Liechtenstein Eyes Minimum Income Tax Rise

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During its last sitting before the summer recess, the Liechtenstein Government adopted a report and application to parliament, on a third fiscal package (Massnahmenpaket III), which includes measures to increase minimum income tax.

A new fiscal consolidation program was deemed necessary due to an anticipated shortfall of tax revenues in 2013. This has meant that, despite previous savings, only two of the five basic budgetary parameters have been met in the Principality's 2013-2016 medium-term finance plan.

Massnahmenpaket III provides for additional savings totaling CHF233m (USD248m), of which CHF52m requires parliamentary approval. The package provides crucially for new revenues of around CHF39m, and includes plans to increase the country's minimum income tax from CHF1,200 currently to CHF1,900, generating approximately CHF16m for the state. A rise in the tax rates for natural persons, as well as the introduction of a new 8 percent tax bracket for the country's top income earners, have already been adopted by parliament, and are expected to further boost state fiscal income.

On the expenditure side, the Government aims to significantly cut or completely abolish certain state contributions. The Government plans to lower the state contribution to the Financial Market Authority (FMA) by CHF3m, for example, and to reduce state operating costs.

Liechtenstein's Prime Minister Adrian Hasler emphasized the Government's commitment to redressing the public finances, and insisted that this objective will be achieved in a fair manner, ensuring that everyone contributes according to their means.

OECD issues plan to crackdown on global tax dodging

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The Organisation for Economic Co-operation and Development has called for a ‘two-pronged attack’ to tackle tax avoidance and evasion through the introduction of new laws to reduce so-called ‘profit shifting’ and increased international cooperation.

Publishing an action plan to reform tax laws at the Group of 20 countries finance ministers’ meeting in Moscow, the international body said national tax laws had not kept pace with globalisation and the digital economy. This had left gaps between different regimes, which can be ‘exploited’ by multi-national corporations to artificially reduce their taxes, including moving funds to lower-rate countries.

The group therefore called for new laws to be put in place, based on international agreement, to set a new standard of tackling tax avoidance.

A plan published on Friday, set out 15 specific actions governments should take, both on their own and through international agreement, to prevent corporations from paying little or no tax.

Issues to be tackled include matching domestic and international rules to relate taxable income to the place where the economic activity that generated it took place. 

Existing tax treaty and transfer pricing rules can, in some cases, allow firms to separate taxable profits from the activities that generate them, the report warned. The G20 should therefore agree international definitions to ensure the ‘intended effect’ of the system –¬ that taxable profits cannot be artificially shifted away from countries where the value is created – is met. These principles could then be embedded in national law as required.

The OECD also set out plans for the automatic exchange of tax transparency information between jurisdictions.

A new single global standard will state what financial information should be shared automatically between countries signed up to a cooperation protocol. This will likely cover interest payments, dividends and the account balance of firms and individuals, and OECD said sharing arrangements should be in place by 2014.

Publishing the plans, secretary general Angel Gurría said the new strategy marked ‘a turning point in the history of international tax co-operation’.

‘International tax rules, many of them dating from the 1920s, ensure that businesses don’t pay taxes in two countries – double taxation. This is laudable, but unfortunately these rules are now being abused to permit double non-taxation. The action plan aims to remedy this, so multinationals also pay their fair share of taxes.’

The managing director of the International Monetary Fund, Christine Lagarde, welcomed the plans from the OECD.

‘Financial regulation and international taxation issues, including the agenda for dealing with international spillovers of national tax policies, also received attention in Moscow. The IMF will continue to do its part in these areas, given their significant implications for the global economy,’ she added.

France Begins Tax Break Purge

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The French Government has unveiled a raft of measures aimed at simplifying administrative procedures for both companies and individuals in France, and at reducing state spending on tax breaks. The proposals are designed to reduce the public deficit by around EUR3bn (USD3.9bn) next year.

Intending to cut spending on tax shelters (les niches fiscales), the Government plans to reduce the income tax shelter benefiting families, the "family quotient," to progressively reduce subsidies accorded for the use of first generation biofuels derived from plant products, and to reform tax perks currently benefiting listed real estate investment companies in France. Furthermore, the Government intends to lower tax rebates granted to farmers for using off-road diesel, and to cut tax breaks available to French overseas departments and territories, including value-added tax exemptions.

The Government aims to dramatically cut red tape, thereby reducing administrative costs for businesses, notably by simplifying the research tax credit (CIR), and by ensuring that more companies subject to corporation tax (IS) in France are required to declare and pay their tax bills electronically.

Also, the Government plans to establish a relationship of trust between the Tax Administration and businesses in France. Consequently, rather than tax audits being carried out post-declaration, the Tax Administration will carry out annual reviews, considering tax options and obligations with businesses prior to the submission of a corporate tax declaration. This will result in a binding opinion, enhancing legal certainty for firms.

