| RUSSELL BEDFORD NEWS
Russell Bedford North America Conference 2024
Russell Bedford has held its first physical event of the year, the North America Conference, in San Diego, California. Among the sessions, Board Director Deanna Salo from Russell Bedford’s Chicago member firm led a roundtable discussion on attracting and retaining talent, and David Barbeito, Partner at Russell Bedford’s Miami member firm, looked at how growth through M&A activity is another practice management issue impacting our members. Another roundtable discussion was focused on growth in North America, facilitated by Russell Bedford CEO Stephen Hamlet and Network Development Director, Kempton Bedell-Harper, with valuable input regarding the future strategy for expansion in the region. Commenting on another successful conference, Stephen Hamlet said: “A fantastic start to another calendar of events and we are delighted to be back in the United States for our North America Conference. It is always so inspiring to see the energy and engagement from our members and to hear the stories of their business journeys. Whilst this is a challenging time for the profession, there has been so much positivity and it’ll be great to see our members seize these opportunities to take their firms further.” Russell Bedford’s Global Chair, Daniel Ryba added: “It is a privilege to be part of this conference and to witness the collaboration within the region. Today’s meaningful discussions have enabled us to learn from each other’s experiences, leading the way for us to navigate the current uncertainties we all face for the benefit of our firms.”
Russell Bedford
MEMBER NEWS
SR Audit Solutions joins Russell Bedford In Azerbaijan
Russell Bedford International has announced the appointment of SR Audit Solutions as its member firm in Baku, Azerbaijan. SR Audit Solutions was established in 2017 by its current director and owner, Saftar Valizada, who said: “We are delighted to join Russell Bedford International. Gaining membership of an international network of professionals is an important step in being able to offer our clients the services they require, wherever they need them. We are eager to embark on this new journey of development and opportunity.” Speaking about the appointment, Russell Bedford CEO, Stephen Hamlet, said: “The addition of SR Audit Solutions in Azerbaijan offers a considerable boost to our EMEA region. The firm’s breadth of services and expertise offers a significant advantage to clients of our members looking for support in Azerbaijan.”
Russell Bedford
GLOBAL
OECD forecasts boost to tax revenues from minimum levy
The global 15% minimum levy proposed by the OECD is expected to significantly increase government revenues and reshape the landscape for multinational companies, the Paris-based organisation has said. The new rules aim to reduce profit shifting and could lead to a decrease in the amount of profits companies park in low-tax jurisdictions. The OECD estimates that the rules could result in a boost of $155bn to $192bn in tax revenues annually. However, the implementation of the global tax deal has faced hurdles, with only around 45 signatory countries taking steps to enact the 15% rule. The US Congress has yet to adopt the minimum tax or the other pillar of the agreement. US Treasury Secretary Janet Yellen has anticipated pressure on Congress to adopt the OECD’s minimum tax, but threats of retaliation have been made by some members of Congress. The OECD analysis also reveals that the minimum levy would reduce global low-taxed profit by 69.5% and decrease the differential between low-tax jurisdictions and others. The FT highlights that the OECD research indicates that tax havens such as Ireland and the Netherlands are set to be the big winners from the global minimum tax.
Bloomberg Reuters Financial Times
Billionaires demand the introduction of wealth taxes
More than 250 billionaires and millionaires, including Abigail Disney and Valerie Rockefeller, have signed an open letter calling for the introduction of wealth taxes at the World Economic Forum in Davos. The signatories argue that taxing the richest individuals will not significantly impact their standard of living but will instead turn extreme private wealth into an investment for the common democratic future. A recent poll of the super-rich shows that 74% support higher taxes on wealth to address the cost of living crisis and improve public services. The poll also found that 58% support a 2% wealth tax on individuals with more than $10m and 54% believe extreme wealth poses a threat to democracy. The UK’s Trades Union Congress suggests that a 1.7% wealth tax on the richest 140,000 people in Britain could raise over £10bn ($12.7bn) for public services.
The Guardian
Key suspect arrested in €40m international tax fraud
A key suspect in a €40m tax fraud was arrested with the help of Dubai Police, Khaleej Times reports. The suspect is a key figure in an organised crime syndicate involved in an extensive tax fraud scheme. The fraud was conducted through companies based in Spain, Romania, and Estonia but operated from Italy. The operation led to the apprehension of several internationally wanted individuals. The global operation code-named ‘Operation Pitstop’ involved law enforcement agencies from 15 countries.
Khaleej Times Online
NORTH AMERICA
IRS expects to collect billions in overdue taxes
The IRS is projected to collect hundreds of billions of dollars more in overdue and unpaid taxes than previously anticipated, thanks to increased enforcement made possible by funding from the Inflation Reduction Act (IRA). A new analysis from the IRS and the Treasury states that tax revenues are expected to rise by as much as $561bn from 2024 to 2034. The IRS now estimates that if IRA funding is renewed when it runs out, revenues could reach as much as $851bn from 2024 to 2034. The IRS has faced threats to its funding, with House Republicans cutting funding by $1.4bn and diverting an additional $20bn to other programs. The agency has been working to show how it is spending its remaining funds, implementing customer service improvements and recouping half a billion dollars in back taxes from tax cheats. The IRS’s increased enforcement is aimed at reversing the declining audit rates for millionaires and large corporations. The tax gap, which is the difference between taxes owed and taxes paid, has grown to over $600bn annually.
Accounting Today CPA Practice Advisor Tax Notes US News and World Report
IRS redesigns notices to improve taxpayer compliance
The US Internal Revenue Service (IRS) is redesigning hundreds of tax notices to make them simpler and clearer, aiming to improve compliance and reduce taxpayer anxiety. The “Simple Notice Initiative” will introduce 31 redesigned notices for the 2024 tax filing season. This initiative is part of the IRS’ modernization drive, which has received $80bn in new funding over a decade. IRS Commissioner Danny Werfel emphasized the importance of clear and understandable information to help taxpayers. The redesigned notices will clearly indicate if they are not a bill or an audit. The IRS has already sent a redesigned notice to 60,000 taxpayers, resulting in a 16% reduction in phone inquiries and a 6% increase in online identity verification. By the 2025 filing season, the IRS plans to redesign up to 200 individual income tax notices.
