Tax Strategies Diverge
Kitty Miv, Editor
21 September, 2020
In this week's column we'll be moving away from VAT, and turning our focus towards other tax happenings in the world, including the big news that the Netherlands has decided to cancel its planned corporate tax cut.
The Dutch Government's 2021 Tax Plan, unveiled in mid-September, revealed that a planned decrease in the headline corporate tax rate from 25% to 21.7% as of 2021 was being shelved. However, a parallel tax cut for small companies from 16.5% to 15% will still go ahead, applying from 2021 on profits up to EUR245,000, up from EUR200,000 currently (with this threshold increasing further, to EUR395,000, in 2022.)
The plan also includes proposals for a carbon tax from January 1, 2021, at an initial rate of EUR30 per tonne, and on the personal income tax front, contains a planned measure to increase the tax rate on savings and investment income, or "box 3" income, from 30 to 31 percent from 2021.
Well, it's difficult to top the cancellation of a corporate rate cut for news value, so Ireland decided that it wasn't going to try to compete, and would leave the headline grabbing with regard to Brexit to its neighbour. With current events in the UK pointing to the likelihood of a no-deal Brexit, the Irish authorities announced recently that they have ruled out changes to income taxation in the Budget to be delivered on October 13.
Finance Minister Paschal Donohoe and Public Expenditure Minister Michael McGrath explained that the Budget will be formulated based on two assumptions: that bilateral trade between the UK and the EU will be taking place on World Trade Organization terms, and that in the absence of a vaccine, COVID-19 will be an ongoing factor with which the population and the economy must "co-exist".
The Cabinet has reportedly agreed that "broad-based increases in taxation would be counter-productive" at this stage in the economic cycle. Further, as set out in the Programme for Government agreed by the coalition partners, there will be "no change to income tax credits or bands" in Budget 2021. The Budget will prioritize the response to the COVID-19 crisis, rather than "normal" budgetary adjustments.
Finland, meanwhile, opted to tinker around the edges of tax reform in its draft Budget for 2021, adjusting personal income tax brackets to account for inflation and increasing taxes on alcohol and tobacco.
The Government also intends to take up some of the recommendations of the working group on energy taxation, including reducing the industrial electricity tax to the minimum level permitted by the European Union and tightening the taxation of fuels used in manufacturing and to provide heating, starting next year. The draft 2021 Budget is due to be discussed by the Government on October 5, 2020.
And finally, in Sweden, targeted taxes were the order of the day, with a new "risk tax" proposed to be imposed on banks and other credit institutions from 2022.
According to the Swedish authorities, the planned levy would be a 0.06% tax on the liabilities of banks and credit institutions in 2022, increasing to 0.07%in 2023, and would apply to liabilities exceeding SEK150bn relating to the company's operations in Sweden.
The Ministry of Finance explained that the aim of the tax – which has now been referred to the Legal Council for review – is to create a fiscal buffer in the event of a financial crisis.
Until next week!
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