In the United States, tax reform continues to be as divisive politically after the fact as it was during the legislative progress. Indeed, a recent survey by the Pew Research Center suggests that those whose political sympathies lay closer to the Democrats than the Republicans still oppose the changes, even though a great many of them stand to benefit.
Complain as they might that the TCJA was skewed towards corporations and fiscally irresponsible, there’s very little that the Democrats can do at the moment to reverse things. Perhaps this year’s mid-term congressional elections may give them more influence over legislation and policy. But, would they really want to start picking off the bits of the TCJA they don’t like? Given that the tax cuts are encouraging some of America’s largest firms to relocate operations domestically, and that the IMF tacitly endorsed … Read More »
The odds against an historic overhaul to the US tax code appear to have shortened considerably recently. But let’s be clear, this is likely to be a marathon, not a sprint. And an obstacle-strewn one at that – a kind of 26-mile steeplechase. In which case, there’s plenty of opportunities for the tax reform bill to trip, stumble, bog down, and ultimately run out of legs.
Not that I’m trying to deliberately talk down the GOP’s tax reform efforts. If we ignore the politics of the proposals for now – as difficult as that may be – it is clear that the kinds of changes that tax reform will bring are long overdue: tax code simplification; lower rates, especially on corporate income; and a wider tax base.
There’s no escaping the fact that there are some politically contentious provisions in the bill … Read More »
China may have been upbraided by the International Monetary Fund earlier this month for the lack of progressivity in its personal income tax regime – how ironic that a country run by communists has, according to the IMF, the highest level of income inequality in the world. However, in many other ways, China seems to be making good progress in adapting its tax system to the demands of today’s economy, including with proposals to improve tax incentives for scientific research.
Value-added tax has now been extended to all areas of the economy, and earlier this month, Chinese Premier Li Keqiang said that reform of the VAT regime would continue. VAT has already saved businesses an estimated CNY1.6tn (USD239.8bn) since its introduction, the Ministry of Finance said.
It was also announced recently that China is to allow foreign investors to defer tax on dividend income … Read More »
For all the anticipation, last week’s revelation by Prime Minister Theresa May that the UK is headed for a “hard Brexit” wasn’t quite the seismic shock it perhaps should have been. People have had so long to ruminate on all the myriad possibilities for the UK’s post-Brexit relations with the EU that most have concluded that if out is to truly mean out, then hard Brexit it has to be. But at least we know now.
As the EU’s most influential figures have been insisting for the last six months, membership of the Single Market and the “four freedoms” that go with it are indivisible: you can’t have one without the others. Otherwise, it would be a double market, or a triple, or a quadruple market, which defeats the whole purpose of the thing. It became fairly obvious early on that … Read More »
You’d think in this new age of transparency, governments would be more accountable for their actions than they used to be. But apparently not. Which is why we have institutions like the Government Accountability Office (GAO) in the United States, to augment the work of Congress in holding the Government to account. And by all accounts, it seems to be doing a fairly good job, including in the area of tax administration. Indeed, barely a month goes by without the GAO calling out the Internal Revenue Service and other agencies for such things as lapses in protecting taxpayer information, ongoing vulnerability of systems to fraud, and various other forms of maladministration and wastage. While the GAO has no legal authority as such, the fact that it is able to expose administrative shortcomings is often enough in itself to bring about … Read More »
Many a government has promised to simplify and reform their country’s nightmarish tax code, only to fail to deliver before its time is up. But regardless of that fact, when a government fails to deliver, it deserves to be called out. And this week’s villain of the piece is the Philippines, where businesses have once again been imploring the Government to reform the nation’s dysfunctional tax system.
For its part the Government has frequently assured taxpayers that it is committed to tax reform. But commitment and action are not the same thing, and the lack of action is now showing. The Philippines ranked 126th out of 180 countries in PwC’s Paying Taxes Index 2016. This index tells us that companies have to make 36 separate tax payments, a process taking an average of 193 hours per year. What’s more, the Philippines’ … Read More »
The United States Internal Revenue Service is more often vilified than it is complimented. So when it does receive a rare piece of praise, it is worth pointing out. Apparently, the agency had a pretty good 2016 filing season, according to the mid-year report delivered to Congress by National Taxpayer Advocate Nina Olson on July 7. As you’d expect, though, there is considerable room for improvement; reportedly, more than 25 percent of telephone enquiries to the IRS still go unanswered, many taxpayers remain baffled by a nightmarish tax code, and rates of fraud and error are still unacceptably high.
However, in the IRS’s defense, it doesn’t make the rules, Congress does; nor, most likely, does it ask to do more with less. But Congress and the Administration routinely demand this, in the knowledge that the agency’s ever-expanding remit is stretching it … Read More »
In the olden days, taxes were used to raise money, initially to help governments wage wars, then later to fund public services. Taxes still help governments wage war and run public services of course, but they are now much more than mere revenue-raisers. They are an instrument of economic policy, and a symbol of the “social contract” between rulers and the ruled. Thus, governments cut taxes in an attempt to stimulate the economy, and raise them to cool overheating markets. That taxes are typically used also to promote income distribution makes tax policy a political issue.
Now taxes are so politicized, it’s very hard to get rid of one — even when it could be argued that it serves little purpose. And South Korea’s debate about corporate tax highlights the role of corporate tax in particular. To most people it … Read More »
There isn’t room here to consider the political, financial, economic, legal, and diplomatic implications of the Brexit for Britain, the EU, and the world. In any case, this being such an unprecedented and historic event, nobody without shamanistic powers knows what the future holds, and even the most visionary of soothsayers will struggle to tell you how it will all pan out. What we do know is that the EU, for all its manifold faults, is generally liked by multinationals because of the single market and the relative certainty that it offers. And they like Britain in particular because of its EU membership, low corporate tax, flexible labor market, and relatively light regulation (in comparison to other member states at any rate). Hence, a great many of them urged Britain to remain. Time will tell how these multinationals will continue … Read More »
It is hard to think of any country in recent history which has had such a singular focus on one tax than Japan has had with its consumption tax. The reason for this is that, as many inside Japan, and economists and analysts outside it, have come to the conclusion, a consumption tax hike is the only thing likely to rescue Japan from future fiscal oblivion. And there are some compelling reasons for increasing the tax. One of them is that, according to the International Monetary Fund, in dollar terms each percentage point increase in consumption tax generates almost USD20bn in revenue. That’s some chunk of change for a relatively minor increase in tax, and would obviously go some way towards budget deficit alleviation and public debt reduction. And at eight percent, the tax is lower than equivalent levies – … Read More »