Reuters
SCOTUS ruling could limit IRS’s regulatory power
The US Supreme Court is currently evaluating arguments in the case of Loper Bright Enterprises v. Raimondo, which could have significant implications for the IRS’s ability to issue regulations. The case challenges the 40-year-old Chevron doctrine, which states that federal courts should defer to agency interpretations when the law is unclear. If the Supreme Court limits or overturns this doctrine, it could open the door for more taxpayer challenges to IRS regulations, resulting in greater uncertainty surrounding tax regulations.
Bloomberg Tax
NYC seeks $2.1m in back taxes from Silicon Valley Bank
New York City is pursuing over $2.1m in back taxes from Silicon Valley Bank, which collapsed last year. The city filed a complaint against the Federal Deposit Insurance Corporation (FDIC), the receiver for the failed bank, citing tax deficiencies from 2017 to 2021. NYC is seeking interest and penalties as well. The FDIC denied the city’s request to be paid from the remaining bank assets. “The City has a legitimate tax claim against the SVB and is entitled to collect taxes due,” stated the complaint. “The FDIC, in its capacity as receiver for SVB, is liable for the claim amount.”
Bloomberg Tax
Supreme Court declines review of Washington state’s capital gains tax
The US Supreme Court has declined to review Quinn v. Washington, the lawsuit challenging the state’s capital gains tax. The tax, which imposes a 7% levy on profits from the sale or exchange of stocks, bonds, and other investments or tangible assets above $250,000, brought in nearly $900m in revenue in its first year. Opponents argued that the tax violated the state constitution, but the Washington Supreme Court upheld it as an excise tax. Supporters of the tax, including Treasure Mackley, executive director of Invest in WA Now, celebrated the decision as a victory for Washington’s children and families. However, the battle may not be over, as a conservative group has filed a petition to repeal the tax, which could potentially be on the ballot in the fall. The US Supreme Court’s decision not to hear the case disappointed opponents of the tax, who believe it has caused damage to the state.
Bloomberg Tax The Columbian CPA Practice Advisor
Tax consequences for nonresidents investing in US
Nonresidents who invest in the US need to be aware of the tax consequences, especially when it comes to the US estate tax. The US is a popular investment destination for foreign investors, with foreign investment increasing to $6.58tn by the end of 2022. However, investing in the US can have devastating tax implications if not properly planned. The US estate tax applies differently to US citizens and non-citizens, depending on their domicile status. US citizens and domiciled non-citizens are liable for estate tax on their worldwide assets, but they receive a generous estate tax exclusion of $13.61m. On the other hand, non-domiciled non-citizens are only liable for estate tax on their US situs assets, with a mere $60,000 exclusion. Non-domiciled non-citizens who own US stocks are particularly affected, as most portfolios contain US stocks. Proper tax planning is crucial to avoid the US estate tax. Seek professional advice before making any investment.
Bloomberg Tax
New York City sues FDIC for $44m in unpaid taxes
New York City has filed a lawsuit against the Federal Deposit Insurance Corp. (FDIC) for approximately $44m in unpaid municipal taxes. The city’s department of finance audited Signature Bank, which closed in March, and discovered tax deficiencies for the years 2015 through 2021. The deficiencies were related to unreported income allocation and adjustments to investment and capital income. This is not the first time New York City has taken legal action against the FDIC for unpaid taxes, as it recently filed a similar suit seeking over $2.1m from Silicon Valley Bank. The FDIC had rejected New York’s request for payment of back taxes in July. The case is NY v. Federal Deposit Insurance Corp., 24-cv-00629, US District Court, Southern District of New York (Manhattan).
Bloomberg
HSBC begins defence in £240m Disney film tax trial
HSBC is set to defend itself against a £240m legal action brought by more than 500 investors over a Disney film tax scheme. The investors claim that HSBC’s marketing of film financing schemes called Eclipse Partnerships caused them losses. The tax scheme, marketed by Future Capital Partners, promised tax relief for investing in film productions, but HMRC denied the tax breaks due to the movies not being made or the productions not being promoted. The investors were then presented with large tax bills. The case against HSBC includes allegations of deceit, conspiracy, and breach of obligations under the Financial Services and Markets Act 2000. HSBC denies promoting tax investment products and has instructed Norton Rose Fulbright to defend it in the case.
City AM
Pennsylvania appeals court strikes down Pittsburgh’s ‘jock tax’
The National Hockey League, Major League Baseball, and National Football League players’ unions successfully argued in a Pennsylvania appeals court that Pittsburgh’s tax on visiting athletes is unconstitutional. The court ruled that the city’s facilities fee, commonly known as the “jock tax,” violates the state constitution’s uniformity clause. The fee, which is a 3% charge on income earned by nonresident athletes and entertainers at Pittsburgh’s sports venues, was found to burden nonresidents with a higher tax rate than residents. The court concluded that this disparity does not achieve the required rough uniformity. The court also rejected the city’s attempt to salvage the tax by striking the resident/nonresident distinction. The case is Nat’l Hockey League Players Ass’n v. City of Pittsburgh, Pa. Commw. Ct., No. 1150 CD 2022, 1/10/24.
Bloomberg Tax
Harvard faces tax bills for massive endowment and legacy admissions
Harvard University faces tax bills and scrutiny over its massive $51bn endowment and policy of admitting legacy applicants. One bill proposes a 2.5% excise tax on Harvard and other private colleges with over $1bn in assets, while another aims to charge fees on rich colleges that give preferential treatment to legacy applicants. The federal investigation into Harvard’s handling of antisemitism on campus could also bring attention to the Massachusetts bills. State Representative Simon Cataldo, who introduced the legacy admissions bill, stated that taxpayers are essentially paying for preferential treatment on the billions held in university endowments. Harvard, MIT, and other universities are already under investigation by the House Ways and Means Committee for their tax-exempt status. The bills aim to distribute wealth to offset tuition at public universities and fund community colleges.
