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Getting back to GST (and VAT!)

Kitty Miv, Editor
16 March, 2022

This week, in the world of tax, at least, the news has been dominated by all things indirect, and it is to this subject that we now turn.

First came reports from India that the Goods and Services Tax Council may announce the replacement of the country's four-rate GST regime with a three-rate framework, when it meets towards the end of this month.

The GST Council is expected to meet in late March or in early April. It will consider measures to hike the GST burden, to ensure that GST revenues hold up despite earlier decisions to significantly narrow the scope of the country's top GST rates.

Local media reports said the Council, which is made up of federal and state officials, is eyeing the introduction of three rates, of eight, 18, and 28 percent. These would replace the current rates of five, 12, 18, and 28 percent.

Then the OECD on March 10 announced the release of a new VAT Digital Toolkit for Asia-Pacific (APAC) nations. The toolkit is intended to support local tax authorities to better collect value-added tax on e-commerce activities.

The OECD explained that: "The Toolkit provides detailed guidance for the implementation of a comprehensive VAT strategy directed at all types of e-commerce. It is designed to help governments secure important VAT revenues and to ensure a level playing field between brick-and-mortar retailers and foreign online merchants."

The European Commission also announced recently that it has launched an in-depth investigation to assess whether Greece's postal operator Hellenic Post (ELTA) received unlawful state aid, including an exemption for its services from value-added tax.

ELTA is the largest provider of postal services in Greece and is the postal operator entrusted with the provision of the Universal Service Obligation (USO), which is a public service mission.

In May 2020, the Commission received a complaint alleging that several measures benefitting ELTA amount to incompatible state aid in favor of the company, including the granting by the Greek VAT Code of a value-added tax exemption to all postal services of ELTA since 2000.

At this stage, based on its preliminary assessment, the Commission explained that it has doubts on whether these measures in favor of ELTA are in line with EU state aid rules, and has therefore decided to open an in-depth probe.

And finally this week, it was reported that the Guernsey authorities are prepared to be flexible with regard to tax reforms needed to generate additional revenue, which could include a Goods and Services Tax.

The introduction of a GST with either a five or eight percent rate is included in two of three options put forward by Guernsey's Policy and Resources Committee, which was asked to identify potential sources of revenue for the government. The alternative would be a three percent "health tax", levied through the social security system. Given that the introduction of a GST would be regressive, the Committee has proposed that the levy's impact could be offset with a hike to the personal income tax-exempt allowance and changes to make the social security tax system more progressive.

In the face of spirited debate on the matter, Mark Helyar, Treasury lead for Guernsey's Policy and Resources Committee, explained that:

"We are listening to islanders, to businesses and to states colleagues in both Guernsey and Alderney. We will keep engaging and keep listening. The Committee is not ideologically wed to a Goods and Services Tax, or any other tax for that matter. It is simply looking for the best, workable solution to a very difficult problem. We want to find that solution in an open and constructive way."

His comments came alongside an announcement that a debate in the parliament, the States, regarding the way forward may be delayed, beyond July.

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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