France To Pay For Pension Deficit With Higher Payroll Taxes

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France is to "preserve" the "heritage" of its pension system by increasing payroll taxes, the Prime Minister has said.

Jean-Marc Ayrault emerged from intensive talks with industry representatives with plans for what he called "responsible" reform.

The deficit in France's pay-as-you-go (PAYG) system is expected to hit EUR20.7bn (USD27.7bn) by 2020. To compensate, employers and employees will have to pay more in contributions, with rates to rise by 0.3 percent in 2017. This will equate to roughly EUR4.50 a month for a worker on the minimum wage.

Many will also be affected by what effectively amounts to a change in the retirement age. The minimum number of contribution years required for a worker to receive a full pension will rise from 41.5 years to 43 years by 2035.

"It will lead little by little to a rise in the effective age of retirement and it is because of this that this is a major structural reform," Ayrault said.

The initiative was immediately condemned by Pierre Gattaz, head of France's employers' confederation. He called the reform "dangerous" and unacceptable, telling Le Figaro that "all the Government does is tax and then tax some more."

Britain approves Cayman Islands fiscal plan

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Britain’s Foreign and Commonwealth Office has approved the Cayman Islands government's four-year fiscal plan covering the years 2013/14 to 2016/17.

In a letter dated 22 August 2013, the United Kingdom's Minister for Overseas Territories Mark Simmonds wrote to Cayman Islands Premier Alden McLaughlin giving his approval for the plan, which the government submitted on 15 August 2013.

The premier welcomed the UK's approval of the plan.

"It demonstrates the positive results that can be achieved when processes are followed and a logical, credible and consultative approach is taken toward fiscal planning," McLaughlin said.

"I am extremely pleased that we are able to put behind us the uncertainty and anxiety that has attended the budget process over the past four years. The country now has a four-year plan that provides certainty and stability to the government's future fiscal planning and provides challenging but realistic targets," he said. 

"My government can now look long-term at its plans and projects rather than having to focus on short-term, short-sighted annual plans,” McLaughlin added.

"Whilst the government has not made many public utterances about the ongoing work to develop this plan, its culmination follows weeks of meetings between the elected government, the ministry of finance and key stakeholders across the entire public sector. From those meetings, a fiscal plan was devised that is credible, sustainable and provides the necessary trajectory for us as a country to meet the fiscal targets outlined in the Public Management and Finance Law," the premier said.

The plan outlined the government's global fiscal targets for the next four budget years and the strategies that will be employed to achieve them and gain compliance with the fiscal ratios contained in the Public Management and Finance Law (2012 revision). The plan favours an initial aggressive reduction in public sector operating expenditure, significant increases to government's cash reserves, no new borrowings, continued repayment of existing loans and zero inflationary revenue measures.

The plan shows the government as the facilitator of economic growth through its support for various private sector initiatives, does not propose any major capital expansion programmes and is not dependent on any revenue measure packages or 'silver bullets' to be successful.

In his letter, Simmonds said he welcomed the Cayman government's clear commitment to fiscal planning and to achieving the key debt ratios agreed in the Framework for Fiscal Responsibility by the end of the financial year 2015/16. He further noted his approval for the top-down, multi-year approach to fiscal planning taken by the government, which he believes will be a powerful tool for sustainable public expenditures and revenues.

Based on this level of detail planning, the UK was able to approve the plan on its first submission. The full details of the plan will be provided when the government presents the 2013/14 full year budget in late September.

China Signs OECD Convention On Tax Information Exchange

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China became the 56th signatory of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters during a ceremony at the headquarters of the Organization for Economic Cooperation and Development (OECD) in Paris on August 27.

With the signing between the Chinese Tax Commissioner Jun Wang and Angel Gurría, Secretary-General of the OECD, all G20 countries have now fulfilled the commitment they made at their Summit in Cannes in November 2011, to sign the Convention and move towards the automatic exchange of tax information as the global standard.

It was emphasized that all tax authorities worldwide are moving from bilateral to multilateral cooperation and from exchange of information on request to automatic exchange of information. The Convention provides a comprehensive multilateral framework for such co-operation and complements other initiatives, such as the standardized multilateral automatic exchange model now being developed by the OECD and its G20 partners. It provides for the spontaneous exchange of information, simultaneous tax examinations and assistance in tax collection.

"This Convention provides the ideal instrument to swiftly implement automatic exchange, and to do so with a wide range of partners," said Gurría. "A valuable tool for governments to fight offshore tax evasion, the Convention also ensures compliance with national tax laws and respects the rights of taxpayers by protecting the confidentiality of the information exchanged."