Bloomberg
Virginia Senate votes to remove tax breaks from Confederate heritage group
The Virginia Senate has voted to dismantle tax breaks for the United Daughters of the Confederacy (UDC), the organization responsible for sponsoring Confederate statues in Virginia. The tax breaks were brought to attention by a high school student who contacted lawmakers. The bills to end the UDC’s exemptions have passed both the House of Delegates and the Senate, but they still need to be reconciled and signed into law by Gov. Glenn Youngkin. The UDC, along with two other Confederate-related organizations, would be removed from the list of groups exempt from real estate and property taxes. The loss of the tax exemption could result in a hefty tax bill for the UDC’s national headquarters in Richmond. The UDC is a nonprofit organization that reported revenue of $1.41m in 2022. A political consultant for the UDC criticized the bill, calling it “punitive” and “offensive.” However, supporters of the bill argue that it is unfair to provide a tax break to a group that spreads a sanitized version of the South and slavery. The bill has received support from both Democrats and Republicans in the legislature.
Washington Post
Majority of US taxpayers feel they pay too much in taxes
A majority of US taxpayers feel they pay too much in taxes and receive a poor value in return, according to a new poll from the University of Chicago Harris School of Public Policy and The Associated Press-NORC Center for Public Affairs Research. The poll found that two-thirds of US taxpayers believe they spend “too much” on federal income taxes, with similar sentiments about local property taxes and state sales tax. Republicans are more likely than Democrats to view taxes as unfair and to say they are paying too much. The poll also revealed that few adults have confidence in how their tax dollars are spent by institutions. Trust in local government is higher than trust in the federal government. The poll highlights the decline in public opinion about taxes and trust in government. The majority of taxpayers would prefer fewer government services if it meant reducing their tax bill. Only about 1 in 4 taxpayers feel they get a good value from paying taxes. The poll shows that most adults find taxes unfair and lack understanding of how their tax amounts are calculated. The dissatisfaction with the tax system is fueled by perceptions of loopholes and lack of transparency.
US News and World Report
EUROPE
UK Treasury to make £12.7bn from new global minimum corporation tax
The UK Treasury expects to make nearly £13bn from the new global minimum corporation tax proposed by the Organisation for Economic Co-operation and Development (OECD). Over the first six years of the tax’s introduction, Treasury estimates suggest it will bring in around £12.7bn. The new tax regime, which will see a 15% minimum tax rate on corporate profits, is part of a global attempt to clamp down on corporate tax evasion. The Treasury said that implementing the rules will protect the UK from “aggressive tax planning by large multinationals” and help “level the playing field for tax competition that has been tipped in favour of no or low tax jurisdictions.” Globally, the tax is expected to raise between $155bn-$192bn, increasing the global corporate tax take by up to 8%. Meanwhile, experts have suggested that the regime will see a shift in how jurisdictions compete for international investment. Miles Dean, head of international tax at Andersen, says: “The battle will most likely shift towards designing tax incentives that are more favourably treated under the minimum tax rules, such as qualified refundable tax credits.” These are tax reliefs for businesses which will not count towards the effective tax rate.
City AM
Ireland’s tax office offers relief to firms
Ireland’s finance minister has announced that the country’s tax office will not require firms to pay interest on deferred taxes during the COVID-19 pandemic. Firms will also be given extra time to repay the debt once they catch up on current liabilities. The tax warehousing scheme, introduced in May 2020, allowed firms to defer liabilities arising during lockdown. Currently, 58,000 firms with €1.7bn of unpaid bills are still availing of the scheme. The interest rate on the debt will be reduced from 3% to 0%, and the tax office may extend the repayment time on a case-by-case basis. Finance Minister Michael McGrath stated that the government aims to support viable businesses in a challenging trading environment. The tax office revealed that 5,265 taxpayers are responsible for the majority of the warehoused debt, while almost 70% of firms with deferred debts owe less than €5,000 each. The government has been urged to introduce additional measures to assist businesses. Business insolvencies in Ireland rose by 32% in 2023, but remain below pre-pandemic levels. Accounting firm PwC predicts a similar increase in 2024 and a return to the average annual closure rate.
Reuters
German Chancellor rejects tax reform ideas
German Chancellor Olaf Scholz has declined to consider corporate tax reform ideas floated by his ministers, emphasizing the need to pass an existing draft law for fiscal relief. The proposed Growth Opportunities Act, which aims to offer tax relief of around €7bn annually, has already passed the lower house of parliament. However, it faces opposition in the Bundesrat, the legislative body representing the German states. Scholz stated that the focus should be on practical and tangible measures that will take effect quickly. Economy Minister Robert Habeck highlighted the importance of tax relief and incentives for investment, expressing concern that the states may weaken the Growth Opportunities Act. Finance Minister Christian Lindner also acknowledged the lack of international competitiveness among German companies and called for swift action to develop a relevant policy package.
Reuters
HMRC accused of failing to utilise the Criminal Finances Act 2017
Data obtained by the Bureau of Investigative Journalism and TaxWatch shows HMRC, the UK’s tax authority, has failed to charge a single company under the Criminal Finances Act 2017. The legislation introduced new powers to charge companies and partnerships that failed to stop their employees or associates from facilitating tax evasion. Additionally, the Corporate Criminal Offences clause substantially lowered the bar for prosecuting businesses that enabled tax evasion. “The lack of any Corporate Criminal Offence prosecutions is quite serious,” said Dan Neidle, founder of Tax Policy Associates and formerly head of tax at Clifford Chance. “A deterrent that you never use is no deterrent.” Dame Margaret Hodge MP, chair of the all-party parliamentary group on anti-corruption and responsible tax, said: “We are in the midst of a cost-of-living crisis, and tax evasion is costing our economy billions each year. So it is appalling that HMRC has failed to prosecute a single enabler of tax evasion.”