Finally, the Government aims to facilitate customs procedures, by offering in future a secure service for taxpayers to declare and pay various taxes and duties online, including levies due on alcohol, on alcoholic drinks, on sugary beverages, and on flour and cereal.

A bill providing for some of the measures is due to be presented in September. Further cost cutting initiatives are currently being considered.

Israeli financial firms directed to advance earnings dates

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Bank of Israel and Finance Ministry said on Monday that the Israeli banks and insurance companies will have to move up their reporting dates to conform with the United States.

Financial institutions will be required to publish their annual financial reports by the end of February instead of March 31, while quarterly earnings must be published within 45 days of the end of the quarter, compared with two months now.

"Advancing the publication dates will enable the public to more quickly obtain updated information on the financial situation and operating results of the institutions, thereby increasing transparency and improving investors' decision-making capabilities," the central bank and ministry said in a joint statement.

"The process was conceived against the background of similar measures taken around the world," it said.

The change will be made gradually, while a start date has not yet been set. (Reporting by Steven Scheer)

Gibraltar Ranked Second QROPS Jurisdiction

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HM Government of Gibraltar is pleased to note that in a recent poll undertaken by Skandia International, registered in the Isle of Man, Gibraltar has been placed second with 26 percent of the vote as the preferred Qualified Recognized Overseas Pension Schemes (QROPS) jurisdiction in a survey of 141 international advisers who use QROPS.

Albert Isola, Minister with Responsibility for Financial Services commented: “This independent poll is very good news for Gibraltar and represents a clear recognition of the significant work undertaken in the field of imported pensions by a team of industry and government representatives led by my predecessor Gilbert Licudi QC. I view this area of business as one where Gibraltar can prosper significantly and aspire to market leadership.”

Since specific legislation was introduced last year, the Finance Center Department has been highlighting the opportunities in this area and as the Skandia Poll confirms, “in the space of less than a year, Gibraltar has come from nowhere to become a very strong QROPS center.”

Former Barbados PM warns Bahamas that VAT may erode tax base

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The former prime minister of Barbados has urged The Bahamas to conduct in-depth studies to determine the likely impact of value-added tax (VAT) on “prices, revenues and the productive sector” since any erosion of the tax base could cause it to fail to generate sufficient revenue.

In a speech to the Grand Bahama Chamber of Commerce on Monday night, Owen Arthur said that the features of the VAT system proposed by the Bahamas government “meet best standards and practices” found in VAT taxation in countries in which it is the primary form of tax.
However, the former prime minister, who implemented VAT in Barbados during his tenure, warned that tax base erosion via VAT’s implementation, or failure to secure broad-based compliance, would hinder the tax’s effectiveness.
He called upon the Bahamian government to undertake significant public outreach and consultation on the legislation, to encourage “strong stakeholder sense of ownership of the new tax”.
His comments in this regard should strike a chord with many in the Bahamian private sector, who have complained about a lack of information and consultation in relation to VAT implementation plans.

“No matter how perfect its features are in their conceptual design, the success of the new tax will depend on the strength and sensitivity surrounding the planning and administration of its introduction,” said the former prime minister.
Arthur also warned of the need to maintain fiscal expenditure discipline after the tax is imposed. “Because of its very nature, the VAT tends to introduce a higher level of buoyancy to the tax system. The growth in revenues will tend to outstrip the growth of the GDP. There will be the appearance that the state is flush with cash, and that extraordinary expenditure claims on the Treasury can be made and sustained. Fiscal disorder can in consequence ensue, triggering in turn a need for adjustment to the VAT rate.”
Speaking in support of the idea of a VAT in The Bahamas in theory, Arthur said that he sees the introduction of a VAT regime as necessary to avoid problematic levels of public debt in The Bahamas and to allow The Bahamas to meet its international obligations to organizations such as the World Trade Organization (WTO).

Arthur said his confidence that The Bahamas can implement VAT well draws upon the fact that VAT was introduced in Barbados “under more challenging circumstances than currently faces The Bahamas as you contemplate its introduction”.
He said: “The VAT was introduced in 1997 at the same time as Barbados started to apply the program of trade liberalization which had been agreed to when it acceded to membership of the WTO in 1994. Its introduction also coincided with the implementation of its obligations, as part of the CSME (Caribbean Single Market and Economy), to reduce its extra-regional tariffs from a high of 45 percent to 20 percent.
“It coincided with the OECD (Organization for Economic Co-operation and Development) Harmful Tax Initiative threat to the functioning of our international business and financial sector that helped to reduce the growth prospects of our economy.

