, to raise the VAT rate by 0.7 percentage points and reduce disincentives to work for second-earners in families, are steps in the right direction.
The OECD recommended that VAT exemptions and reduced rates should be "wound back" to finance lower personal income taxes, particularly on lower income earners. It added that the cantons could make more use of the recurrent taxation of immovable property and that there is scope to raise more revenue from environmental taxes.
Then later in the week, Brexit seeped in to the news once more, as it emerged that the UK and Switzerland have signed a transitional social security agreement that will apply when the UK leaves the EU.
According to the UK Government, the agreement will protect the existing social security coordination arrangements between the two partners when the UK leaves the EU.
Existing entitlements, including reciprocal healthcare coverage, will continue until the end of December 2020 for both UK and Swiss nationals and for EU citizens who move to, travel to, or work in the UK or Switzerland during this period. UK nationals will continue to be subject to only one country's social security scheme at a time.
Finally, on the Swiss front, it emerged that the Federal Council had adopted dispatches on amendments to the country's double tax agreements with New Zealand, the Netherlands, Norway, and Sweden, which will implement the BEPS minimum standards.
Each of the protocols contains an anti-abuse clause to deny treaty benefits where one of the principle purposes of an arrangement is to obtain treaty benefits, such as reduced withholding tax rates, in inappropriate circumstances.
Meanwhile, in the EU and elsewhere, value added tax was once again the focus, with Russia ruling out another hike to its value-added tax rate via government spokesperson Dmitry Peskov, who was quoted by Russian media as stating that a tax increase is not planned or being considered.
Peskov revealed, however, that the increase to its value-added tax rate from the beginning of this year, from 18 to 20 percent, had netted the Government record revenues, with VAT revenues rising by more than 20 percent during the second quarter of this year, with the increased rate expected to generate an additional RUB2 trillion (USD31bn) over the next three years.
The EU was also preoccupied with matters value added this week, hosting a meeting on November 8 to discuss planned reforms to the bloc's indirect tax system. Finland, which currently holds the presidency of the European Union, announced that EU finance ministers planned to discuss various value-added tax issues, including tackling VAT fraud and simplifying the VAT regime for small companies.
With regards to VAT fraud, proposals to require payment service providers to report data on cross-border payments have been under discussion. This information would be collected in an electronic system that could be used by the anti-fraud authorities of member states to improve VAT fraud detection. The European Council is seeking a general approach on these legislative proposals.
The Council is also seeking to reach a political agreement on reforms intended to reduce the VAT compliance burden on small businesses and improve the neutrality of the VAT regime. The presidency will seek support for a proposal to harmonize VAT registration thresholds across the EU.
Until next week (when who knows what will be occupying the top slot, news-wise!)
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