The Observer
Italy’s constitutional court to decide legality of 2023 windfall tax on energy firms
Italy’s constitutional court will decide whether a 2023 one-off windfall tax on energy firms is lawful, an administrative tribunal has ruled. Last year, the Treasury raised almost €3.5bn from 7,000 producers and sellers of electricity, gas, and petrol products. The government expects to take in additional revenue this year. If the constitutional court rules against the government, it would limit the scope to impose similar taxes in the future or force Italy to reimburse the sums collected. Prime Minister Giorgia Meloni adopted the measure to replace a similar tax that triggered criticism and refusals to pay by multiple firms. Eni and Enel have paid €450m and €600m for the 2023 windfall tax, respectively. The administrative judge said the tax had hit firms outside European regulations and could imply an illegitimate form of double taxation. The timing of a ruling by the constitutional court is not yet known.
Reuters
EU companies face new tax reporting obligations
Companies in the EU will need to comply with the Corporate Sustainability Reporting Directive this year. Bernard van Gerrevink, Vera Moll, and Max Zanderink of KPMG provide insights on the new directive, which requires companies falling within its scope to report on environmental, social, and governance (ESG) information. While tax is not currently included as a sustainability matter, there is an argument to include it in the assessment. The directive will require approximately 75% of limited liability companies to report on tax-related information. Companies within the scope of the directive are currently required to obtain limited assurance from an external auditor. The introduction of the directive also brings data management challenges, and companies should begin assessing their control environment and data quality.
Bloomberg Tax
UK tax authority misses its own digital tax deadline
HMRC, the UK’s tax authority, has failed to meet the deadline for responding to MPs who criticised plans to digitise the tax system. The Public Accounts Committee issued a report criticising the tax office for repeated failures that have caused delays and cost overruns in the new online service. Making Tax Digital, which VAT-registered businesses have used since 2022, will not be extended to self-assessment taxpayers until 2026 – eight years later than planned. The new service is also costing £1bn more than expected. Committee chair Dame Meg Hillier expressed concern that HMRC is “succeeding in making tax difficult” instead of digital. She added that it was “utterly extraordinary” that HMRC had failed to reveal costs of more than £2bn that would be borne by taxpayers when it pushed for investment in the programme. A Treasury source said the deadline had “some flexibility” and had been extended by “a few weeks.”
Mail on Sunday
Italy plans to use social media data to track down tax dodgers
Italy plans to use information on living standards shared on social media to track down tax dodgers, according to Deputy Economy Minister Maurizio Leo. The government aims to tackle the deep-rooted problem of tax evasion in Italy by employing data scraping techniques to identify taxpayers who have not paid their dues. Leo emphasized the seriousness of tax evasion, comparing it to terrorism. While previous administrations have made some progress in combating tax evasion, the issue persists. Recent Treasury data revealed that the estimated amount of missed taxes and social contributions decreased to €83.6bn in 2021 from €107.8bn in 2016. However, Prime Minister Giorgia Meloni’s administration has faced criticism for implementing fiscal amnesties and showing leniency towards evaders.
Reuters
Ryanair boss says $8bn investment in Italy is possible if air ticket tax is scrapped
Ryanair CEO Michael O’Leary says the airline has the potential to invest an additional €8bn in Italy if the country eliminates the local tax on air tickets. O’Leary aims to meet with Italian Prime Minister Giorgia Meloni to discuss the conditions necessary for Ryanair’s investment. He suggests that the government should abolish the additional tax on air fares, which is used to cover pension costs for air sector workers. In addition, Ryanair plans to open two new bases in Italy and increase flights to and from Rome, Milan, and Bergamo. The airline aims to expand its market-leading position in Italy, taking advantage of potential airport slots made available through ITA Airways’ partnership with Lufthansa.
Reuters
HMRC tax penalties hit record high
The value of HMRC tax penalties surged by 25% between 2022 and 2023, with the £851m in penalties imposed between November 2022 and October 2023 marking a record high. The total was up from £681m in 2021/22, according to data obtained by UHY Hacker Young. The firm said the increase in penalties has put additional pressure on struggling taxpayers and businesses, who are already dealing with high interest rates and the threat of recession. Sean Glancy, a partner at UHY Hacker Young, said: “HMRC continues to widen the net for tax penalties, so people who weren’t captured before are getting caught now.” He added: “HMRC is often not reasonable in removing penalties for genuine errors – they sometimes seem to operate with a ‘shoot first, ask questions later’ approach. Once a penalty is issued, the process is quite draconian, however about half of penalties are withdrawn on appeal.”
City AM
French dairy giant Lactalis searched in tax fraud probe
The offices of French dairy giant Lactalis have been searched by members of France’s PNF financial prosecutor body as part of a probe into alleged tax fraud. The investigation, opened four years ago on suspicion Lactalis had undermined taxable profits, covers a period from 2009 to 2020, the prosecutor’s office said. Lactalis stated that the search was related to “old events already reviewed by authorities”.
Bloomberg Reuters
UK tax authority opened 1,091 serious tax investigations in a year
Analysis by law firm Pinsent Masons shows that HMRC, the UK’s tax authority, opened 1,091 serious tax investigations in the 12 months to March 31, 2023. There were 417 COP8 investigations, which look into the most serious suspected cases of tax evasion, as well as 674 COP9 civil investigations into those believed to be avoiding tax. In total, HMRC has 3,300 COP8 and COP9 investigations under way. These probes allow taxpayers to avoid the heaviest penalties if they cooperate fully with the tax office. Pinsent Masons said COP9 investigations generated £89m for HMRC in the 12 months to March 31, 2023, while COP8 investigations generated £72.4m. Sophie Warren, tax manager at Pinsent Masons, said the number of serious tax investigations opened “demonstrates the extent of HMRC’s crackdown on the most serious tax evasion and avoidance.”
FT Adviser
Duet Group founder sentenced for tax trades
Henry Gabay, founder of Duet Group, has been sentenced to four years and 10 months in prison for his involvement in a tax scheme that cost Germany about $100m. Gabay and his ex-partner Osman Semerci were convicted of aggravated tax evasion. Semerci, a former rising star at Merrill Lynch, received a sentence of three years and six months. The two men are the first high-profile members of London’s financial community to be hit with custodial sentences in the tax scandal. They were part of the wider Cum-Ex trading ploy, which exploited the dividend tax system to pass large sums of money from Germany’s treasury to investors and banks. The trades aimed to generate €215m in illicit tax refunds, of which €93m were paid out. German prosecutors continue to target 1,800 suspects in their probe. The practice of Cum-Ex trading may have cost Germany as much as €10bn.
