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Relief packages coming thick and fast...

Kitty Miv, Editor
01 June, 2022

In this week's column, we will be looking at the tax relief measures being put in place by governments and international bodies to mitigate against the various economic shocks being experienced across the world, starting with Bulgaria, where the authorities have announced a package designed to cushion taxpayers against rising international energy prices.

The tax relief measures include a zero percent rate of VAT on bread and an increase in the tax credit for families with children, from BGN4,500 per year to BGN6,000, in addition to discounts on fuel, including petrol and diesel. The Government has further said that it will tax the "excess profits" of energy firms. VAT on energy used for heating and hot water, including natural gas, will be reduced to nine percent, and excise duty on electricity, natural gas, and methane will be set at zero percent, the Government has said. It has also announced that it will double the VAT registration threshold to BGN100,000 (USD54,600). Many of the measures are expected to be included in the mid-year Budget.

In Germany, the Government has also committed further resources to tackling the energy crisis. The German Federal Council, the Bundesrat, has approved a number of tax relief measures which were approved by Germany's Cabinet and the lower house of parliament, the Bundestag, earlier this year.

The measures include a reduction in the energy tax on fuels for three months. The energy tax rate is to be reduced by EUR0.2955 per litre for petrol and by EUR0.1404 per liter for diesel. Further, the Council approved the withdrawal of the Renewal Energy Sources Act (EEG) surcharge from July 1, 2022. Under the new measures, companies will be allowed to carry back losses from 2022 and 2023 up to EUR10m to the two immediately preceding years. The Act will also extend the optional declining-balance method of depreciation for another year.

In Finland, meanwhile, the focus was on the humanitarian impact of the ongoing situation in Ukraine, with the Government confirming that it will introduce a value-added tax exemption for donations of goods from anywhere in the EU for persons fleeing the Russian invasion of Ukraine, and for services related to such goods. The Government said the measure is expected to be implemented at EU level. The provisions are proposed to be applied retroactively from February 24, 2022, and to remain in force until the end of 2022.

And last but not least, in the UK, the Government announced a new tax on energy companies' windfall profits applying at a rate of 25 percent to profits that arise from May 26, 2022, onwards.

The new levy was announced by the Chancellor Rishi Sunak after several months of pressure from opposition lawmakers, and came as part of a package of moves aimed at cushioning the impact of the cost of living crisis for UK taxpayers.

It applies to the profits of oil and gas companies operating in the UK and the UK Continental Shelf and will increase the headline rate of tax on those profits from 40 percent to 65 percent. It is temporary and will be phased out when oil and gas prices return to historically more normal levels, the Government says. The implementing legislation will also include a sunset clause, which will remove the tax after December 31, 2025.

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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