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Budgets Bypass Manifestos, Manifestly

Kitty Miv, Editor
28 November, 2019

Political manifestos are flying like confetti in the United Kingdom, and likely containing measures with as much longevity as the same, lasting just long enough to pull the political party (or, as is looking increasingly possible, parties) over the December 12 finish line, before dissipating in a puff of practicality. Anyway, moving swiftly on to less ephemeral matters.

Elsewhere in the world, then, tax information exchange and budgets appear to be the order of the day, with a number of governments looking to get their counting houses in order ahead of the end of the year.

In Uzbekistan, for instance, the government confirmed recently announced changes to the country's corporate income tax and VAT regimes in the 2020 Budget.

In line with an earlier announcement, the Budget included a cut to the VAT rate to 15 percent from 20 percent effective from October 1, 2019. The Budget also confirmed the Government's plans to remove the flat rate VAT scheme for certain medium-sized enterprises.

Further, the Budget provided for an increase to the headline corporate tax rate from 12 percent to 15 percent.

Other measures included a reduction in the single social payment from 25 to 12 percent for state enterprises, and legal entities in which the state owns at least 50 percent of its authorized capital, and the introduction of a new tax system for individual entrepreneurs, who will newly pay a fixed tax rate based on their actual income.

Ghana, meanwhile, sought to broaden its tax base, with Minister of Finance Ken Ofori-Atta recently presenting the government's 2020 Budget to Parliament.

The 2020 Budget included the following measures to increase the country's tax-to-GDP ratio:

The renewal and extension of the five percent National Fiscal Stabilization Levy on company profits and the two percent Special Import Levies for an additional five years;

A review of current legislation in a bid to strengthen the relevant laws and provide additional regulations and administrative guidelines for the taxation of e-services;

A review of legislation with a view to bringing about new measures to require taxpayers to disclose aggressive tax planning arrangements that may lead to tax base erosion or profit shifting;

The simplification of existing tax legislation, including making abridged versions of the Customs Act, Excise Duty Act, Income Tax Act, and the Value-Added Tax Act; and

The submission to parliament of Revenue Administration Regulations and the updated Transfer Pricing Regulations.

Ofori-Atta also explained that the personal income tax bands will be adjusted, and that those on the newly increased minimum wage will be exempt from tax in 2020, with personal tax reliefs being revised upwards.

On the topic of information exchange, in Switzerland, the authorities revealed that the country would be amending its domestic framework for the automatic exchange of information, in line with recommendations made by the Global Forum on Transparency and Exchange of Information for Tax Purposes.

The OECD's Global Forum conducts peer reviews of member countries in two phases. Phase 1 covers the legal and regulatory framework of the country concerned. Phase 2, to which Switzerland was admitted in 2015, assesses how effectively a territory exchanges tax information in practice.

Switzerland's AEOI framework has been operational since January 1, 2017.

Changes have been now been proposed to the Federal Act on the International Automatic Exchange of Information in Tax Matters (AEOIA), following a consultation that ended in June 2019.

The changes will enhance due diligence obligations on Swiss financial institutions and enhance document retention rules. An exception from reporting will also be removed for condominium owners' associations.

The Swiss Parliament is expected to examine the proposals for the first time during the 2020 spring session, with changes entering into force at the start of 2021 at the earliest.

In the European Union, in this area, it was announced that the EU's Competitiveness Council would be meeting at the end of November to agree a general approach on a legislative proposal to release to the public information on multinational enterprises' tax affairs.

The meeting follows the passage of a resolution by members of the European Parliament on October 24, 2019, calling on EU member states to agree proposals that would require the public disclosure of country-by-country reports.

MEPs passed the resolution on public CbC reporting by 572 votes to 42, with 21 abstentions. MEPs said that agreeing a position would allow talks between member states and the European Parliament to begin, with the aim of reaching a final text on the proposed rules.

Under current rules, multinational groups located in the EU or with operations in the EU with total consolidated revenue of EUR750m (USD833.4m) or more are required to file CbC reports. The report must include information for every tax jurisdiction in which the group does business, covering the amount of revenue, profit before income tax, income tax paid and accrued, number of employees, stated capital, retained earnings, and tangible assets.

According to MEPs, making the information public would boost transparency and discourage companies from shifting profits to low-tax jurisdictions.

The MEPs' resolution also called on the Finnish presidency of the European Council to "recommence and prioritize work" on the public CbC reporting proposal.

On the subject of the EU's near neighbors to the North, it was also recently revealed that the double tax agreement between the Nordic countries will be updated with new anti-tax base erosion and profit shifting provisions with effect from January 1, 2020.

The Finnish Government (they get about, don't they?) announced that the domestic ratification procedures have now been concluded in respect of the updated double tax agreement, enabling it to enter into force from November 28, 2019.

The protocol to the Nordic double tax agreement – covering Denmark, Sweden, Norway, Finland, Iceland, and the Faroe Islands – was signed on August 29, 2018.

The updated treaty includes a new preamble, which states that the DTA is not intended to create opportunities for non-taxation or reduced taxation through tax evasion or avoidance, or treaty shopping, and attempts to abuse it will be counteracted by the treaty's provisions. Further, it provides that mutual assistance procedure dispute resolution may be initiated in a contracting state other than the taxpayer's state of residence.

Until next week!


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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