All this uncertainty is no joke
Kitty Miv, Editor
15 March, 2019
Timetables. They're not very glamorous, but they are terribly important. Imagine turning up to the airport to discover the morning flight to London is actually the red-eye to Sydney, leaving 10 hours later than advertised. Or arriving at the train station to learn that the express to Rome is now the all-stations stopper to Rimini. That would be very frustrating, even distressing, depending on how urgently you'd need to get from A to B, C, D, or E.
Legislative timetables are also very important. They help businesses and individuals plan for the future, including in the area of taxation. Certainly, all manner of external influences can intervene to make it hard for a timetable to be stuck to. But at least with a schedule, you've got a vague idea of the direction of travel, and how long it's going to take. Without one, tax planning becomes difficult, if not impossible.
A pity then that the world's major powers and tax policy influencers keep changing the timetable for new digital tax rules, especially given that these could be some of the most ground-breaking tax reforms since the introduction of corporate taxes. Indeed, it's become a bit like the aforesaid plane and train example. The international digital tax was supposed to depart from OECD headquarters in Paris in 2020. Then it got brought forward, and was instead due out of Brussels before the end of 2018, but only going as far as the EU. However, some member states failed to show up, and it's now well behind schedule, and will probably only go half way to the destination that was originally planned. But now we hear that the international digital tax could be early – about a year early if US Treasury Secretary Steven Mnuchin and his French counterpart Bruno Le Maire have anything to do with it. Who's driving this thing?
And what of the national digital taxes? France's digital tax is going full steam ahead after Le Maire officially unveiled legislation for a three percent revenue tax, along similar lines to that proposed by the European Commission last year. But you'll need a time machine to actually get on board, as the timetable says it starts on January 1, 2019. Meanwhile, Spain's digital tax appears to be grinding to a halt due to problems with the legislative machinery. Parliament's rejection of the 2019 Budget and the calling of fresh elections, to be held in May 2019, may even derail it.
I think Italy's digital tax remains on track, but until the Government fleshes out the proposals, we only have a vague idea where it's going and when it will get there. The UK at least signaled well ahead of time that its digital tax will commence in 2020, even giving us the exact month: April. How helpful! I often arrive at the airport hoping my plane will leave some time before the 31st. So, shall we try and guess the day? April 1? A little inappropriate perhaps. All this uncertainty is no joke.
While I'm on the subject of slipping timetables, the matter of the tax extenders reared its ugly head in the United States Congress last week. Remember those? You could be forgiven for forgetting. In the US, in quieter times on the tax front, the drama of the annual or biannual renewal of the tax extenders was the tax legislative event of the year. In the manner of a Hollywood action thriller, usually the day would be saved at the last minute, even the last second, by a vote in favor of renewal, often after some tense and uncomfortable scenes on the House and Senate floor. How appropriate then that one of the measures up for renewal is the special expensing regime for film and TV productions.
However, this package of temporary tax breaks has been rather overshadowed by the TCJA, which is why most people have probably forgotten about it. What's more, the actual provisions – mostly tax credits and deductions – are somewhat niche. I dare say that there aren't many taxpayers in the US who will benefit from the 20 percent mine rescue team training tax credit (that's not to underappreciate their very valuable work, of course), or the three-year depreciation period for race horses two years old or younger, to cite but two examples of the 28 items in the package. Although many would argue that the tax credits for the production and use of clean forms of energy and the deduction for tuition expenses are of much wider societal benefit.
Either way, it's certainly not helpful that some of these tax breaks expired as long ago as December 31, 2017. It's not ideal either that Senate Finance Committee Chairman Chuck Grassley's new legislation will only renew them through the end of 2019. What's more, there are few indications that Congress will actually vote on the bill, let alone approve it. There's the budget deficit to think about. And, politically, the tax extenders aren't flavor of the month. Or in other words, the next elections are a long way off. By which time I suspect the appropriate amount of money to renew them will magically appear. However, maybe, for the sake of taxpayer certainty, it's time these tax provisions were allowed to quietly expire one and for all.
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