He noted that the signing of the Convention also "represents another significant step in the strengthening of collaboration between China and the OECD." The OECD and China cooperate closely on a number of other taxation issues, as China plays a leading role as a Vice-Chair of its Steering Group and as a member of the Peer Review Group, and participates in the OECD's Forum on Tax Administration and its Committee on Fiscal Affairs, where the OECD looks forward to working with China to deliver on the Action Plan to put an end to tax base erosion by multinational enterprises.

In addition, Gurría congratulated China on "the very positive results of China's peer review, which demonstrated the adequacy of China's legal and regulatory framework and the effectiveness of its tax administration in implementing the Global Forum's standards."

Accounting firm merges practices in Bermuda, BVI and USVI

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International accounting and financial consulting firm Deloitte announced the merger of its Bermuda, British Virgin Islands and US Virgin Islands offices effective on Monday.

The combination is said to bring enhanced services to clients and greater access to Deloitte professionals who provide insights and solutions to complex business challenges in an ever-increasing borderless global marketplace.

The merger coincides with the retirement of BVI/USVI managing partner Mark Chapman, who will continue as a consultant to the firm through the end of October. Chapman joined Deloitte BVI in 1995 focusing on offshore entities in the financial services sector. In his nearly 30 years with Deloitte, he has helped to build the largest professional services firm in the Virgin Islands. 

Directors Carlene Romney and Richard White succeed Chapman and assume leadership of the operations in the BVI and USVI offices. 

An audit professional, Romney joined Deloitte in January 2000. She has extensive experience performing audits, including spending three years with the Boston, Massachusetts office with Deloitte where she gained additional experience performing financial services audits. 

White has over 13 years of experience working in practice and industry as a chartered accountant. He started his career in London at a Big Four firm working in all areas of public practice. Richard joined Deloitte in the Virgin Islands over six years ago where he has helped clients with audit, accounting and financial advisory engagements.

“I am pleased to bring together our professionals to better serve our clients,” said John Johnston, office managing partner of Deloitte Bermuda and CEO of Deloitte Caribbean and Bermuda Limited. “While we have always enjoyed a good working relationship under the Deloitte brand, this merger cements our shared values of working together to deliver excellence. It is an important step in our strategy of greater integration of the Deloitte firms across the Caribbean region.”

The practices will continue to operate as Deloitte & Touche Services Ltd from current locations in Road Town, British Virgin Islands and St Thomas, US Virgin Islands. Combined with the Bermuda practice, over 170 professionals will deliver audit, tax, consulting and financial advisory services. There are no plans to close offices and each will have local leadership. Professional staff will continue to have employment opportunities, with few redundancies expected.

“Our clients, communities and professionals will benefit from our merger,” stated Romney. “With access to more talent, we are able to deliver additional services that help our clients, especially in areas such as tax, restructuring, and risk management.”

Added White, “We are excited to take the strong foundation that Mark Chapman built and continue the tradition.”

Bahamas looks to Middle East for growth

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The government of The Bahamas will undertake a trade mission to the Middle East this fall, with the intention of drawing into the country some of the region’s wealth in the form of sovereign wealth funds and high net worth individuals.

Fred Mitchell, minister of foreign affairs, said that officials from Saudi Arabia will visit The Bahamas next week, a representative from Qatar will come in October, and a trade mission to Dubai is being planned for later that month.

Ryan Pinder, minister of financial services and trade, told Guardian Business that the government will continue to look for new partners in order to expand the financial services sector during a period when traditional sources of wealth are less forthcoming.

“When you look to expand an industry you have to be nimble enough to adjust to look at markets that demonstrate growth and wealth, and certainly it is clear we’ve identified Latin America as one of those regions and we understand that the EU economy has limited growth prospects there so we look to other markets. Latin America is one, North America is one and certainly we feel that certain areas in the Middle East are growth areas,” Pinder said.

He added that the intention of the upcoming trade mission would be to develop The Bahamas as a financial services hub that can connect Middle Eastern interests with “opportunities in Latin America and North America,” adding: “The Bahamas could be a perfect conduit for that.”

Noting that Bahamas-based financial institutions do currently deal with Middle Eastern clients, and some even have a presence in the Middle East, Pinder said the hope is that these linkages can be further leveraged.

“We believe there’s a lot more growth business to be had. Traditionally a lot of Middle East private wealth management has been centered in Geneva. We believe we can utilize our location on this side of the world to give added value to clientele,” he explained.