“Above all, the scale of fiscal adjustment that was intended to be accomplished by the move to a VAT by Barbados, far exceeded that now intended in The Bahamas. In Barbados, the VAT was used to replace 11 forms of indirect taxes, and 44 kinds of fees as a means of raising revenue.”
Nonetheless Arthur noted that in The Bahamas a unique situation exists in that the VAT system is intended to replace a system of very high import taxes and there is at the same time “no intention to introduce taxes on income or corporation taxes as exists in other jurisdictions in the Caribbean”.
“The resulting new tax regime will therefore only succeed in generating an equivalent amount of revenue to that which it replaces if great care is first taken to accurately estimate, and then even greater discipline is exercised in maintaining the proposed broad base. To be precise, the introduction of a VAT in The Bahamas will broaden the tax base especially by bringing a number of activities, particularly services, into the tax net.
“But in so far as income and profits will continue to be free of taxes, the overall tax base against which revenue is raised in The Bahamas will be smaller, in relative terms, than that of other CARICOM countries which have a VAT as well as taxes on income,” noted Arthur.
“The proposed rate of the VAT in The Bahamas will be the same as in most other Caribbean countries. With the proposed lowering of the rates of import duties, a VAT at the standard 15 percent rate will only serve its revenue generating objectives if discipline is exercised to maintain its base that it is given to begin with.”

Arthur noted that another major concern would be to ensure compliance.
“The challenge is that the VAT is intended to simplify the tax system, but it is itself a complex tax to design and to administer. To address this challenge, no effort should be spared to design and to have in place a fully competent VAT implementation unit before the VAT is introduced. In addition, the most comprehensive public relations outreach program has to be undertaken.”
Noting the tendency for VAT to hit the pockets of the poor disproportionately, Arthur said it is important to build “special discriminatory features” into the structure of the tax that will allow these proceeds to be redistributed to their advantage.

Liechtenstein, Switzerland Update Tax Accord

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Liechtenstein and Switzerland have amended the bilateral agreement between the two countries on environmental levies, to reflect the decision by both treaty partner states to extend the carbon dioxide levy until 2020.

In accordance with the agreement, Liechtenstein is obliged to transpose Swiss Federal legislation on environmental taxes into national law. An accord dating from January 29, 2010, bestows certain competencies in the area of environmental levies and the Carbon Dioxide Act (CO2 Act) to the Swiss Federal Authorities.

Switzerland revised its CO2 Act on January 1, 2013. Forming the cornerstone of Swiss climate policy, the revised Act sets an emissions reduction target for 2020 and sets out various measures for buildings, transport and industry. Furthermore, the Act provides for the carbon dioxide levy imposed on fossil fuel to be extended until 2020.

The CO2 levy increases the cost of heating buildings with oil or gas, making energy efficiency renovations and renewable energies more attractive. A portion of the levy is used for the buildings program, which promotes building renovations, investments in renewable energies, waste heat recovery, and building utilities optimization. The incentive fee for fossil thermal fuels also provides an incentive to companies to operate as energy efficiently as possible.

Approximately two-thirds of the CO2 levy is redistributed to the general public, notably via a reduction in health insurance premiums. Since the redistribution is carried out per capita or per franc of salary independently of consumption, all households and installations that consume low quantities of fossil thermal fuels benefit from it.

Consequently, the Liechtenstein Government now aims to align its legislation with Switzerland's revised CO2 Act. To this end, the Government recently adopted a bill providing for the carbon dioxide levy to be extended and submitted the corresponding report and application to parliament for ratification.

BVI data theft may stymie Indian tax authorities

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The Economic Times reported : a cat-and-mouse game is about to begin between Indian tax authorities and wealthy individuals who find their names in the public domain for allegedly forming companies in the British Virgin Islands (BVI) to stash away undisclosed assets.
Following a claim that the BVI data was stolen, individuals that have come under the scrutiny of the Indian authorities may escape prosecution, as stolen information carries little legitimacy in court proceedings.
"This is the stance they are taking. Courts are unlikely to accept stolen data and invoking the treaty with BVI too becomes difficult. The treaty has no scope for fishing expeditions," said a senior tax professional and an expert on offshore trust matters.
According to the Economic Times, only specific information about individuals or companies that are under investigation can be shared.
While these individuals in the BVI list have come under scrutiny, the very investigation is based on stolen data, the tax expert said.
On April 1, the Economic Times reported that tax officials suspected many Indian residents of holding shares in BVI companies, and the shares were bought well before the Reserve Bank of India announced a liberalised remittance scheme for buying shares in companies abroad.
On April 4, The Indian Express reported the findings of the International Consortium of Investigative Journalists and named some of the Indians connected to BVI entities.
On June 14, the consortium released information about 100,000 secret companies, trusts and funds in offshore hideaways.

