VAT's (not) All, Folks!
Kitty Miv, Editor
14 August, 2021
VAT seems to have been the flavor of the week this week, and so it is to indirect taxes that we turn our attention, starting with Guernsey, where big changes are potentially afoot in order to secure additional revenue to help with the post-COVID economic recovery, as it was announced that Guernsey lawmakers are to discuss the possibility of introducing a value-added tax system, at a debate scheduled for September 2021.
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, however, it has been 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.
With matters climate-related firmly on the world agenda this week with the publication of the IPCC report, it was timely that on August 4, 2021, the European Commission released a proposal for a Council Implementing Decision to allow Germany to introduce a reverse charge for emissions allowances.
In March, Germany requested authorization to derogate from Article 193 of the VAT Directive regarding the person liable for payment of VAT in case of transfer of emission allowances traded in the national system under the Fuel Emission Allowance Trading Act (BEHG).
Under the BEHG, Germany has created a legal framework for a national emissions trading scheme for the pricing of greenhouse gas emissions from fossil fuels, which do not fall under the EU Emissions Trading Scheme, from 2021 onwards. The Act is intended to help Germany achieve its national climate targets, including the long-term target of net-zero greenhouse gas emissions by 2050, and the reduction targets under the EU Climate Regulation, as well as improving energy efficiency.
The Commission has proposed that Germany should be allowed to require VAT under a reverse charge for traded allowances under the new system until at least December 31, 2024. The VAT reverse charge mechanism involves shifting liability to account for VAT from the supplier to the customer and is usually put in place as an anti-fraud measure, to prevent suppliers from charging VAT on onward supplies and failing to remit VAT collected to the tax agency.
And finally for this week, joining the many other countries throughout the world this year that are seeking to capture tax revenues from transactions that are increasingly taking place digitally, Georgia has confirmed it intends to introduce new VAT rules for overseas suppliers of digital services from October 1, 2021.
Under the rules, which were initially intended to be in place from July 1, overseas suppliers of broadcasting, telecommunications, and electronic services must charge VAT of 18 percent on supplies to consumers. The requirement applies to businesses that lack a permanent establishment and are not resident in Georgia.
Until next week!
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