Pinder added that the government will only attempt to engage in business with countries that have diplomatic relations with the US, and would also seek to use the trade mission to study Dubai’s success as a center for arbitration, an industry The Bahamas is also planning to develop.

Indicators do suggest that, notwithstanding the present turmoil in countries such as Syria and Egypt, the Middle East is ripe for further engagement by The Bahamas.

A recent study in the ‘Insights’ series of publications by leading wealth manager Barclays Wealth found that Middle East-based high net worth individuals (HNWIs) are more confident about their prospects for making money than their counterparts in Europe and North America.

Six in ten of the region’s HNWIs believe wealth can be created faster today than in the past, compared to 43 percent of respondents in Europe and 31 percent in North America, the report found.

Such findings do point to a higher level of interest in wealth management offerings that The Bahamas could provide.

As for sovereign wealth funds (SWFs), globally these are managing around $1.8 trillion at present on behalf of states such as Qatar and the United Arab Emirates.

In a May 2013 report, financial services firm KPMG notes that these funds are increasingly being seen by the West as an important source of capital given how the impact of the economic downturn on SWFs in the oil rich countries was partly mitigated by the increase in the price of oil during recent years.

This effect has left these funds in a strong position to take advantage of the recovery in the global markets.

UK Buyers Count Cost Of Stamp Duty

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Four out of every five UK homes purchased in 2012-13 will be subject to stamp duty within the next five years, the TaxPayers' Alliance has said.

Stamp Duty Land Tax (SDLT) is charged at either 1, 3, 4, 5, or 7 percent of the total purchase price of properties costing more than GBP125,000 (USD194,553).

The TaxPayers' Alliance has looked at the Land Registry's monthly property transactions data, and compared it with information from HM Revenue and Customs (HMRC) to determine the amount of SDLT payable. The results relate to transactions carried out in England and Wales during the period from April 1, 2012 to March 31, 2012.

With property prices expected to spike over the next five years, the Alliance has warned that by 2017-18, two-fifths of properties will be subject to SDLT at 3 percent or more. The price of a third of all properties within the 1 percent SDLT bracket in 2012-13 will have risen above the 3 percent SDLT threshold in just five years' time. This means that the average tax bill for these properties will go up from GBP2,319 in 2012-13, to GBP8,445 by 2017-18.

Unsurprisingly, properties in London are the most likely to attract SDLT. By the end of 2017-18, 99 percent of all London properties will be liable, with five out of six subject to the 3 percent rate. The East Midlands can expect to see the fastest increase in the number of liable homes, up from 50 percent last year to 71 percent by 2017-18.

In five years, SDLT will be applicable to more than half of all homes in every region in England and Wales.

Matthew Sinclair, Chief Executive of the TaxPayers' Alliance, said: "As the property market recovers, more and more people will be sucked into paying punitive rates of Stamp Duty and it will be more expensive to move than ever. High Stamp Duty rates stop young people buying a home and starting a family, discourage elderly people from downsizing and make it harder to move to a new place for a new job. The Government urgently need to cut Stamp Duty and ease the burden before the situation gets even worse."

Switzerland Consults On Negotiation Methods With EU

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The Swiss Federal Council has adopted draft terms of reference for negotiations on a bilateral basis with member countries of the European Union (EU) on institutional matters, such as trade and tax agreements.

In June 2012, the Federal Council instructed the Federal Department of Foreign Affairs to draw up draft terms of reference for negotiations with the European Union on such, and the Federal Council has now sent that draft to the Foreign Affairs Committees and the cantons, for consultation.

It was said that the bilateral approach "remains the best instrument of European policy Switzerland has at its disposal to defend its interests with respect to the EU," which continues to be Switzerland's most important trading partner by far. Based on a matrix of around 20 or so main bilateral agreements and about 100 other sectoral agreements, it ensures access for Swiss business to the single European market.

The Council confirmed that, "in order to preserve what Switzerland has gained, the bilateral approach must be renewed, taking care to safeguard Swiss independence and prosperity, as well as ensuring access to the market." Discussions at the national level and with Switzerland's European partners have enabled the country to outline a number of technical and legal solutions.

In the opinion of the Council, the bilateral approach preserves Switzerland's autonomy as a non-EU member state, and does not entail automatic adoption of the acquis communautaire – the accumulated legislation, legal acts and court decisions which constitute the cumulative body of EU law. The incorporation of any new acquis in a bilateral agreement must be decided by Switzerland in full accordance with its domestic procedures.

