All roads lead to Rome for Russell Bedford’s 34th Annual Conference
Russell Bedford’s 34th Annual Conference in Rome on October 18th to 22nd 2017 saw a record number of attendees. The delegate programme opened with welcome addresses from Russell Bedford International chairman Bill Rucci and CEO Stephen Hamlet. The dominant theme of the conference was creating new business opportunities and there were also sessions on data analytics and the future development of the Russell Bedford brand among many other topics.
RBI firms contribute to World Bank Doing Business report 2018
Forty seven Russell Bedford International member firms have, for the ninth consecutive year, assisted the World Bank in researching its annual Doing Business project. This year’s report shows no change on last year’s top-performing countries: New Zealand, Singapore and Denmark again occupy the top three places. The report, titled Doing Business 2018: Reforming to Create Jobs, also highlights the performance of emerging economies and notes remarkable improvements in individual countries’ regulatory regimes. Stephen Hamlet, CEO, Russell Bedford International, said the report “remains one of the most consistent barometers of the regulatory burden on businesses and entrepreneurs worldwide – and an initiative we are proud to support.”
Senate plan analysed
House Republicans have revealed new details for tax reform legislation that seeks the biggest U.S. tax code transformation in more than 30 years. The plan, titled the Tax Cuts and Jobs Act, wants a deep cut in the corporate tax rate to 20% from 35%, compressed individual income-tax brackets, and an eventual repeal of the estate tax. To partly offset lost revenue, it is proposed to curtail the deductions individuals take for state and local tax payments and mortgage interest and the ones businesses receive for interest paid on debt. The plan also repeals personal exemptions based on family size and calls for the top individual tax rate to be left at 39.6%, but pushing the income threshold for that rate to $1m for married couples from $480,050. The House Ways and Means Committee will seek to consider the bill next week with the aim of turning it into law by Christmas. The plan has precipitated a backlash from business, and the U.S. Chamber of Commerce while applauding the measure said “a lot of work remains to be done.” The Wall Street Journal notes that the e business community is divided over the House of Representatives Republican tax-reform proposal, with small business, housing advocates and higher education against the plan and manufacturing and chief executives in favor. “The bill eviscerates existing housing tax benefits by drastically reducing the number of homeowners who can take advantage of mortgage-interest and property-tax incentives,” said Granger MacDonald, chairman of the National Association of Home Builders. However, Mark A. Weinberger, a chair on the Business Roundtable, said: “The release of tax-reform legislation demonstrates Congress’s commitment to boosting American jobs, American wages and American competitiveness.”
Senate plan analysed
The Senate Republican tax plan diverges significantly with the one drafted by the House GOP, in key areas including the timing of a corporate tax-rate cut, the number of individual tax brackets, the details of international tax rules, and the particulars of estate-tax changes. The Senate bill, according to Senate Finance Committee aides, would delay until 2019 a cut in the corporate tax rate to 20%, preserve the current seven-bracket individual income tax structure, with top and bottom rates of 38.5% and 10% respectively, and double the estate-tax exemption to a maximum of around $11m per person. Another point of difference is that it doesn’t create a special, lower top rate for so-called pass-through entities. Conservative group FreedomWorks said “There’s a lot to like” in the plan, but added that the 2019 corporate tax delay is “unacceptable”. Greg Valliere, chief global strategist at Horizon Investments, said: “One thing seems clear: there isn’t enough money to pay for everything that each house wants. Something has to give – most likely corporate tax relief, which may not be as generous as proponents expected a few weeks ago”. The Senate Finance Committee is scheduled to consider the bill next week, and the full Senate may vote the week after Thanksgiving.
Koskinen concerned about cuts to IRS
The outgoing boss of the IRS John Koskinen discusses the strains on the tax body and President Trump’s controversial tax returns in an interview with PBS. Koskinen, who will complete his term tomorrow, reveals that he doesn’t believe the move to impeach him was ever going to succeed. He also says he has not seen President Trump’s returns, noting that the IRS cannot look at anyone’s returns specifically unless as part of an audit. He adds that he has spent the last four to six weeks advising Senators that he is deeply concerned with the cuts imposed upon the agency and whether it will continue to function effectively. He says either the IRS’s IT system will fail or the organization will carry out fewer audits, the compliance system will then erode, costing the government billions of dollars. Finally, Koskinen says he thinks that the tax code is far too complicated and difficult for taxpayers to navigate. Therefore the IRS would strongly support any changes that simplify the process for taxpayers.