France, Switzerland Ink New Inheritance Tax Accord

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Swiss Finance Minister Eveline Widmer-Schlumpf and her French counterpart Pierre Moscovici have recently signed, in Paris, the new Franco-Swiss agreement aimed at avoiding double taxation in the area of inheritance tax. Both Ministers also signed a joint declaration reaffirming their commitment to extensive bilateral dialogue, to resolve outstanding tax issues.

Replacing the existing bilateral accord from 1953, the new text is intended to put an end to certain situations of non-taxation of inheritances. The revised treaty provides that France can tax heirs and beneficiaries resident in France, although after deduction of any inheritance tax paid in Switzerland. Switzerland thereby retains its primary right of taxation and its taxing power is not affected.

However, heirs and beneficiaries of the deceased who are resident in Switzerland must have been resident in France for at least eight out of ten years prior to the period of receipt, in order for France to be able to exercise its taxing power.

Furthermore, the agreement establishes tax transparency for real estate companies. Real estate held indirectly via a company is taxable where these assets are located. However, this tax is not applicable if the deceased or his/her family owns half of this company and property represents more than a third of all of the assets of the company.

Finally, the accord facilitates future information exchange between Switzerland and France, permitting requests and group requests, even in cases where taxpayers' banking details are not known.

According to the Swiss Federal Department of Finance, the signing of the Franco-Swiss agreement marks "a first concrete step" in mutual dialogue. Underlining the commitment of both countries to further strengthening cooperation and to deepening discussions, the Federal Department of Finance highlights the fact that a joint working group is to be set up in September, tasked with finding a solution to contested tax issues.

The working group will address issues including administrative assistance in tax matters, the regularization of untaxed assets, Switzerland's expenditure-based taxation (lump-sum taxation), and the application of tax regulations governing the Basel-Mülhausen airport.

Welcoming the joint signing of the treaty, French Finance Minister Moscovici emphasized that the accord constitutes significant progress in the fight against tax exile and tax evasion, as well as in strengthening bilateral dialogue between France and Switzerland.

The inheritance tax agreement must first be approved by the parliaments of both treaty states, before the provisions can enter into force.

France Clarifies Regulations Pertaining to the Wealth Tax Cap

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The French Finance Ministry has clarified regulations pertaining to the wealth tax cap (ISF) and life insurance contracts. It has also announced that the deadline for filing "corrective" ISF tax declarations is October 15.

Currently, ISF, income tax, the general social contribution (CSG), and the contribution for the repayment of social debt (CRDS) are capped at 75 percent of income. If the amount of tax due exceeds this threshold, a taxpayers' wealth tax bill is subsequently reduced accordingly to respect the regulation.

Details of the specific income to take into account when calculating the ISF cap were published in the country's Official Journal on June 14 (BOI-PAT-ISF-40-60-20130614).

In its publication, the Tax Administration highlights the fact that annual income derived from capitalization contracts and bonds, as well as income generated from other similar investments, notably life insurance contracts taken out with insurance companies located in France or abroad, is now included within the scope of the ISF cap. This is as social levies are withheld each year on this type of income, in accordance with Article L 136-7 of the French Social Security Act (CSS).

In practice, this will mean that interest derived from euro fund life insurance policies, whether mono- or multi-based, is to be taken into consideration in future when calculating the ISF "tax shield."

Taxpayers in France subject to ISF this year should already have filed their ISF tax returns, as the final reporting deadline was June 17. Given that individuals might not have included revenue from life insurance contracts in their ISF cap calculations, the Government has fixed a deadline of October 15 for filing corrective returns.

Taxpayers are invited to submit a corrective declaration using the same form as before, namely either the declaration of supplementary income (form 2042 C) or the ISF declaration (form 2725), depending on the level of their assets.

The late filing of corrective declarations, and any additional taxes that may result, will not be subject to either late interest or penalty payments, provided that they are submitted before October 15.

BVI Issues Action Plan On Transparency

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The British Virgin Islands on July 05, 2013 issued an action plan to prevent the misuse of legal persons and legal arrangements through the use of Tax Information Exchange Agreements, alongside other measures.

The plan states that BVI recognizes and supports the need for transparency in relation to the establishment of corporate entities, including legal arrangements, and is committed to supporting initiatives that seek to establish international standards in that respect.