Greece Closes More Tax Offices

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Greece's Finance Ministry has announced the closure of 14 island-based tax offices, as tax workers continue to hold protests against cutbacks that they say threaten jobs and undermine the ability to tackle tax evasion.

The move, which will be implemented from September 1, completes a commitment to slash the number of tax offices from 290 in 2011 to 120. The Ministry of Finance has emphasized that areas with large numbers of islands will continue to have more than one tax office, and that there are increasing numbers of electronic tax services available. Further, arrangements are being put in place so that payments can be made at banks, and desks handling tax affairs will be established in municipal buildings in areas where tax offices have closed.

Meanwhile, tax officials have held a protest outside the Finance Ministry against cutbacks in the tax authority. The Panhellenic Federation of Tax Employees (POE DOY), argues that more resources are needed to fight tax evasion, and that this is only way to free Greece from foreign control and from the Troika. The union previously held a strike from June 27 to 28, and further protests are planned.

Greece's Government promised tax administration reforms in January, including plans to reduce the power of local tax office managers to override tax code provisions, and new measures to ensure the quality of tax auditors.

French finance minister confirms 'end of recession'

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French Finance Minister Pierre Moscovici (pictured) welcomed “the end of the recession in the French economy” on Wednesday, with a stronger-than-expected 0.5 percent quarter-on-quarter growth in April through June, its best result in two years.

France’s economy has jumped out of reccesion, posting stronger-than-expected 0.5 percent quarter-on-quarter growth in April through June, its best result in two years, official data released Wednesday showed.

The return to growth in the second quarter followed 0.2 percent contractions in both the final quarter of last year and the first quarter of this year.

The expansion, which beat analyst forecasts, was largely thanks to improved domestic consumption, the national statistics agency INSEE said in a statement.

“This is the largest increase since the first quarter of 2011,” it added.

French Finance Minister Pierre Moscovici welcomed the rebound in gross domestic product, which he said “confirms the end of the recession in the French economy”.

“It amplifies the encouraging signs of recovery,” he said in a statement.

While various data has indicated that French economy is perking up, analysts had expected that the recovery would be more tepid.

After earlier predicting that the economy would contract by 0.1 percent overall this year, INSEE said it now expects growth of 0.1 percent for 2013, in line with government forecasts.

Data to be released later Wednesday is expected to show that the eurozone has edged out of its 18-month recession, with many analysts pencilling in 0.2 percent growth.

A return to sustained growth will be crucial for France’s efforts to bring its public spending deficit back under the EU ceiling of 3.0 percent.

Earlier this year Europe’s second l- argest economy was given a two year-reprieve until 2015 to reach the 3.0 percent target by the EU.

But analysts say the country may still miss its new target of cutting it to 3.7 percent of GDP this year.

The exit from recession will also no doubt be welcome news to French President Francois Hollande, who was scoffed at by some commentators after claiming last month that the economic recovery had begun.

Cyprus Government Plans To Amend Property Tax

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The Government of Cyprus has announced plans to amend the country's Immovable Property Tax, exempting the lowest-valued properties but also scrapping a EUR75 minimum payment.

Property tax in Cyprus is currently based on valuations made in 1980, although the amount payable by a taxpayer is determined by their total property value taken together. If the Government’s intentions become law, those whose total property is valued at EUR5,000 or less will no longer have to pay anything. Total property valued at between EUR5,000 and EUR40,000 will now be taxed at 0.6 percent.

A Government spokesperson explained that the move, decided at a cabinet meeting in Troodos, would correct distortions in the tax system and remove an administrative cost.

From next year, the 1980 valuation will be updated to 2013 values. The spokesperson added that it was expected that the re-valuation would return EUR10m to taxpayers.

Property tax in Cyprus is due to be paid by November 15. It was also recently announced that those who pay by October 16 will receive a 10 percent discount, but that those who miss the deadline will be subject to a 10 percent surcharge.

Bundesbank predicts fresh Greek bailout

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Greece will need a new bailout programme by the start of next year, according to an internal Bundesbank document reported by the German media.

Concerns that Greece will need a new aid package by 2014 have been repeatedly played down by the German government ahead of elections in September, anxious not to alarm German voters.

According to Der Spiegel , the Bundesbank document states that by the start of 2014, at the latest, the Eurozone will “most likely agree a new loan programme to Greece.”

The Bundesbank document also states that the risks of the current rescue programme are “extremely high”, the performance of the Greek government was “barely satisfactory” and there was “substantial doubt” about its ability to implement essential reforms.