Bloomberg
IMF warns UK against further tax cuts
The International Monetary Fund (IMF) has cautioned the UK government against implementing new tax cuts before the upcoming general election. The IMF claimed the UK economy needs higher tax revenues to meet growing demands for public services and investment. It recommended strengthening carbon and property taxation, closing loopholes in wealth and income taxation, and reforming the pensions triple lock. Responding to the IMF’s recommendations, finance minister Jeremy Hunt said: “It is too early to know whether further reductions in tax will be affordable in the budget but we continue to believe that smart tax reductions can make a big difference in boosting growth.” The IMF also projected that the UK economy will be the second worst performing in the G7, with a growth rate of 0.6% this year.
Financial Times The Independent UK The Daily Telegraph The Times
French police search Finance Ministry’s tax administration offices over Neymar transfer
French police have searched the Finance Ministry’s tax administration offices over allegations of favourable treatment granted to football club Paris-Saint-Germain (PSG) over the transfer of Brazilian star Neymar, a source close to the investigation said. The raid was part of a bigger investigation into the suspected tax treatment given to the club as part of Neymar’s 2017 transfer from Barcelona to PSG.
Reuters
Ryanair urges Germany to lower aviation taxes and charges
Ryanair has called on Germany to lower its aviation taxes and airport charges, stating that they are among the highest in Europe. Chief executive Michael O’Leary emphasized the budget airline’s appeal for lower costs in Europe’s largest economy. If Berlin meets Ryanair’s demands, the airline predicts a potential doubling of its traffic in Germany over the next six years.
Zawya EN
Bank executive linked to tax avoidance scheme
Simon Smith, Morgan Stanley’s global co-head of investment banking, is listed as a member of Cobalt Data Centre 2, an alleged tax avoidance scheme being contested by HMRC in the UK. The scheme offers tax breaks to investors in deprived areas, but HMRC disputes its eligibility for tax allowances. The UK’s Supreme Court is expected to rule on a hearing into the matter later this year.
The Daily Telegraph
Italy uncovers fraud linked to Chinese shadow bank network
Italian police have uncovered a tax fraud carried out by 85 suspects involving $1.9bn in false invoices. The money was laundered through a system of Chinese shadow banks. Police have seized assets including cash, luxury cars and real estate. They also blocked 1,569 bank accounts and ordered the sequester of 140 companies believed to have issued false invoices.
Reuters
Former Freshfields partner convicted over tax scandal
An ex-Freshfields Bruckhaus Deringer partner, Ulf Johannemann, has been sentenced to three and a half years in prison for his involvement in the Cum-Ex trading strategy. Johannemann, who was once the law firm’s head of global tax, was convicted for his advice to Maple Bank GmbH in Cum-Ex deals that cost Germany a tax loss of €374m. A former Maple banker on trial alongside Johannemann received a two-year suspended term. Johannemann was found guilty of aiding in the crime and violating basic principles as an attorney. Johannemann may face additional charges for his work with other banks.
Accounting Today
UK’s Court of Appeal supports judge’s decision to hold tax fraud trial without jury
The UK’s Court of Appeal has supported a judge’s decision to hold a tax fraud trial without a jury after one juror felt threatened. The judge dismissed the jury after it was revealed that a juror had been approached outside the trial and felt fearful for his family. The trial judge discharged the juror and ruled that there was a real possibility of bias among the jury. The judge decided to rule on the verdict alone but four defendants appealed, claiming their right to a fair trial would be breached.
The Times
Dutch king faces 49.5% tax rate on allowance
King Willem-Alexander of the Netherlands may lose half his paycheck as the country’s parliament considers taxing his income. Currently, the king and his immediate family members do not pay taxes on their yearly allowance, but a proposal has been presented to change this. If the law is altered, the king would pay a 49.5% tax rate on his allowance, reducing his pay to €605,000. The proposal is expected to pass through both houses of parliament and has gained popularity among the public. The king’s costs, excluding his allowance, would still be covered by the Dutch state. The total budget for the Dutch Royal House is €75.1m. The proposal will be voted on this month and will require approval in the upper house of parliament to officially change the constitution. “It’s only fair that the royal family also pays their share,” observed Joost Sneller, a member of the D66 party.
Bloomberg
Tax returns cause stress levels akin to the recall of some of life’s worst events, study says
Business owners in the UK find filling in their tax returns as stressful as the recall of some of life’s worst events, a study by Goldsmiths has found. The study, conducted by Goldsmiths, part of the University of London, and researchers from a firm called Symmetry, used devices that typically assess high-performance athletes to measure stress levels. The study revealed that the stress caused by dealing with the tax authority’s demands for information was comparable to recalling the loss of a loved one. Even those who used an accountant and modern accounting software experienced a 56% increase in stress levels. Meanwhile, a separate survey by Intuit Quickbooks found that 54% of sole traders and small business owners questioned their ability to run a business after filing their returns, and 22% said the process had taken a physical toll. Chris Brauer, director of innovation at Goldsmiths, suggested that business owners could reduce stress by adopting a programme of activity focused on reducing the pain of the process.
The Times
Arnie detained over EU tax for luxury watch
Arnold Schwarzenegger is facing criminal tax proceedings in Germany, accused of failing to declare a luxury watch upon landing in Munich. Munich customs spokesman Thomas Meister said tax should have been paid on the watch because Mr. Schwarzenegger was intending to sell it in the European Union. The watch, custom-made for the movie star and former governor of California by Swiss luxury brand Audemars Piguet, will probably be auctioned at a fundraising dinner for Mr. Schwarzenegger’s climate initiative in Kitzbuehel, Austria. It’s unclear what legal consequences, if any, he could face, but it’s possible that the investigation could result in a fine or court appearance.
