Liechtenstein Adopts Implementing Law For Austrian Tax Deal

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The Liechtenstein Government has adopted a draft law implementing the withholding tax agreement with Austria.

On January 29, 2013, Liechtenstein and Austria concluded a withholding tax accord, together with a protocol revising the existing bilateral double taxation agreement (DTA) between the two countries.

The withholding tax treaty provides comprehensive provisions on tax cooperation, ensuring the swift and comprehensive regularization of the untaxed assets of Austrians held in Liechtenstein, and guaranteeing cross-border tax compliance for the future. Furthermore, the provisions protect financial intermediaries in Liechtenstein, and provide legal certainty for investors, vis-à-vis tax treatment.

The latest bill waved through by the Government contains provisions governing implementation of the withholding tax accord, notably the regularization of the past, the future taxation of capital income, non-tax transparent wealth structures, and the monitoring of compliance with the requirements arising from the agreement.

According to Liechtenstein's Prime Minister Adrian Hasler, the draft law was drawn up following consultation with the business associations concerned, and takes into consideration the outcome of the consultation, in so far as the agreement with Austria permits. