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reaching fever pitch

Kitty Miv, Editor
03 October, 2019

When we last left the Brexit players, the background noise was vague but threatening, with Boris blustering, the EU seemingly equanimous in the face of UK governmental fury, and neither side inclined to budge one iota from either their side's agenda or their red lines. Plus ca change, as our French cousins might well say.

Whilst it is not my place to comment on the various rumors flying around in the UK, at both a political and personal level, it is fair I think to say that things have not improved for the PM in the intervening week, nor has substantive progress been made towards a satisfactory conclusion to the Brexit conundrum.

Therefore, I think we'll leave that issue there, concentrating instead on the areas of continental Europe in which tax business is continuing, if not exactly as normal, then as close an approximation as can be managed currently.

For example Ireland, despite its proximity to the turbulence, has been busy legislating on a number of domestic tax matters, in addition to preparing its national budget for delivery.

In a very timely speech, given the current climate on climate (sorry...), Taoiseach Leo Varadkar told the UN Climate Action Summit in Los Angeles recently about the Irish government's plans to "ring fence additional revenues raised from carbon tax to fund climate action".

In a speech published for delivery to the UN General Assembly, Varadkar explained that: "Leadership is required to take action. And I believe leadership is also required to convince people that it is not too late to act. It's not. We are inspired by children and young people who have embraced this cause and keep it at the top of the agenda... Now with our Climate Action Plan we know what we are going to do. Next year, we will underpin it through new Climate Action legislation including carbon budgeting. We have a carbon tax and have a cross-party agreement to increase it to EUR80 per tonne by 2030. From next year, all new revenues raised from carbon tax will be ring-fenced to fund climate action and just transition."

Ireland's carbon tax is currently charged at EUR20 (USD21.98) per tonne of CO2 equivalent. The charge is paid by the importer or the extractor on the content of fossil fuels. The rate has not changed since 2014. In June, the Government announced that it has plans to quadruple the tax over the next decade.

Still speaking from Los Angeles, Varadkar weighed in on the government's plans for the forthcoming budget, suggesting that it could include modest income tax cuts.

The Irish PM told reporters in the US that while the Budget will not be a "give-away" and will "have a minimal tax package," the Government is keen to "put money back in people's pockets."

Varadkar added that the Government is "looking at a number of things certainly around income taxes." He explained that "there will be some tax reductions but they won't be like the last three years."

Finance Minister, Paschal Donohoe, had previously revealed that he intends to "make a set of very safe choices in relation to taxation" at the Budget.

Elsewhere in Europe, meanwhile, the French authorities have been busy, unveiling plans on September 23 to ensure the payment of value-added tax on items bought by French residents from online marketplaces, as part of a package of measures included in the 2020 Finance Law.

Under the proposals, announced by Minister of Public Accounts Gerald Darmanin during a visit to an Amazon delivery facility near Paris, online marketplaces facilitating sales between third-party sellers and buyers in France will be liable for VAT on these purchases from 2021.

The reforms will also see the creation of a blacklist of online platforms that fail to comply with certain tax and reporting requirements.

In an additional measure, logistics warehouses will be required to keep a record of the origin and destination of packages, and the amount of VAT due, for a period of 10 years.

The measures will also be accompanied by simplification measures to ensure widespread compliance with the changes, Darmanin explained, seeking to reassure the industry.

Other measures included in the Draft Finance Law, presented to the National Assembly on September 26 by Minister of Finance Bruno Le Maire and M. Darmanin were that:

  • The rate of corporate tax for companies with profit above EUR500,000 (USD547,000) will be reduced to 31 percent in 2020, to 27.5 percent in 2021, and to 25 percent from 2022. This amends the changes included in the 2018 Finance Act, whereby corporate tax was due to fall to 28 percent in 2020, to 26.5 percent in 2021, and to 25 percent from 2022;
  • The housing tax (taxe d'habitation) will be eliminated for 80 percent of households by 2020 and phased out for the remaining 20 percent in the period to 2023;
  • 18 taxes which generate low levels of revenue and which are costly to administer will be abolished as part of a wider simplification of the tax system. This follows the scrapping of 26 such taxes in the 2019 Finance Act; and
  • The lowest personal income tax bracket will be reduced from 14 to 11 percent (although households subject to the 41 and 45 percent tax rates will not benefit from this tax cut).

So, while things reach fever pitch politically and economically elsewhere in the world (including in the United States, but that's a whole column in itself, and perhaps one for another week), it is somewhat reassuring to know that perhaps cooler heads are prevailing in some countries.

Until next week...

Tags: Euro | Government | Law

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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