Ireland is Not a “Tax Haven”

www.bethelfinance.com

While speaking to the subcommittee on global taxation of the Parliament of Ireland, Frank Barry, a leading national economist and the Chair of International Business and Economic Development at Trinity College Dublin, denounced international accusations that Ireland’s tax system facilitates excessive tax avoidance for multinational businesses, saying that such claims are tantamount to nothing more than political “grandstanding”.

Frank Barry’s comments came as a repose to the recent launch of an inquiry by the European Commission on the alleged special tax deals given to large multinational corporations by the governments of Ireland, the Netherlands, and Luxembourg.

Frank Barry explained that despite the claims of special tax treatment, Ireland is not a “tax haven”, and any possible tax changes have the effect of tarnishing the country’s reputation for stability.

He also said that other countries in the EU are currently poised to take advantage of any alterations and adjustments made to Ireland’s tax system, and they will not hesitate to make appropriate changes in their own regimes in order to attract investors away from Ireland and to take advantage of “any leeway that we give them”.

As an example, pointed to the UK’s patent box regime, which allows businesses to pay a lower tax rate if they are engaged in innovative research activity, and he went on to say that “…I believe already we have lost some companies to the UK who are exploiting that.”

Frank Barry also addressed a recent report by the World Bank which claimed that the effective tax rate in Ireland may be as low as 6.5 percent, saying that the results were mere “bank of the envelope calculations”, and the actual effective tax rate in Ireland is between 11 and 12 percent.

Liechtenstein Congratulated On Successful Tax Policy

www.bethelfinance.com/rm

Standard and Poor's has maintained Liechtenstein's triple A rating, alluding to a stable outlook and highlighting the fact that the Principality's fiscal and financial policies have very much contributed to Liechtenstein's reputation and strength as a safe, reliable, and attractive economic location.

As regards tax policy, the ratings agency emphasized the Government's ongoing commitment to pursuing a fiscal consolidation course to narrow the small fiscal gap. Here, Standard and Poor's noted that the Government recently submitted its third fiscal package to parliament, providing for new revenues totaling around CHF39m (USD42m), to compensate for an anticipated shortfall of tax income. The package provides crucially for a rise in the minimum income tax and for cuts in expenditure. The Government accounts are expected to return to balance in 2017.

Underscoring that economic growth in Liechtenstein relies predominantly on the country's banking and industrial sectors, Standard & Poor's explained that the Principality's low tax regime, coupled with its traditional banking secrecy, and stable political environment, have supported the development of a large financial services sector, which contributed about 27 percent of gross domestic product in 2010. While describing the financial industry, consisting mostly of asset managers, regional banks, and trusts, as a "contingent fiscal liability," the agency nevertheless stressed that the risk is mitigated by the industry's strong capitalization and banks' potential access to the Swiss National Bank (SNB).

While making clear that Liechtenstein's heavy reliance on the financial services industry could lead to "reputational issues," the body praised the proactive work of the Government in swiftly meeting the demands of international regulators, notably by adopting the latest anti-money laundering legislation. Furthermore, it underlined the Principality's commitment to tax compliance and extolled the country's tax agreement policy, in particular its willingness to automatically exchange tax information with other jurisdictions, especially with the UK and with the US. This "effective policy making" is expected to continue, it said, adding that it believes that "the Principality will continue to adapt its financial sector to business models that focus less on banking secrets and tax evasion," vitally important if external regulatory pressures mount.

Commenting, Liechtenstein's Prime Minister Adrian Hasler stated that the triple A rating will enable the country to offer itself up as a highly stable and attractive economic location. However, the top priority for the Government is still to consolidate the state budget, Hasler warned, while insisting that the Government is on track.

Malta Signs Double Taxation Avoidance Agreements With Turkey

www.bethelfinance.com

An income tax treaty for the avoidance of double taxation between the governments of Malta and Turkey will come into effect on January 01, 2014.

The treaty, which was signed in 2011, involves a 10 percent withholding tax on dividends paid by a Turkish resident company to a Maltese company in which it has at least a 25 percent stake. In all other cases a maximum withholding tax of 15 percent will be applied.

Under the terms of the treaty Malta will not tax dividends paid by a Maltese resident company to a Turkish resident company.

A maximum Turkish withholding tax of 10 percent will apply to interest paid by a Turkish resident to a Maltese resident beneficial owner of the interest income.

Canada Consults On 2013 Economic Action Plan

www.bethelfinance.com/rm

On September 13, the Department of Finance released for consultation draft legislative proposals that would implement a number of tax measures from Canada's Economic Action Plan 2013, which was originally introduced in March this year by Finance Minister Jim Flaherty during his 2013 Budget.

The draft legislation contains various measures to be taken within the personal income tax code, including an increase to the Lifetime Capital Gains Exemption to CAD800,000 (USD774,000) and indexing the new limit to inflation.

However, the major elements within the personal income tax changes relate to tax compliance. Examples include: extending the reassessment period for reportable tax avoidance transactions and tax shelters when information returns are not filed properly and on time; ensuring that derivative transactions cannot be used to convert fully taxable ordinary income into capital gains taxed at a lower rate; and ensuring that the tax attributes of trusts cannot be inappropriately transferred among arm's length persons, and responding to the Federal Court of Appeal decision in the Sommerer case to restore the intended tax policy result in relation to non-resident trusts.

In like manner, with regard to international taxation, the reassessment period for taxpayers who have failed to correctly report income from a specified foreign property on their annual income tax return, will be extended; as will the application of Canada's thin capitalization rules to Canadian resident trusts and non-resident entities.

