Budget season is far from over
Kitty Miv, Editor
04 June, 2019
Well, I'm back to you again after a brief hiatus, and somewhat fittingly, this latest column is brought to you by the letter 'B'.
More specifically, budgets.
Yes, it's that time of year, when governments get it into their heads to re-invent the wheel, re-assert that 2+2 indeed equals 4 (or sometimes 5, depending on the arithmetical gymnastics required to balance the books), and generally squeeze their poor beleaguered populace until the pips squeak.
Barbados and the Bahamas (sticking with the 'B' theme) were no exceptions, with the former recently announcing sweeping changes to its personal income tax and VAT regimes. Effective July 1, 2019, Barbados will remove the 16 percent lowest income tax rate and the second rate of 33.5 percent. Instead, the lowest tax rate on income up to BSD50,000 will be 12.5 percent. The rate on income above this threshold will fall from 40 percent to 33.5 percent, between July 1, 2019, and December 31, 2019, and from January 1, 2020, the rate will fall to 28.5 percent.
However, while this sounds, on the surface of it, to be good news for Barbadians, from May 1, a new obligation has been introduced for foreign suppliers to charge VAT on supplies to consumers in the jurisdiction, in addition to the introduction of a 20 percent withholding tax on gambling winnings from lotteries and betting, new limits on the amount of related-party interest that can be deducted from income derived from a business or property, the introduction, effective September 1, 2019, of a thin capitalization rule, with a ratio of 1.5 to 1, and a commitment to introduce transfer pricing rules in the near future.
The government of the Bahamas, meanwhile, also announced sweeping tax changes in its budget, delivered on May 29, including a new tax on banks, which will replace annual fees, and new VAT obligations on online marketplaces and the removal of VAT on exported services.
Under the new Bahamian budget, banks will no longer be subject to business license fees. Instead, moving forward, all banks will be subject to supervisory fees and charges, and those with Bahamian dollar liabilities of over USD100m will incur a Domestic Systemically Important Institution (DSII) levy of 0.3 percent per year, which will be payable to the Central Bank of The Bahamas. The Government released no further details on the regime but said the new structure will result in a marginal increase in fees and tax from banks.
The Budget further announced that all online marketplaces that advertise and facilitate vacation rentals in The Bahamas will now be required to pay VAT on their rental and related sales to consumers in the Bahamas.
However, in good news for service providers, exported services – accounting services, legal services, information technology services, management consulting services, and financial services, etc. – are no longer subject to VAT.
In higher tax New Zealand, meanwhile, there were fewer budget-related surprises, with the government confining itself to measures already announced ahead of the May 30 budget speech. Earlier in May, the New Zealand government had revealed plans to reform the goods and services tax rules for telecommunications services, to bring them in line with the current treatment of other remote services and international standards.
Announcing the proposals and a consultation on them, Revenue Minister Stuart Nash noted that the special rules for telecommunications services are now "out of step with the OECD's guidelines for GST and VAT and for establishing taxing rights."
"This raises the possibility of a person either being taxed twice or not at all for using global roaming overseas," he explained at the time.
The proposal involves aligning the GST treatment of most telecommunications services with the treatment of other remote services like digital downloads. Remote services are generally subject to New Zealand GST when they are supplied to a New Zealand-resident consumer, with the changes intended to apply from October 1, 2020.
And finally, in budget-related news, it was suggested that Pakistan may raise its sales tax rate in the upcoming 2019-2020 Budget. However, with this announcement not reported to be in the offing until at least June 11, 2019, this is likely to be the subject of a future column. Budget season, it would seem, is far from over...
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