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Deal Or No Deal

Kitty Miv, Editor
10 October, 2019

As in previous weeks, and despite the deadline drawing ever nearer, the outcome of Brexit is still anyone's guess, and so, once again, I'm opting to stick with safer topics, although safe doesn't necessarily mean uninteresting in this case.

For example, this week's big news – and it is big news, given just how many years various administrations have been equivocating, prevaricating, and various other '-ings' over the measure – the Japanese government finally went ahead with its plans to increase the standard sales tax rate.

The Japanese authorities have been trailing the move for years now, with the potential last minute danger to the introduction of the measure, or the potential last minute savior of the Japanese economy (depending on your perspective) being the likely chilling effect of a sales tax hike on consumer confidence, and with the knock-on effect that is expected to have on spending.

Given the relative weakness of the Japanese economy over the last few years, with its concerns over the impact of an aging population on government receipts, this is a valid worry. However, the increase has now entered into force (following two previous delays), so let the dice fall where they may, economically speaking.

However, in order to mitigate the impact of the rate rise on lower income groups, a reduced eight percent rate will apply to the supply of foods and drinks – with the exception of liquors and restaurant services – and to subscription newspapers issued twice or more a week.

Elsewhere in the world, there was a definite sense of indirect tax house-cleaning, with the Estonian Ministry of Finance announcing the approval of amendments to the country's VAT Act to transpose the European Union's VAT "quick fixes", which are aimed at improving the functioning of the European Union VAT regime, and will enter into force on January 1, 2020.

Meanwhile, the Uzbek authorities in late September issued a decree reducing the country's rate of VAT from 20% to 15%, effective October 1, 2019. In addition, the decree stated that when preparing the 2020 State Budget, the Cabinet should increase the standard corporate tax rate from 12% to 15%, and reduce the single social payment from 25% to 12% for state enterprises, and legal entities in which the state owns at least 50% of its authorized capital.

Speaking of budgets, this has been a bumper week for them, with Algeria releasing its draft Budget Law for 2020, including proposals for a number of tax reliefs.

The Government announced that it will offer a profit tax holiday and value-added tax exemptions for start-up businesses during their initial years, and is looking to roll out four new tax-privileged special economic zones.

The Budget would also relax the "51/49" rules on foreign direct investors that preclude foreign investors from holding a majority shareholding in an Algerian venture.

Then on October 7, 2019, the Norwegian Government submitted its 2020 Budget to Parliament, including changes to the research and development tax incentive and the removal of the low-value import VAT exemption, among other measures. With regard to VAT, the authorities unveiled proposals to remove the VAT exemption on imports of goods valued below NOK350. As part of this change, a simplified registration and reporting scheme for the calculation and payment of VAT will be established, with the responsibility for the payment of VAT placed on the foreign seller or the e-commerce platform offering goods to Norwegian consumers. This scheme will apply to goods with value up to NOK3,000 and will be introduced on April 1, 2020, although food and drink, alcohol, tobacco and restricted goods are excluded from this scheme.

Finally, and still with an emphasis on VAT, we have a little bit of Brexit to finish (arguably the opposite of a palate cleanser...), with the news that the UK Government had released guidance explaining a temporary arrangement for VAT registration that has been developed for if the UK leaves the EU without a deal.

Non-UK businesses in the EU who are currently not required to VAT register in the UK owing to cross-border simplifications, such as call-off stock arrangements and the zero-rating of intra-community acquisitions of goods and accounting, may need to register for VAT if the UK leaves the EU without a deal. The special temporary arrangement will enable businesses to submit an advanced notification of UK VAT registration under specific circumstances.

Specifically, businesses that are not currently eligible to register for VAT yet, and would need to be from November 1, can benefit from temporary arrangements for advanced notification of VAT registration. VAT registrations will go live only if the UK leaves the EU without a deal.

This is to support supply chains for UK businesses which have suppliers in the EU. HMRC will continue to refuse applications for VAT in all scenarios outside of this in order to protect the integrity of the VAT regime and guard it against fraud, the government explained.

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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