Diageo’s recently published annual report was revealing for a couple of reasons. First, it showed how large multinational companies are more often than not embroiled in at least one tax dispute across the many jurisdictions in which they operate.
Second, in Diageo’s case, one of these tax disputes concerned the United Kingdom’s Diverted Profits Tax (DPT). And this development was interesting because this was one of the first times that the UK tax authority, HMRC, has assessed DPT against a company.
The next development of interest will be what happens next in this dispute. And doubtless other multinationals with potential exposure to this charge will be keenly watching how it unfolds, with a view to strengthening their own defences against the tax. However, they’ll need a long attention span. Because under the DPT legislation, after a taxpayer is issued with a DPT payment notice … Read More »
In the UK, it is interesting that while the Government continues to dismantle the “non-dom” regime, under which wealthy foreign taxpayers (for the most part) don’t pay tax on their overseas earnings as long as those earnings stay offshore, Italy is creating its own non-dom regime, aimed at attracting the sort of entrepreneurial types that have been lured to London for decades, centuries even.
Indeed, a number of European countries that have struggled to compete with the UK on tax now appear to be falling over themselves to lay out the red carpet for London bankers and other highly remunerated professionals who contribute substantial sums in tax. France has been banging this particular drum for a number of months now, albeit without doing much about it, and the German state of Hesse – home to Frankfurt, continental Europe’s main finance center … Read More »
South Africa has proposed the removal of the 183-day foreign-earned income exemption in certain situations. Those certain situations, it seems, are when an expat resides in a jurisdiction with very low or non-existent taxes, which means they could be getting away with being doubly non-taxed. But the proposal has led to inevitable concerns that expats will end up being doubly taxed instead.
The Government argues that the foreign income exemption was put in place at a time when South Africa had far fewer double tax avoidance treaties than it does today. It assures those taxpayers likely to be affected by the new rule – if introduced – that tax credits will be available to prevent situations of double taxation arising. Although I imagine applying for a foreign tax credit is unlikely to be a comforting prospect for those who currently don’t need to. What’s … Read More »
A new index on tax complexity around the world was published recently, courtesy of TMF Group, the international professional services firm. There were few surprises therein. The top-end of the index featured the usual rogues’ gallery of fiendishly complicated tax systems, many of which were found in Latin America, where taxpayers often contend with three layers of taxation – federal, state/regional, and municipal.
The only surprise perhaps was that Brazil, infamous for its tax complexity, as noted here last week, wasn’t top of the overall league table. That unwanted accolade went to Turkey, mostly because of extensive local language and currency requirements, and a long and frequently changing tax code. In short, don’t think about navigating the Turkish tax code without the services of a knowledgeable local guide, according to TMF. Istanbul is no longer Byzantium by name, but the nation’s tax … Read More »
The John Cleese award, for “stating the bleedin’ obvious,” goes to the International Monetary Fund this week, for advising Brazil that it – and its taxpayers – would benefit from a simpler tax regime.
Of course, those who follow international tax developments are likely to be well aware that Brazil has one of the most complex tax regimes in the world for businesses. But for those who aren’t in the know, let me apprise you of some of the grizzly details.
Brazil routinely props up PwC’s “Paying Taxes” time-to-comply league table, and last year it took the average medium-sized firm more than 2,000 hours to complete its tax compliance obligations. And that actually represented a considerable improvement over the previous year, when PwC put the figure at 2,600 hours.
But what makes Brazil’s tax system so nightmarish, when multinational companies are accustomed to tax … Read More »