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Indirect Tax Matters...

Kitty Miv, Editor
05 July, 2021

This week in tax news VAT has been dominating the headlines, with various governments around the world pressing the indirect tax policy lever in order to boost their depleted coffers, or to buoy up their struggling economies and populations.

In the latter camp, we have Norway, which has enacted legislation to prolong value-added tax relief measures for certain industries heavily affected by the COVID-19 pandemic. The rate covers passenger transport, accommodation, public broadcasting, and access to cinemas, museums, amusement parks, and major sporting events.

The reduced rate of VAT was temporarily cut from 12 percent to six percent from April 1, 2020, to June 30, 2021. Under the newly enacted legislation, the tax relief measure will be extended until September 30, 2021. The rate will revert back to 12 percent from October 1, 2021.

In its recent examination of the Irish economy, the International Monetary fund urged Ireland to broaden its tax base in the face of international tax reform proposals, arguing that the Republic is too reliant on the corporate tax take, and that future corporate tax revenue "could be impacted by a possible adoption of an international minimum tax that is higher than Ireland's 12.5 percent."

Suggestions made by the IMF included reducing the items subject to preferential VAT and excise rates and increasing the property tax burden.

The IMF also urged Dutch Caribbean territories, Curacao and Sint Maarten to look to value added taxes to secure their financial futures, in its annual tax policy report on their economies.

For Curacao, the IMF said while the turnover tax planned by the new government in Curacao will be a step towards a value-added tax, significant deviations persist. The IMF suggested that, while Curacao must broaden the tax base and streamline the tax system and make it growth friendly, "Curacao would benefit from moving to a full-fledged VAT with parameters calibrated to increase government revenue."

On tax reform in Sint Maarten, the IMF observed that: "The planned tax policy reforms would benefit from more specificity and incorporating the advice from recent IMF technical assistance." It stated that: "The turnover tax ought to be maintained unless [the southern, Dutch side of the island] Sint Maarten and [the northern, French side of the island] Saint Martin agree on a harmonized VAT."

Meanwhile, the Greek Government announced its intention to make permanent value-added tax relief for five Greek islands. Under the relief measure, which had been due to expire on June 30, the islands may charge value-added tax that is 30 percent lower than in the mainland.

The measures applies to the islands of Chios, Samos, Lesvos, Kos, and Leros, which are facing higher costs due to the arrival of significant numbers of refugees, as well as disruption to their tourism industries as a result of COVID-19.

Portugal and its associated territories have also opted to put in place regional measures, with the Azores, an autonomous region of Portugal, recently announcing that it is cutting its headline value-added tax rate to 16 percent (from 18 percent) with effect from July 1, 2021.

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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