New pass-through rules make over complex
The National Federation of Independent Business has criticised a Republican tax reform provision creating a new rate for “pass-through” businesses. Profits for pass-through businesses go through to owners untaxed and then are reported as income on their individual returns. The top rates on some income will be slashed from 39.6% to 25%, but to counter an expected rush by service providers such as doctors, lawyers and accountants to register as pass-through businesses, the bill has assumed they will be excluded from the pass-through rate, while a raft of formulas determine how other businesses’ income is subject to the pass-through rate. Experts say the attempt to exclude professionals had over-complicated the bill while National Federation of Independent Business spokesman Jack Mozloom said it was wrong to pick winners and losers based on what they do. “We certainly want manufacturers to get a tax break, but we want their accountants to try to get a tax break too,” he added.
Britain blocks sanctions against non-cooperative tax jurisdictions
The UK government teamed up Luxembourg and Malta this week to resist calls to sanction those countries placed on an EU tax haven blacklist. EU commissioner Pierre Moscovici had urged such a list to be enforced with “credible and meaningful” sanctions. “This time we have to point the finger at Britain,” said Sven Giegold, the European Parliament Green group’s finance spokesperson, reacting to the Paradise Papers leak. “With its overseas territories, Great Britain dominates the map of tax havens […] The British are particularly sceptical about the EU’s black list of tax havens, for self-protection.” He added: “We must make best use of the Brexit negotiations to close the UK’s tax havens.” The FT reports that leaders of UK overseas territories are under pressure from what some say is a calculated “campaign to gain public access to private financial information,” with EU politicians ready to signal virtuously about British territories and dependencies. The FT also reports that the Dutch government is to open an investigation into thousands of corporate tax deals signed by the government after the Paradise Papers revealed an official signed off on a deal allowing P&G divert profits to the Cayman Islands. In France, the Independent reports that filmmaker Jean-Jacques Annaud, the maker of Mirage fighter jets and oil giant Total SA are among high-profile French names defending themselves after the leaked Paradise Papers documents showed they used tax havens.
European Commission questions Apple’s Irish taxes
EU competition authorities have asked Ireland to explain how Apple was taxed in the country post-2015 after the Paradise Papers revealed the tech firm had apparently sidestepped a crackdown on tax avoidance in 2015 by shifting the management of certain subsidiaries to Jersey. Margrethe Vestager, the competition commissioner, said: “We are looking into this of course without any kind of prejudice, just to get the information.” Apple said in a statement: “When Ireland changed its tax laws in 2015, we complied by changing the residency of our Irish subsidiaries and we informed Ireland, the European Commission and the US. The changes we made did not reduce our tax payments in any country.”
MEPs call for action over tax havens
An open letter signed by more than 30 MEPs expresses hopes that the Paradise Papers revelations will prove to be a tipping point that forces governments into action against the offshore tax industry. In their letter, the MEPs expressed disappointment that the UK and other governments had not acted in the wake of previous data leaks such as the Panama Papers and demanded more transparency and greater regulation. Meanwhile, Gordon Brown has thrown his weight behind calls for the G20 to get tough on the jurisdictions that allow tax to be avoided. The former prime minister has signed an open letter to the current chair of the G20, Argentinian president Mauricio Macri, calling for a crackdown on tax evasion, and he has pledged to deliver the letter personally if it gets 1m signatures.
Palm-fringed islands not the only culprits
The Economist predicts that the Paradise Papers leak, although unlikely to be as earth-shattering as the Panama Papers, will add to pressure to “fix the patchwork of rules and treaties governing cross-border business taxation.” The article adds however that it would be unfortunate if the documents simply “reinforce the cliché that the culprits are palm-fringed islands” when onshore financial centres such as London, New York and Miami “offer the most attractive combination of respectability and secrecy – making them magnets of unparalleled power for the world’s tainted money.” Separately, Deutsche Welle examines some of the issues raised concerning corruption and bribery in Africa following revelations in the Paradise Papers. Peter Jones from Global Witness says the leak raises the moral question of whether it is legitimate for the continent’s elites to avoid paying taxes while the majority of Africans live below the poverty line.
Paradise Papers: The professionals’ responsibility
Following the Paradise Papers leak, the BBC’s Clive Coleman outlines some of the measures to prevent lawyers and accountants establishing and marketing tax avoidance schemes. The disclosure of tax avoidance schemes (DOTAS) regime came into force over a decade ago, and means anyone who fails to disclose a marketing scheme to HMRC can be fined up to £1m. New criminal offences, including “failure to prevent the facilitation of tax evasion”, are also being rolled out by HMRC. The Common Reporting Standard is expected to further ensure that people or companies who are resident in the UK pay the correct tax. Clare Munro, a tax partner at Lubbock Fine, comments: “Public attitudes to tax avoidance… along with HMRC’s greater focus on tackling avoidance, is making artificial and aggressive structures a thing of the past.”