It goes on to note a number of measures which the British Virgin Islands has undertaken to promote transparency. Some of those measures are as follows:

-To date, the British Virgin Islands has concluded 24 Tax Information Exchange Agreements (TIEAs) and is in the process of negotiation with other countries for more TIEAs;
-In order to ensure better coordination and response to tax information exchange matters, the British Virgin Islands established the International Tax Authority (ITA) within the Ministry of Finance with the primary responsibility of facilitating assistance to foreign tax and law enforcement authorities in tax and tax-related matters;
-The British Virgin Islands was the first jurisdiction to develop and implement a paper on immobilizing bearer shares in order to remove the anonymity associated with bearer share companies and this regime is well-established and enforced under the BVI Business Companies Act, 2004;
-The British Virgin Islands subscribes and adheres to the Statement of Best Practice for Trust and Company Service Providers issued by the then Offshore Group of Banking Supervisors (now transformed into the Group of International Finance Center Supervisors) and accordingly licenses and supervises to high standards all trust and company service providers in the Territory;
-All licensed trust and company service providers are supervised for their anti-money laundering and terrorist financing obligations, including the availability of beneficial ownership information, and periodic inspections are carried out in respect of the licensees to establish compliance and, where shortcomings are identified, appropriate enforcement action is taken;
-The British Virgin Islands, in consonance with its long-standing policy of not encouraging or welcoming those who choose to break laws applicable to them, has committed to and is actively engaged in negotiations with the US Treasury in finalizing an Inter-Governmental Agreement (IGA) to facilitate the exchange of tax information; the British Virgin Islands is similarly engaged with Her Majesty’s Treasury and has committed to the G5 Multilateral Pilot Project on the automatic exchange of tax information.

Israel’s Tourism Ministry Focusing on China

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The Israel Government Tourist Office in China is organizing a Road Show in three cities this week (Rosh Chodesh Menachem Av to 5 Av): Beijing, Shanghai and Guangzhou. 500 leading Chinese travel agents are invited to attend the Road Show, some of them being specialists in the Middle East market.

Following the seminars, which will expose the participants to the Israeli tourism product, there will be a series of round-table meetings between Israeli and Chinese tour operators to encourage cooperation. The ministry has also produced a booklet in Chinese, featuring business profiles of the Israeli companies participating in the Road Show.

The Road Show, which is accompanied by extensive advertising in the trade and mainstream media, will also feature attractions such as Israeli food, Dead Sea mud treatments etc.

The Israel Embassy in Beijing recently announced the implementation of reforms for Chinese visitors receiving entry visas to Israel, in order to encourage tourism. These include, among others, an option for a visa for independent travelers without the need for assistance from a local tour operator; a simpler procedure for issuing business visas to Israel and for bank guarantees for residents of Beijing, Shanghai and Guangzhou (where Israel has consular offices. It should be noted that, presently, Israeli consular services are not available worldwide due to a work dispute by Foreign Ministry employees). These easier procedures are part of a program to make Israel more accessible to the Chinese tourist and to encourage airlines to operate flights to Israel in the near future.

In recent years, Israel has become an attractive tourism destination for the Chinese visitor, with an increase of 27% in incoming tourism from China during the first five months of 2013 versus the same period last year (and a 45% increase on 2011). China is the most important source country worldwide for tourism, with an increase of 20% in the numbers of visitors from China to international destinations during 2010-2011. In 2012, more than 20,000 visitors from China arrived in Israel.

Tourism Minister Dr. Uzi Landau stated “The Tourism Ministry has identified the tourism potential in China, defining it as one of the leading destinations in its campaign for emerging markets. As a result, we will work to increase the number of incoming tourists from China to Israel over the next few years. The two countries are rich in ancient history and heritage and I am sure that Chinese tourists will find Israel a source of inspiration.”

Andorra Firms Up IRPF Income Tax Plans

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Andorran Finance Minister Jordi Cinca has provided further clarification on provisions contained in the Government's bill, providing for the introduction of a tax on individual income in Andorra (IRPF).

The tax is intended to "complete" a new competitive and comparable fiscal framework, enabling Andorra to conclude double taxation agreements with other states. The tax is also designed to promote equity, in accordance with the country's constitution, and to provide greater stability and diversity of state income. Cinca made clear, however, that indirect taxation will remain a more important source of state income.

The IRPF tax will be levied on the global income of natural persons at a flat rate of 10 percent. The levy will be imposed on income from labor, on income from economic activities, on income from capital (both moveable and immovable assets), and on capital gains and losses. Once the IRPF enters into force, the levy will replace the existing tax on economic activities (IAE).

Furthermore, the bill establishes a minimum personal IRPF exemption of EUR24,000 (USD30,698), rising to EUR40,000 in households where the spouse or partner is not in receipt of any income. The text also provides for an IRPF tax rate of 5 percent (50 percent IRPF tax rate reduction) to be levied on income of between EUR24,001 and EUR40,000.