USA Today Washington Post
AFRICA
MultiChoice group settles $37.3m tax dispute in Nigeria
MultiChoice Group, Africa’s largest pay TV company, has reached a settlement with Nigerian tax authorities. The subsidiaries of MultiChoice Group have agreed to pay a total tax amount of about $37.3m. The Federal Inland Revenue Service (FIRS) froze MultiChoice Nigeria’s accounts and issued a tax claim of 1.8 trillion naira ($1.27bn) for its Nigeria operation, along with a $342m claim for value-added taxes. The group stated that the tax amount of 35.4 billion naira will be paid by MultiChoice Nigeria and MultiChoice Africa Holdings, offsetting the security deposits and good faith payments made to date. “We are pleased to have resolved this matter and will continue to comply with all tax obligations in Nigeria,” said MultiChoice Group.
Business Day
Kenyan court blocks government from collecting housing levy
A Kenyan court has blocked the government from collecting a housing levy that President William Ruto wants to use for a low-cost housing program. The court ruled that the mandatory 1.5% tax introduced in July will be suspended until an ongoing appeal against its validity is heard. The appeal seeks to overturn a High Court ruling that declared the housing tax discriminatory because it only applied to those with formal jobs. The court stated that public interest lies in awaiting the appeal’s determination to avoid irreversible decisions made under the impugned laws.
Bloomberg
Nigeria expects revenue boost with tax overhaul
Nigeria expects to significantly boost revenue collections this year as plans to overhaul its tax system start to pay dividends. The Federal Inland Revenue Service forecasts revenue to increase 57% in 2024 to 19.4 trillion naira ($20.3bn), compared with last year. To grow revenue this year, the agency will improve efficiency and tax compliance, including changing its organisational structure to be more taxpayer focused and further automate tax collection. Those measures will add to others aimed at boosting revenue such as shifting more of the burden to wealthy citizens while cutting corporate taxes and introducing electronic invoicing of value added tax. President Bola Tinubu’s government is targeting revenue to help fund an ambitious reform program focused on accelerating growth in Africa’s most populous nation and lifting 100 million people out of poverty. A low tax take has forced the government to rely significantly on borrowing to meet its public spending needs, complicating efforts to rein in debt and fund infrastructure, education, and health projects.
Bloomberg
ASIA-PACIFIC
Australia’s tax office accuses PwC of hiding report on scandal
Australia’s tax office has accused consulting firm PwC of deliberately hiding a report on the company’s actions during an ongoing scandal. The agency expressed frustration with PwC for not releasing crucial details about an internal investigation into PwC conduct. An investigation by law firm Linklaters cleared overseas PwC partners of using confidential Treasury information for commercial gain. However, the report revealed that six international operatives from PwC were disciplined for not asking questions about the nature of the data. ATO senior executive Jeremy Hirschhorn criticised PwC for refusing to provide information on the individuals mentioned in the report. Tax Practitioners Board chair Peter de Cure also expressed his disappointment in not receiving the list of names mentioned in the report. The board is currently conducting nine investigations into PwC’s conduct. Representatives from PwC, as well as other big four consulting firms, are scheduled to appear before the Senate inquiry. The tax office expects PwC to implement cultural changes, but acknowledges that it will take time.
West Australian The Guardian
Hong Kong tax revenue could expand by US$1.28bn under global minimum levy for corporations, official says
The Hong Kong government plans to implement a new 15% global minimum tax for large multinational companies which could generate an additional HK$10bn (US$1.28bn) in tax revenue per year. Commissioner of Inland Revenue Tam Tai-pang stated that several hundred multinational companies will be affected by the new tax rule. The implementation of the tax is part of a global agreement among nearly 140 jurisdictions to reduce corporate tax avoidance. Under the new regime, if a multinational corporation’s effective tax rate in Hong Kong is below 15%, other jurisdictions will have the right to collect the top-up tax. Despite concerns that the tax may drive companies away from Hong Kong, Tam reassured lawmakers that many major economies, including the UK, EU countries, and Singapore, have pledged to implement the tax. The new tax rule aims to ensure that multinational firms with annual revenue of at least €750m pay a minimum of 15% tax on their global income. Lawmaker Robert Lee Wai-wang suggested introducing non-tax incentives to attract businesses to Hong Kong alongside the new tax law.
South China Morning Post
Tata Motors urges India to incentivise EVs, not hybrids
Tata Motors is lobbying against tax cuts that could benefit Toyota and Tesla, arguing that India should incentivise electric vehicles (EVs) rather than hybrids. India currently taxes EVs at just 5%, while the levy on hybrids is as high as 43%. Tata has met with officials and written to India’s trade department, stating that hybrids should not be incentivised as they are already taxed lower than gasoline cars. Tata believes that further incentivisation of hybrids would be detrimental to climate goals and the nation’s economy. The lobbying by Tata is aimed at protecting its dominant EV market share. Tata’s rivals, Mahindra & Mahindra and Hyundai Motor, have also requested that the current policy discouraging tax reductions on hybrids be maintained. Tata argues that EVs are the only practical solution to combat India’s urban air pollution and reduce oil imports.
Livemint.com Reuters
Philippine President signs law to ease tax payment
Philippine President Ferdinand Marcos Jr has signed into law a bill that aims to make it easier for taxpayers to pay their taxes. The “Ease of Paying Taxes Act” simplifies procedures by allowing taxpayers to file tax returns electronically or manually. It also allows non-residents to register for these facilities, attracting foreign investors and making it easier for them to do business in the Philippines. The law mandates the tax authority to act on claims for tax refunds within 180 days and raises the threshold for mandatory issuance of receipts. The number of income tax return pages is also reduced. President Marcos aims to increase tax effort and infrastructure spending during his term. The government wants to raise tax collections to above 17% of GDP by 2028 and sustain infrastructure spending at 5% to 6% of GDP.
Reuters South China Morning Post
China’s aluminium exports to EU drop 30% amid carbon border tariff
The volume of aluminium product exported by China to the EU which was covered by the bloc’s carbon border tariff fell by 30% in 2023, according to the China Nonferrous Metals Industry Association. The EU’s Carbon Border Adjustment Mechanism (CBAM) aims to prevent more polluting foreign products from undermining its green transition. Although carbon dioxide emission charges at the border won’t be collected until 2026, EU importers are required to report the greenhouse gas emissions associated with the production of targeted imported products. China, the world’s top producer and exporter of aluminium, saw its aluminium exports to the EU decrease by 30% last year, totaling 689,000 tonnes. The main types of aluminium products affected were structures, plate, sheet, and strip. The total trade value for these products declined by 26% to 22.76 billion yuan ($3.16bn). Germany, France, and Italy were the top destinations for Chinese shipments.