In respect of business taxation, the draft legislation will eliminate the unintended tax benefits of leveraged life insurance arrangements, and enhance corporate anti-loss trading rules to address planning that avoids those rules. It will also expand the eligibility for the accelerated capital cost allowance for clean energy generation equipment to include a broader range of biogas production equipment and equipment used to treat gases from waste.

In addition, the accelerated capital cost allowance for capital assets used in new mines and certain mine expansions will be phased out, and the deduction rate for pre-production mine development expenses will be reduced.

Interested parties are invited to provide comments on the draft legislative proposals by October 15, 2013.

Hong Kong, South Korea Agree To Share Tax Information

www.bethelfinance.com

South Korea and Hong Kong have reached an agreement to share tax information, particularly on those South Koreans suspected of having undeclared funds in Hong Kong.

The South Korean Ministry of Strategy and Finance announced the reaching of the deal between the two countries' tax authorities – Hong Kong's Inland Revenue Department (IRD) and South Korea's National Tax Service (NTS) – under which South Korea will obtain access to account information held by financial institutions in Hong Kong.

The agreement comes at a time when, in a bid to reduce the incidence of tax evasion, the NTS is proposing to impose heavier fines on those South Korean residents who are found to hold substantial unexplained financial accounts in overseas jurisdictions. South Koreans with overseas financial accounts worth more than KRW1bn (USD924,000) would be obligated to report the assets, and to explain the sources of the funds, or pay at least a 10 percent fine.

The deal between the IRD and the NTS will require parliamentary approval in both countries before it can be officially signed, but it is hoped that it will enter into force next year.

Guernsey Signs TIEAs With Switzerland And Hungary

www.bethelfinance.com

Guernsey's Chief Minister, Deputy Peter Harwood, signed Tax Information Exchange Agreements (TIEAs) with Switzerland and with Hungary in London today, according to a government press release.

Deputy Harwood commented: "Guernsey's relationship with Switzerland is of great value and we have much in common as finance centers outside of, but working with, the European Union."

He went on: "I am delighted to be able to sign this Agreement, not only because it acts as another indicator of Guernsey's commitment to tax transparency, but also because Switzerland is a country of significance for our industry. This Agreement strengthens the economic and political ties between Guernsey and Switzerland."

Dominik Furgler, the Swiss Ambassador to the UK said: "I am very pleased to sign this Tax Information Exchange Agreement with Guernsey, which will contribute to strengthening the relationship between Switzerland and Guernsey, and further demonstrates Switzerland's commitment to implementing international standards."

Guernsey's Chief Minister also signed an agreement with the Hungarian Ambassador to the UK, Janos Csak. Commenting on the agreement, Deputy Harwood said: "I am very pleased to sign this agreement with Hungary, a country which sits at the heart of the European Union and is now a long-standing member of the Organization for Economic Co-operation and Development and the World Trade Organization.

"The agreement demonstrates Guernsey's ongoing commitment to tax transparency with the member states of the EU."

Guernsey's Director of Income Tax Rob Gray noted that: "The signing of this latest TIEA Agreement takes Guernsey's total to 46 - including 16 of the G20 members. The Island's growing network of tax agreements further demonstrates the ongoing commitment to meeting and exceeding international standards in tax transparency."

Not fair to call Overseas Territories tax havens, says Britain’s Prime Minister David Cameron

www.bethelfinance.com/rm

   Britain’s Prime Minister David Cameron has officially recognised that the Overseas Territories and Crown Dependencies operate “fair and open tax systems”.
Speaking in the House of Commons, he said, "I do not think it is fair any longer to refer to any of the Overseas Territories or Crown Dependencies as tax havens. They have taken action to make sure that they have fair and open tax systems."

   Cameron’s comments were welcomed by the Overseas Territories in the Caribbean.
Cayman Finance, the private sector group that represents the Cayman Islands’ financial services industry, said the remarks by the prime minister finally recognised the transparency of the Cayman Islands financial services industry built over the past four decades.
   A good, recent example of how the Cayman Islands compares to other jurisdictions is illustrated in the OECD secretary-general's report to the G20 leaders, issued in early September, Cayman Finance said.
   The report shows ratings for 98 jurisdictions, based on nine criteria, giving a green, amber, or red rating for each and where 'green' denotes the highest rating. Cayman is rated green across all nine categories. Brazil and the US have two ambers, Russia has seven, and Canada, Germany, Spain, and the UK each have one.
   "Clearly we appreciate the comments by the prime minister. Given the facts, like the OECD/FATF reviews, we believe it is about time Cayman starts to receive some credit. We applaud Prime Minster Cameron for making this statement, which reflects the reality of the situation regarding international financial centres. We hope other heads of state emulate his actions, and the international media starts to focus on facts rather than fiction," said Gonzalo Jalles, CEO of Cayman Finance.
   Premier and minister of finance of the British Virgin Islands, Dr Orlando Smith, said, “I thank Prime Minister David Cameron for setting the record straight and acknowledging that the BVI should no longer be labelled as a ‘tax haven’.

   “For many years the BVI has implemented the highest international standards on transparency, accountability and information exchange on tax matters, as set out by international bodies such as the OECD.
   “We strongly agree with Mr Cameron’s assessment that the focus should now shift to those countries that really are tax havens. We have long argued that to create a level playing field, all financial centres should be covered by global agreements on regulatory standards. The BVI considers it particularly important that in order to achieve fairness and overall success on these issues policies should be raised to the highest level of established international standards to ensure across-the-board compliance.
   “I reiterate my government’s support for the UK’s agenda on tax, trade and transparency and fully support all efforts aimed at establishing global standards. The BVI will continue to be a constructive partner in evolving and setting the highest standards of regulation. We are proud of our part in the global economy and we believe that good regulation is good for business. We are pleased this has now been recognised by the UK government.”