The draft legislation provides for a number of tax breaks for families, for incapacity, as well as for the acquisition of a primary residence. Consequently, the bill accords a tax reduction for dependents, amounting to EUR750 for each child under 25, and for elderly dependents over 65, provided that they are not in receipt of annual income in excess of EUR12,000. The provisions grant a tax reduction of up to EUR1,000 annually for investment in a principle residence, and provide for a tax exemption of EUR3,000 to be granted for interest income, to protect small savers.

Finally, the bill provides for a raft of exemptions from income tax. These include tax exemptions for compensation income resulting from a personal injury liability, compensation pay for unfair dismissal, literary, artistic, and scientific financial awards (under certain conditions,) dividends and participation paid out by companies resident in Andorra, and income from bonds issued by the Principality of Andorra.

The bill contains provisions intended to avoid double taxation, as well as tax deductions for job creation and investment in Andorra.

Liechtenstein Extends Carbon Dioxide Tax

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The Liechtenstein Government has adopted a bill revising the Principality's Carbon Dioxide Act (CO2 Act), aligning the legislation with Switzerland's revised CO2 Act, and providing notably for the carbon dioxide levy imposed on fossil fuel to be extended until 2020. The Government has approved the corresponding report and application to parliament for ratification.

The Liechtenstein bill not only extends the carbon dioxide tax, which was introduced in Liechtenstein in 2008, but also contains provisions governing the emissions of newly registered cars, and introduces a "compensation" requirement for importers of fossil fuels, notably importers of petrol and diesel.

The bill brings Liechtenstein's law into line with Switzerland's revised CO2 Act, which entered into force in the Confederation on January 1, 2013. For competitive reasons, Liechtenstein agreed in 2010 to transpose Swiss federal legislation on environmental levies into national law, within the framework of the bilateral treaty concluded between Liechtenstein and Switzerland.

Switzerland's revised CO2 Act forms the cornerstone of Swiss climate policy. It sets an emissions reduction target for 2020 and sets out various measures for buildings, transport, and industry.

The revised CO2 Act maintains the incentive fee on fossil thermal fuels (CO2 levy) introduced in 2008 and raises it in step with interim targets. First, the CO2 levy increases the cost of heating buildings with oil or gas, making energy efficiency renovations and renewable energies more attractive. A portion of the levy is used for the buildings program, which promotes building renovations, investments in renewable energies, waste heat recovery, and building utilities optimization.

Furthermore, the revised Act introduces two measures aimed at reducing emissions caused by transport. In addition, importers of petrol and diesel must also compensate for a portion of motor fuel emissions by investing in climate protection projects in Switzerland.

The incentive fee for fossil thermal fuels provides an incentive to companies to operate as energy efficiently as possible. Companies that have committed to limit their greenhouse gases can be exempted from the levy by the Federal Government. Large companies in specific industries that generate a large quantity of emissions are automatically exempted from the CO2 levy and are instead involved in the emissions trading scheme. The Federal Government allocates a constantly decreasing quantity of emissions allowances to these companies. If the companies generate more than their allotted quantity of CO2, they purchase the emissions allowances they need to make up the difference within the emissions trading scheme.

Approximately two-thirds of the CO2 levy is redistributed to the general public, notably via a reduction in health insurance premiums. Since the redistribution is carried out per capita or per franc of salary independently of consumption, all households and installations that consume low quantities of fossil thermal fuels benefit from it.

New work permit policy enhances Bahamas financial services sector

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Guardian Business can confirm : Foreign business professionals traveling to The Bahamas solely for meetings for a less than two-week stay will no longer require a short-term work permit.

As The Bahamas looks to maintain its position as a world-class financial services centre, Minister of Financial Services Ryan Pinder said this newest policy is part of the government’s commitment to make doing business in The Bahamas easier.

“Through consultations with the Ministry of Financial Services, we became aware of the need for clarification on certain matters relating to immigration policies and especially for those who come to The Bahamas for short-term business trips, who don’t come for any kind of compensation or remuneration,” he told reporters last week.
He noted that the Ministry of Financial Services is partnering with the Department of Immigration to ensure that there is efficient entry into The Bahamas for business meetings.
Dr Nicola Virgil-Rolle, director of financial services, pointed out that the movement of foreigners throughout The Bahamas for international business, finance and trade is expected and encouraged. She also stressed that it is the Department of Immigration’s duty to facilitate this movement in accordance with the country’s immigration laws and policies.
“The Ministry of Financial Services and the Department of Immigration are pleased to advise the public of the Immigration and Entry Procedures for short-stay (less than two weeks) business and client meetings in The Bahamas where there is no financial gain involved. With respect to entry to The Bahamas for said purposes, be informed that short-term work permits are not required,” she explained.