In July, Greece secured further aid from the Eurozone on condition that it implemented reforms including cutting public sector jobs and improved the collection of tax revenue. The Bundesbank document suggested this aid was approved due to “political necessities.”

After private creditors were forced to take losses on their Greek debts, Greece’s main creditors are other countries in the eurozone including Germany. The costs of a further bail-out would be borne by European taxpayers.

Carsten Schneider, budget spokesman for the main German opposition party, the Social Democrats, said: “There will be a rude awakening after the election. The Chancellor is lying to people before the election when she denies that more aid is needed for Greece. This aid will lead to losses for the German taxpayer.”

Prominent economists including Marcel Fratzscher of the German Institute for Economic Research expect that Greece will soon need fresh aid. The current loan package from the EU and IMF is due to expire at the end of 2014.

A spokeswoman for the German finance minister Wolfgang Schaeuble said: “The current programme runs until 2014. At present there is no reason or need to change the programme.”

Bernd Lucke, of German euro-sceptic party Alternative fuer Deutschland accused the German government of deceiving voters.

“It is becoming increasingly clear that the Greeks will not be able to avoid a fresh aid package linked to a new debt haircut,” he said in a statement.

Switzerland, Luxembourg Vie For RMB Crown

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Competition for Renminbi business is heating up between Switzerland and Luxembourg with both territories reporting details of their success in the area to date.

A recent statement from Luxembourg's Minister for Finance Luc Frieden concerning Luxembourg's ambition to position itself as the leading international Renminbi center in the Euro area comes on the heels of a report from the Swiss Bankers Association discussing Switzerland's appeal for Renminbi-denominated wealth and asset management business.

Frieden is confident that Luxembourg has firmly established itself as the market leader. He pointed out that Luxembourg is home to RMB40bn (USD6.5bn) in deposits; RMB62bn in loans provided by Luxembourg banks; and about 39 RMB-denominated bonds are listed on the Luxembourg Stock Exchange with a combined value of RMB24bn. "The figures speak for themselves and confirm that Luxembourg is already today de facto the leading international RMB center in the euro area," he said.

He continued: "Luxembourg is known for its advanced economic, legal and regulatory system, as well as its very efficient financial system paired with an international dimension. Naturally the internationalization of the Renminbi has impacted our financial center, given the fact that the financial services provided in Luxembourg are by essence international and serve a market that largely transcends the domestic one."

"The first Renminbi-denominated bond outside of Greater China was listed at the Luxembourg Stock Exchange in September 2011. Our banks and our financial institutions have already gained valuable experience in this area and so we did not only discover the Renminbi today." He highlighted also the valuable presence of ICBC, Bank of China and the China Construction Bank who have established European headquarters in Luxembourg.

"Our ambition is to firmly establish Luxembourg as the first and most important international Renminbi centre in the Euro Area, and the Luxembourg government will continue to lend its strong support, via the Luxembourg platform, to turn the Renminbi business into a common success from a European as well as Chinese perspective."

Switzerland, too, is vying for a significant share of the market. A recent report released by the nation's bankers association lays out Switzerland's efforts to welcome Chinese currency flows, and discusses Switzerland's conducive environment for wealth and investment.

It underscores the importance of the Renminbi for offshore financial centers with China expected to account for more than one third of world's economic output by 2016, according to IMF estimates.

The Bankers Association pointed out that "as a global payment currency, the Renminbi has moved from position 35 in October 2010 to number 13 in only two years. Some 12 percent of China’s external trade is currently settled in Renminbi, an almost six-fold increase in three years. Today, more than 10,000 financial institutions conduct business in Renminbi, up from 900 two years ago. By 2015 Chinese companies expect one-third of Chinese external trade to be Renminbi-denominated."

According to the association, thousands of banking clients already hold accounts in Renminbi, with assets in custody or under management exceeding RMB10bn.

It anticipates that the Swiss financial center will receive a considerable boost when the comprehensive free trade agreement with China takes effect. "Switzerland was the first country in Europe (with the exception of Iceland) to conclude such an agreement with China," it pointed out.

The Swiss Government outlined in December 2012 a blueprint for establishing Switzerland as a hub for Renminbi businesses. Looking ahead, the report notes that efforts are under-way which might eventually lead to the establishment of a RMB-CHF swap line between the People‘s Bank of China and the Swiss National Bank. This would greatly facilitate Renminbi clearing by a bank located in Switzerland, lowering transaction costs and highlighting Switzerland’s position as a European hub for China and Renminbi business, the Association believes.