Channel Islands commit to tax avoidance plan
Jersey, Guernsey and the Isle of Man have signed a joint commitment to tackle tax avoidance. The havens for offshore funds have acted in the wake of the Paradise Papers leak. Jersey’s chief minister Ian Gorst said he wanted to ensure “our island and financial services are not used by rogue operators”.
Australian tax office set to probe Paradise Papers schemes
The Australian Taxation Office (ATO) says it is poised to examine leads exposed by the Paradise Papers to launch new investigations into global tax avoidance. Mark Konza, the ATO’s deputy commissioner, international, said: “I am confident the ATO is in a position to respond decisively to this data release . . . we [will] investigate all leads and have the resources and expertise to take action against taxpayers or intermediaries found to be caught up in the illegal use of offshore structures or providers.” Meanwhile, Oxfam has petitioned the Australian government to create a global blacklist of tax havens and sanction those who exploit them. Oxfam Australia said: “Scandals involving the super-rich robbing the world’s poorest of much-needed tax revenues . . . can be avoided if the Australian Government and others take immediate steps towards tax reform.”
Revenue boost if Australia cuts company taxes
A Treasury research paper suggests Australia could gain an extra $30bn in revenue if the government cuts the company tax rate – but the country’s economic growth will take a permanent hit if the proposed cut is not introduced. Separately, the Australian reports that miner and commodities trader Glencore says it received a $37m tax refund last year – but predicts it will pay more than $400m in company tax this year. The company’s disclosure of its tax position in Australia comes amid focus in the Paradise Papers on a multibillion-dollar cross currency interest rate swap entered into between two of its subsidiaries in Australia and two in Bermuda.
Japan’s tax reform plan
Nikkei Asian Review reports that Japan’s fiscal 2018 tax reform plan will include incentives to promote investment aimed at raising wages and lifting productivity. A Finance Ministry official said the plan seeks to “provide a great deal of support for companies doing their best to boost pay.” Meanwhile, the Finance Ministry will widen the taxation net on overseas corporations and plans to impose levies on online retailers without local branches but which operate large-scale warehouses. It is noted that US companies such as Amazon.com will not be subject to the new rules. The revisions would make the Japanese practice compatible with the OECD’s multilateral tax treaty – but Washington is not a signatory to this and has its own tax treaty with Japan.
China expands corporate tax cuts for hi-tech firms
China’s Ministry of Finance is to expand corporate tax rate cuts for hi-tech services firms nationwide in a drive to attract more foreign investment. The tax rate for such firms will be reduced to 15%, effective from January 1st this year. Meanwhile, the government is to exempt banks’ interest income from loans to small businesses and rural households from value added tax in an attempt to remedy a lack of financing to small enterprises.
India wants global fund managers
India’s government is looking at the relaxation of permanent establishment rules to attract fund managers who manage global investment funds to the country, say sources.
UAE’s tax authority wants firms to register for VAT
The director general of UAE’s Federal Tax Authority (FTA) is calling on firms that are subject to the value-added tax to register before December 4th to avoid paying penalties. The country introducing a 5% levy on January 1st – but twenty days is needed by law to process applications. FTA officials said companies that submit applications after December 4th are not guaranteed to have their formalities completed. They will be unable to charge 5% VAT to their customers and may have to pay the tax from their own pocket.
Saudi Arabia clarifies VAT rates
Saudi Arabia’s tax authority has moved to provide guidance on the financial services value-added tax exemption and the general rules on value-added tax rates ahead of the introduction of the on January 1st, 2018. Most financial services transactions will be exempt from VAT, including interest on loans; lending fees charged with an implicit margin; mortgages; financial leasing; transactions involving money and securities; and current, deposit, and savings accounts.
Argentina plans tax code overhaul
Argentina is to overhaul its tax code to boost economic growth and reduce inequality. The government wants to reduce corporate income taxes to 25% from 35% within five years, cut employers’ social security taxes and get rid of levies on come bank transactions. “We’re going to move toward a more normal tax system, more like what other countries have,” said Treasury Minister Nicolás Dujovne.
Brazil extends tax debt renegotiation program
Brazil’s President Michel Temer has extended for two weeks a tax debt renegotiation program that has so far collected more than 10bn reais ($3.05bn) in back taxes this year for the government.
Regulators looking to curb accountants’ powers
Global regulators are looking to shake up how corporate audit rules are written away from the influence of accountants. Gerben Everts, who chairs the group of global regulators that monitors the International Federation of Accountants, said: “I am not saying the current standards are weak or should not be complied with, but I think there is a lot of potential for stronger standards in the audit world with less flexibility, less optionality.” A consultation will end in February and the monitoring group will publish a final proposal next summer.