Business Day
Polycab shares plummet 23% amidst tax evasion allegations
India’s cables and wires bellwether, Polycab, experienced a record 23% drop in its shares, resulting in a loss of $1.9bn in market value, triggered by investor concerns over reports of tax evasion. India’s finance ministry revealed evidence of tax avoidance at a wire maker, without disclosing the company’s name. The ministry stated that Polycab engaged in unaccounted cash sales, cash payments for unaccounted purchases, non-genuine transport, and sub-contracting expenses to suppress its taxable income. The sector’s sentiment has been negatively impacted by this sharp selloff, despite benefiting from Prime Minister Narendra Modi’s infrastructure initiatives. Polycab’s smaller rivals, KEI Industries Ltd., RR Kabel Ltd., and V-Marc India Ltd., also experienced significant drops in their stock prices. Polycab denied the tax evasion allegations but has not received any communication from tax authorities regarding the outcome of the search conducted in December.
Bloomberg
Australia’s Labor government defends proposed tax rule changes
Australia’s centre-left Labor government is defending proposed tax rule changes that would reduce benefits for the wealthy and provide more breaks for low-income earners. Treasurer Jim Chalmers stated that the policy shift aims to build trust and offer cost-of-living relief without fueling inflation. Under the new policy, individuals earning up to A$140,000 will experience lower taxes, while a 37% tax band will be maintained for high earners, with the savings redirected to those on low incomes. Prime Minister Anthony Albanese assured that every Australian taxpayer will receive a tax cut. The move comes as Australian households face financial pressure due to high inflation rates.
ABC Online Sydney Morning Herald U.S. News
Indonesia’s presidential candidates propose new tax collection agency
The three main candidates who are standing in Indonesia’s presidential elections on February 14 propose to boost government coffers by creating a new tax collection agency. Policymakers have long considered the creation of a more powerful tax institution to tackle the problem of chronically weak revenue collection. All three candidates have pledged to shift responsibility for the tax department from the finance ministry to the president – despite scepticism from the tax and business community.
Reuters
India’s tax collection reaches 81% of budget target
India’s tax collection from April 1-January 10 has reached 81% of the budget target of 18.2 trillion rupees. Corporate tax grew 12.4% and personal income tax grew 27.3% year-on-year. The government’s gross tax collected, before adjusting for refunds, was 17.2 trillion rupees, about 17% higher than last year. Refunds worth 2.5 trillion rupees were issued during the fiscal year.
Livemint.com
Korea’s tax revenue drops by $38.89bn in 2023
Korea’s tax revenue fell 51.9 trillion won ($38.89bn) in 2023 from a year earlier due to weak corporate activities and the property market slump, according to the Ministry of Economy and Finance. The country suffered a record amount of 56.4 trillion won shortfall compared to the forecast made in the 2023 budget planning. The decline in tax revenue was mainly due to the fall in corporate taxes collected and income taxes amid an economic slowdown. Corporate taxes shed 23.2 trillion won, or 22.4%, while income tax collected fell 10%, or 12.9 trillion won. The value-added tax collected also went down by 7.9 trillion won, or 9.6%.
The Korea Times
Indian government reduces import duty on mobile phone components
The Indian government has reduced the import duty tax on mobile phone components to 10%. The move aims to boost the manufacturing of mobile phones in the South Asian country. Previously, the import duty was set at 15%. The decision to cut the import duty is expected to attract more investments in the mobile phone manufacturing sector.
Livemint.com
Malaysia exempts capital gains tax and taxes on foreign-sourced income
Malaysia has exempted the imposition of capital gains tax and taxes on foreign-sourced income on unit trusts, according to the country’s second finance minister. The exemption on foreign-sourced income is effective from January 1, 2024 until December 31, 2026, while the exemption on capital gains tax is effective from January 1, 2024 until December 31, 2028.
Reuters
Philippines shelves plans for new taxes on junk food and sweetened beverages
The Philippines has decided to postpone the implementation of new taxes on junk food and sweetened beverages due to high inflation. Finance Secretary Ralph Recto stated that imposing taxes at this time would further contribute to inflationary pressures. Instead, the government will focus on enforcing existing laws. Recto also mentioned that the proposed tax increase on motor vehicle users may need to be moderated, but expressed support for levies on single-use plastic and digital services. The Philippines aims to reduce its debt to about 51% of GDP by 2028. The internal revenue bureau targets to collect 3 trillion pesos ($53.2bn) this year, while the customs agency expects revenue of about 1 trillion pesos. Recto emphasized that the best way to raise revenue is by growing the economy and expanding the tax base.
Bloomberg
Pacific Islands embrace taxes for unhealthy foods
Pacific Islands are increasingly imposing taxes on unhealthy foods as they battle non-communicable diseases, according to a New Zealand study. The research, led by the University of Otago in Wellington, found that since 2000, a quarter of the 22 Pacific Island countries and territories studied had introduced such taxes. “Taxing unhealthy foods is an effective strategy to promote healthier choices and reduce the burden of non-communicable diseases,” said Dr. Andrea Teng, a public health physician involved in the study.
ABC Online
LATIN AMERICA & CARIBBEAN
Ecuador’s national assembly rejects VAT increase for security offensive
Ecuador’s National Assembly has voted against a proposed increase to the value added tax (VAT) that would have financed a security offensive against criminal gangs. The measure failed by 83 votes to 43, with nine abstentions. However, lawmakers did approve a one-time measure to tax banks’ profits from 2023 at between 5% and 25%. The government expected the VAT increase to raise $1.1bn per year, while the one-off tax on bank profits is forecast to raise $145.9m. Ecuador has been experiencing a surge in violence since the pandemic hit its economy, leading to increased demand for law and order. This legislative setback for President Daniel Noboa comes after previous successes with an electricity bill and a separate tax bill.
