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A VAT snapshot

Kitty Miv, Editor
08 June, 2022

Value added taxes have been dominating the news this week, with governments across the world making use of the indirect tax policy lever, starting with Thailand, where the authorities recently enacted legislation for the previously announced value-added tax exemption for certain digital currency transfers.

The value-added tax exemption will be offered during the period April 1, 2022, to December 31, 2023, Thailand's Cabinet decided earlier this year. The Cabinet also agreed to recognize losses from cryptocurrency trading, to allow taxpayers to offset these against taxable gains. The measures, however, will apply only to transactions on exchanges approved by the Ministry of Finance.

In Europe, meanwhile, the European Union was busy patting itself on the back over the changes to the EU's value-added tax rules for e-commerce that were introduced from July 1, 2021, stating that newly released revenue statistics point to a successful implementation of the measures. The EU reforms were intended to simplify VAT rules for goods sold online and introduce new obligations on online marketplaces to require them to contribute in the fight against tax fraud.

The package provided that non-EU providers of all types of cross-border services to consumers would be required to charge VAT and remit that VAT to the consumer's home state tax agency; EU providers would be required to charge VAT on all types of cross-border services to consumers and on intra-EU distance sales of goods; and low value consignment relief, which enabled goods valued below EUR22 (USD26) to enter the EU market VAT-free, would be abolished.

The package also included two key simplification measures, namely that: the mini one-stop-shop scheme (MOSS) would be expanded into the One Stop Scheme (OSS) relieving online traders of having to register for VAT in each of the member states in which they sell covered goods or services; and taxpayers carrying out cross-border online sales of goods or digital services of up to EUR10,000 per year would be empowered to apply the VAT rules of their home country.

According to the six-month figures released by the Commission, in the first half-year of operation, Member States collected EUR6.8 billion in VAT revenues via the expanded OSS portals. In addition to this EUR6.8bn, over EUR2bn in VAT revenues was collected on imports of low value consignments not exceeding EUR150.

Meanwhile, in Saudi Arabia, Finance Minister, Mohammed Al-Jadaan, reportedly confirmed that the hike to the country's value-added tax rate is temporary, but likely to remain in place for the moment.

In response to falling oil prices, Saudi Arabia trebled the rate of VAT from five percent to 15 percent with effect from July 1, 2020. The Finance Minister has said the rate will be retained despite the recovery in oil prices, telling Reuters at the World Economic Forum that: "We will ultimately consider cutting the VAT but at the moment we are still replenishing the reserves."

And finally for this week, in Sri Lanka, the authorities hiked the country’s value-added tax rate with immediate effect, and also stated that they will raise its corporate tax rate.

The measures were announced in a bid to stabilize the country's finances, after tax reliefs announced in 2019 established a considerable deficit.

The value-added tax rate was increased with effect from June 1, 2022, from eight percent to 12 percent. Further, the telecoms levy was restored to 15 percent, up from 11.25 percent, having been cut back in December 2019.

The Government has also committed to increase the corporate income tax rate from 24 percent to 30 percent, in a bid to secure financing from the International Monetary Fund. Further, the intermediate rate of corporate tax will be raised to 15 percent. Both changes are proposed to be effective from October 2022.

Until next week!


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About the Author


Kitty Miv, Editor

Kitty was born in Argentina in 1960 to a Scottish cattle rancher and his Argentine wife. Educated in Edinburgh and at Princeton, Kitty worked for the World Bank as an economist, where she met and married an emigre Iranian banker. During her time with the Bank, Kitty worked in a number of emerging markets, including a spell in the ex-USSR as a Transition Economies Team Leader. Kitty is now a consultant in Brussels and has free-lance writing relationships with a number of prominent economic publications. kitty@lowtax.net

 

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