“However, to facilitate the ease of entry into The Bahamas, the Department of Immigration recommends that the travel details of such visitors be advised to the airport superintendent of immigration at least 72 hours prior to the expected date of entry.”
“The Ministry of Financial Services expresses its gratitude to the Department of Immigration for its continued cooperation in the development of The Bahamas’ financial services industry.”
Earlier this year, Pinder had confirmed plans for a modernized immigration policy designed specifically for the financial sector.
“Paramount in this proposal will be mechanisms to identify and confirm legitimate business needs for foreign talent. For example, is the need because of specific company knowledge, language requirements and promoting head office training programs? In this process we must keep in mind the approval process by the regulators, where applicable,” he told Guardian Business.
Pinder noted that a dynamic international business center requires a modern, development-focused immigration policy. The plan, he said, is to implement a policy that would meet the needs of businesses and protect the opportunities and mobility for Bahamians.
“My ministry understands that every international business center operates with foreign talent and that every center has a rigorous immigration process. However, our center demands a responsive immigration management system that considers domestic development goals,” Pinder explained.

The financial services minister revealed to Guardian Business that The Bahamas must ensure there is “appropriate” succession planning and knowledge transfer within a “reasonable” timeframe.
“We must ensure that there are clearer, more transparent requirements, faster processing time, an applications tracking process and flexibility to fairly deal with urgent cases,” he added.
“Finally, we must ensure that the immigration process reduces uncertainty through a more efficient process.”
Meantime, Minister of Immigration and Foreign Affairs Fred Mitchell revealed to Guardian Business that most companies stress that the foreign labor component is minor but comes in “critical and highly-specialized areas.”

“They are usually at the top of the management tree. Of course the other issue is when you’re talking about private wealth management, one of the important aspects of it is relationships. So people have to move where their managers move and that’s something we have come to understand in terms of what that means for the sector,” he said.
“It’s a matter which we watch very carefully. We work very closely with the Department of Labour because we want to be sure that we are getting the maximum employment benefits for the Bahamian people. We are trying to introduce monthly meetings with the sector so they can tell me what the issues are and whether or not we are doing better or worse, so that we can try to get things done expeditiously.”
Mitchell stressed the importance of the financial services sector, which is the second pillar of the country’s economy and contributes 20 percent of the gross domestic product (GDP).
“We have to keep it productive and continue to promote it. That requires a degree of foreign labour, so we have to get that process done as quickly and efficiently as possible. We are working closely together with the Ministry of Financial Services,” said Mitchell.

Switzerland Set To Sign French Inheritance Tax Deal

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The Swiss Federal Council has given the go-ahead for the signing of the new Franco-Swiss agreement, aimed at avoiding double taxation in the area of inheritance tax.

The current agreement dates from 1953 and has not been revised since then. In 2011, France informed Switzerland that it was considering rescinding the accord, arguing that it was no longer in line with its policy on agreements. Switzerland decided that a revision was preferable to an unregulated situation because the treaty guarantees legal certainty for taxpayers and avoids the risk of double taxation.

The new text provides that France can tax heirs and beneficiaries resident in France, although deducts any inheritance tax paid in Switzerland. Switzerland thereby retains its primary right of taxation and its taxing power is not affected. In addition, the agreement establishes tax transparency for real estate companies: indirectly held property will in future be taxable in the place where the property is situated.

In July 2012, a preliminary draft agreement was initialled and was submitted to a hearing. Due to the negative reaction of various Swiss cantons and interested parties, Switzerland proposed a number of improvements in the draft to France and, following subsequent discussions, a more favorable arrangement was found. The following improvements were made:

•  Heirs and beneficiaries of the deceased who are resident in Switzerland must have been resident in France for at least eight out of ten years prior to the period of receipt, in order for France to be able to exercise its taxing power;
• Real estate held indirectly via a company is taxable where these assets are located. However, this tax is not applicable if the deceased or his/her family owns half of this company and that the property represents more than a third of all of the assets of this company;
• The agreement will be applicable subsequent to approval by parliament and after the deadline for the optional referendum has expired. Originally, application of the agreement had been envisaged from January 1, 2014.

The signing of the inheritance tax agreement between Switzerland and France will occur in July. It is in line with the principles of international tax law. As is the usual practice, the text of the agreement will be published at the time of signature.

The signing of the treaty will allow structured dialogue to be pursued on pending financial and tax matters between the two countries: administrative assistance in tax matters, regularization of untaxed assets, expenditure-based taxation (lump-sum taxation), and the Basel-Mülhausen airport.

