Worldwide Tax News
OECD Publishes Report on Revenue Statistics in Asian Countries: Trends in Indonesia, Malaysia and the Philippines
On 19 August 2015, the OECD published the report, Revenue Statistics in Asian Countries: Trends in Indonesia, Malaysia and the Philippines. The report is part of the OECD's Global Revenue Statistics project, and covers tax revenue trends, levels and structures from 1990 to 2013, as well as country profiles of tax administration and recent reforms.
Increasing tax revenues and ensuring sustainable domestic resource mobilisation will be critical as emerging Asian economies seek to boost the provision of public goods and services and improve economic growth and living standards.
Revenue Statistics in Asian Countries: Trends in Indonesia, Malaysia and the Philippines shows that the tax-to-GDP ratio has grown steadily since 2000 in all three countries, but has remained relatively stable in recent years.
In 2013, Indonesia had a tax-to-GDP ratio of 13.1%, which was slightly lower than the 16.2% reported in the Philippines and the 16.9% reported in Malaysia. The three countries’ tax levels were significantly below those of OECD countries in the region such as Korea, where the tax-to-GDP ratio was 24.3%, or Japan, where it was 29.5%, and well below the OECD average of 34.1%.
The OECD report shows that the tax-to-GDP ratios in the three countries have risen steadily over the 2000-2013 period. In Indonesia, the tax-to-GDP ratio increased by 4.5 percentage points, in Malaysia it rose by 2.3 percentage points and increase was of 0.5 percentage points in the Philippines. This compares to a decline of 0.2 percentage points across the OECD.
Revenue Statistics in Asian Countries: Trends in Indonesia, Malaysia and the Philippines provides cross-country comparisons across these economies together with Japan and Korea. Comparable and consistent tax statistics facilitate transparent policy dialogue and provide policy makers with an important tool to assess alternative tax reforms.
Beyond statistics in this year’s report - the second edition of Revenue Statistics in Asian Countries and the first to include the Philippines - a special feature provides country profiles on recent tax administration and related reforms in Indonesia, Malaysia and the Philippines. Continued reforms will be necessary to help these tax administrations raise additional tax revenues in the future.
Puerto Rican Consumption Tax Commission Recommends Moving Forward with VAT Implementation
On 12 August 2015, the Consumption Tax Transformation Alternatives Commission issued its report on the implementation of a value added tax (VAT) regime in Puerto Rico. The law for the implementation of VAT in Puerto Rico was signed 29 May 2015, but included the condition that its final implementation would depend on the findings of the Commission, which looked at alternatives to VAT.
In its report, the Commission states that implementing a VAT system would be the most efficient way to tax consumption, and therefore the transition from sales and use tax (SUT) to VAT in Puerto Rico will continue. The transition from SUT to VAT has already begun with an increase in the total SUT rate from 7% to 11.5% effective 1 July 2015. The transition will continue with the introduction of a 4% SUT on business-to-business and professional services on 1 October 2015, and a final transition to VAT at the rate of 10.5% effective 1 April 2016, while maintaining a 1% Municipal SUT.
Slovenia Issues FAQ on Mutual Agreement Procedures
On 17 August 2015, the Financial Administration of Slovenia published a list of frequently asked questions (FAQ) on using mutual agreement procedures to resolve issues where a Slovenian taxpayer believes that the provisions of an applicable tax treaty have not been properly applied. Key points of the FAQ are summarized as follows:
- Slovenian tax residents may lodge MAP requests with the Slovenian Ministry of Finance (competent authority);
- Request may be lodged if a taxpayer believes either or both of the relevant competent authorities have not properly applied the provisions of the treaty;
- Requests must generally be lodged within 3 years from the first notification of action not in accordance with a treaty, although certain treaties provide for a shorter or longer period, such as 2 years in the case of Italy and Canada; 5 years in the case of Norway and the U.S.; and no limit set in the case of Sweden and the UK;
- Requests may be made while cases are pending with the administrative authorities or the courts in accordance with the provisions of the applicable treaty, and, in certain cases, requests can be made after an issue has been decided by a court;
- If agreement is not reached under MAP, arbitration procedures may be initiated if provisions for arbitration are included in the applicable treaty
Click the following link for FAQ (Slovenian Language).
South Africa Publishes Updated Guide on Valuation of Assets for Capital Gains Tax Purposes
On 19 August 2015, the South African Revenue Service published the third edition of the Guide on Valuation of Assets for Capital Gains Tax Purposes. The guide covers:
- Methods for determining value of assets acquired before the valuation date (1 October 2001), which include:
- 20% × (proceeds less allowable expenditure incurred on or after valuation date);
- Market value; or
- Market value on valuation date (1 October 2001), including:
- Time limit for performing valuations;
- Who may perform valuations;
- Methods to be adopted in valuing certain assets;
- Submission and retention requirements;
- Loss limitation rules; and
- Burden of proof;
- Market values other than on valuation date; and
Click the following link for the Guide on Valuation of Assets for Capital Gains Tax Purposes.
China Considering Nationwide Property Tax
According to recent reports, the Standing Committee of the China's National People's Congress has included the introduction of a nationwide property tax in its legislative plans. Currently, no nationwide property tax is levied in China, although pilot property tax programs based on transaction values have been introduced in Chongqing and Shanghai in an effort to cool the property markets in those cities.
The development of a property tax is only in its initial stages, with the main options being a tax based on property size or a tax based on the number of properties owned. Aside from determining the basis of the tax, a key issue is the impact of China's land use system, which allows for a land use period of 70 years for residential, 50 years for industrial, and 40 years for educational and cultural purposes. Because there is no permanent ownership, there may be legal issues with taxing property owners.
Costa Rican Tax Reform Bills Submitted to Legislative Assembly
On 12 August 2015, legislation to implement amendments to individual income tax, corporate income tax and value added tax was submitted to Costa Rica's Legislative Assembly. The tax reform includes several changes, summarized as follows:
New individual income tax upper rates and brackets:
- up to CRC 793,000 - 0%
- over CRC 793,000 up to 1,190,000 - 10%
- over CRC 1,190,000 up to 2,225,000 - 15%
- over CRC 2,225,000 up to 4,450,000 - 20%
- over CRC 4,450,000 - 25%
For self-employed individuals, the rates range from 10% to 25%.
Main changes include:
- Allowing a special tax year ending 31 December (previous coverage);
- Introducing new thin capitalization rules;
- Strengthening transfer pricing rules;
- Introducing a new capital gains tax at a standard rate of 15%; and
- Limiting the deduction of expenses paid to tax havens.
Main changes include:
- Expanding the scope of VAT to cover all supplies of goods and services in Costa Rica, with exceptions for education services, and goods and services produced for self-consumption;
- Introducing the possibility of a VAT refund for certain low-income individuals and for certain health-services;
- Increasing the VAT rate from the current 13% to 14% in 2016, and to 15% in 2017;
- Granting exemptions for supplies made by companies operating in free trade zones; and
- Introducing a 5% reduced rate for certain raw materials, services related to agricultural goods production, commissions paid to qualifying pensions, and airfares for national or international flights originating in Costa Rica.
As the legislative assembly reviews the legislation, the amendments are subject to change, and once approved, will generally apply from 1 January 2016.