Reuters
Chile proposes tougher tax penalties to boost government finances
Chile’s Finance Minister, Mario Marcel, has presented a proposal to clamp down on tax evasion and bolster government finances. The bill includes measures such as adopting new technology, encouraging the use of anonymous whistleblowers, and imposing tougher penalties for filing false tax documents. The aim is to raise government income by 1.5% of GDP and reduce overall evasion by 25%. The legislation is crucial to fund President Gabriel Boric’s plans for the nation’s pension system and efforts to combat crime. After a previous tax reform proposal was rejected by Congress, negotiations with lawmakers and business groups have been renewed.
Bloomberg
Brazil’s Congress prioritises tax reform and environmental measures
Top legislative priorities in Brazil’s Congress this year include proposals dealing with a reform to consumption taxes approved last year as well as environmental measures. In addition, regulating artificial intelligence (AI) is another subject lawmakers will tackle this year. Senate leader Rodrigo Pacheco noted that a bill to regulate AI should be evaluated by April.
Reuters
MIDDLE EAST
Palestinian Authority to pay 60% of December salaries to public sector workers
The Palestinian Authority (PA) will pay 60% of public sector workers’ December salaries this week as it faces the fallout of Israel’s refusal to transfer tax funds earmarked for Gaza. Funding to the PA has been severely restricted due to the dispute over transferring tax revenues collected by Israel. International donor funding has also fallen significantly. Palestinian Prime Minister Mohammad Shtayyeh stated that the funding situation is very difficult. The budget dispute has left thousands of Palestinian public sector workers without pay for months.
Reuters
Family foundations optimise financial strategies under UAE tax regime
Family foundations in the UAE can now optimise their financial strategies under the new tax regime. The UAE has introduced a groundbreaking approach for family foundations to be treated as unincorporated partnerships, providing flexibility and transparency in managing personal assets and investments. This move aims to safeguard and grow a family’s wealth, ensure a seamless transition across generations, and contribute to philanthropic endeavours. The designation as an unincorporated partnership comes with certain conditions to prevent tax evasion. The foundation must be established for the benefit of natural persons or a public benefit entity, engage in asset or fund management, not conduct any business activities, and have a primary purpose other than tax avoidance. Compliance with additional conditions prescribed by the minister is also required.
Khaleej Times Online
Event to discuss Kuwait’s joining of OECD/G20 inclusive framework on BEPS
KPMG is organising an event to discuss the impact of Kuwait joining the OECD/G20 Inclusive Framework on BEPS (base erosion and profit shifting). Kuwait has agreed to take part in the Two-Pillar Solution to bring about tax reforms and ensure that multinational enterprises pay their fair share of taxes. Kuwaiti multinational companies operating outside Kuwait with an annual revenue greater than €750m will be subject to 15% tax on their profits in Kuwait. The implementation is expected to be in place from 2025 onwards. Zubair Patel, the Head of Tax at KPMG in Kuwait, remarked that Kuwait’s participation in the implementation of the BEPS package of 15 measures will make for increased coherence of international tax laws. Kuwait’s current corporate income tax rate stands at 15% and applies only to non-Kuwaiti companies earning income from Kuwait.
Trade Arabia
Dubai Chambers organises tax training workshops for business community
Dubai Chambers recently organised 14 training workshops on corporate tax aimed at increasing awareness in this area among the city’s business community. The sessions were attended by 1,327 representatives from businesses across diverse sectors. The workshops ensured participants kept pace with the latest legislative developments and corporate tax compliance requirements. Businesses gained a comprehensive understanding of the tax system together with key factors including exemptions, qualifying for exemptions in free zones, accounting standards, tax groups, and transfer pricing.
Trade Arabia
Israel’s tax authority reports $1.75bn in gas and natural resource profits
Israel’s Tax Authority has announced that it collected 6.55 billion shekels ($1.75bn) in levies from gas and excess profits on other natural resources in 2023. Of this amount, 4.7 billion shekels are considered definitive and are transferred to Israel’s sovereign wealth fund. The fund’s assets have surpassed $1bn. The tax collections are typically challenged by oil and gas companies before becoming definitive. The fund, established in 2014 to prevent the Israeli shekel from overheating due to the sudden expansion in national wealth, began operating in 2022. It is projected to grow to as much as $12bn in the next decade. Israel’s significant natural gas deposits were discovered in the east Mediterranean in 2013, leading to major production. The fund initially invests 60% in foreign stocks and the rest in corporate bonds.
Reuters
FTA signs membership agreement with Etihad Credit Bureau to enhance tax compliance
The Federal Tax Authority (FTA) has signed a membership agreement with Etihad Credit Bureau to strengthen tax compliance in the UAE. The agreement allows authorised personnel from the FTA to access credit reports of taxpayers through Etihad Credit Bureau’s database, facilitating tax audit procedures and ensuring data accuracy in tax returns. The electronic link between the FTA and the Bureau provides immediate updates on taxpayers’ credit status. The agreement aims to enhance compliance with tax legislation based on authenticated and accurate information. .
Zawya EN Khaleej Times Online
Egypt cabinet approves tax and fee exemption abolishment for state-owned enterprises
Egypt’s cabinet has approved regulations to abolish tax and fee exemptions for state-owned enterprises, fulfilling a key condition set by the International Monetary Fund (IMF). The IMF urged Egypt to level the playing field between the private and public sectors. The new regulations apply to all investment or economic activities undertaken by state agencies, excluding military work and national security requirements. The move is part of Egypt’s efforts to reduce the government’s role in the economy and promote a fair business environment. The cabinet approved the law in June but had yet to finalize the executive regulations needed for implementation.
Arab News
UAE stands firm: no income tax for individuals
The UAE has no plans to impose income tax on individuals, according to Ministry of Finance’s Undersecretary Younis Al Khouri. Al Khouri clarified the government’s position during the 9th meeting of the Under-Secretaries of Ministries of Finance in the Arab Countries. The meeting featured the participation of experts from the IMF, the World Bank, and the OECD. Recently, Saudi Arabia too reiterated there were no plans to introduce income tax.
Gulfnews.com |