Bermuda premier welcomes UK and US support for island's economy

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Premier of Bermuda Craig Cannonier has welcomed comments by British governor of Bermuda, George Fergusson, and US consul general to Bermuda, Robert Settje, urging the insurance and reinsurance industries to promote their value to economies around the world and to help build a stronger Bermuda economy.
“The Bermuda government is focused on strengthening the Bermuda economy and creating jobs and opportunities for Bermudians. We appreciate the support of the UK governor and the US consul general. Their recognition that Bermuda provides real value to the US in the form of insurance, reinsurance, international investment and the need to deliver that message around the world is very much appreciated,” Cannonier said.
“We will continue to work with them and others as we promote Bermuda's financial products and services and underscore their value around the world,” the premier concluded.

French Auditors Seek Cut In Social Levy Tax Shelters

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The French Court of Auditors has published its report on the 2013 state finances, in which it underlines the importance of swiftly implementing structural reforms in France to reduce public expenditure, advocating notably a review of existing tax breaks, predominantly as regards social contributions.

Alluding to the fact that growth in France is likely to be negative in 2013, the Court posits that this will inevitably influence and result in lower revenue levels than initially predicted.

However, irrespective of economic growth, the body identifies an additional risk to public revenues, namely uncertainties surrounding the development of corporate and value-added tax (VAT) revenues. Here, the auditors cite as examples an increase in demands from corporations for VAT credit reimbursements, as well as a possible increase in undeclared activity and other forms of VAT fraud, including carousel fraud.

Given the deterioration of the economic growth forecast and concerns about predicted income levels, the Government will need to immediately implement temporary measures and initiate structural reforms, to lower expenditure and to ensure lasting recovery of the public finances, the Court warns.

Arguing that certain tax breaks directly affect the base of social levies, the Court emphasizes the need for a "systematic re-examination" of tax shelters. The Court highlights, for example, the fact that pensioners in France are currently subject to different rates of the country's general social contribution (CSG), depending on the actual amount of their pensions.

Pensioners whose fiscal income reference is below EUR10,024 (USD13,071) are not currently required to pay CSG on their pensions. Pensioners with sums in excess of this threshold are subject to a reduced CSG rate of 3.8 percent, up to the income tax threshold. Finally, taxable pensioners pay CSG at a rate of 6.6 percent. This compares to the standard rate of CSG imposed on employees of 7.5 percent.

Although France's 2013 Social Security Finance Law creates an additional contribution imposed on taxable pensioners of 0.15 percent, rising to 0.30 percent in 2014, the residual gap between taxable pensioners and employees will still be 0.6 percent in 2014, "without real justification," the Court maintains. The Court therefore advocates aligning the CSG rates for taxable pensioners and salaried taxpayers, taking into account the additional 0.3 percent contribution. Such a move, which would yield EUR1.2bn in 2014, the Court estimates.

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Bahamas government to reveal more on VAT

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Minister of State for Finance Michael Halkitis said the Bahamas government intends to reveal more details on the legislation and regulations to support its proposed value added tax (VAT) system as early as the next three to four weeks.
The system is scheduled to take effect on July 1, 2014.

Halkitis told The Nassau Guardian that the government wants to be able to provide members of the public with the proposed legislation as well as the relevant regulations on the new tax system so they can be discussed at the same time, well in advance of the enforcement date.

“We will give the public a good idea of the items that will be exempt and the registration threshold so the public can have a better understanding of its potential impact on them,” Halkitis said.

“When we present the actual legislation for public discussion then we will accelerate our public education, which involves moving throughout the country and informing the people of its potential impact on them, etc.

“You can expect to see towards the end of the summer and into the fall an intensive public education program because we realize that is very important.”

While there have been some fears that VAT may add to the financial burden of the lower class, Halkitis said he expects the new system to bring in more money from wealthier individuals.

“Right now we virtually do not tax the services portion of our economy and we know that individuals with higher incomes spend a greater portion of their income on services,” he said.

“We are fully aware that particularly those at the bottom end of the economic bracket can ill afford any increase in the cost of living and we’ll do all we can to mitigate against that.

“We are also aware that nobody likes to pay taxes and we can’t afford to overtax the economy and drive us back into a recession, so we are trying to balance the need for revenue against making sure we don’t overtax the economy, and of course we have to look at the hole in the budget that we have to fill so we get lower deficits, lower amounts to alter the public debt.”

Halkitis said the VAT system will have built-in protections to offset overtaxing.
He said basic food items, medicine, education, health care and financial services are categories that will likely be exempt from the tax.
He also said that once VAT is implemented the government will reduce certain customs duty rates.

“So we will take all measures to ensure that it does not fall disproportionately on those who can least afford it,” Halkitis said.
The government intends to impose a 15 percent VAT on most goods and services, except for those that fall under the exempt category.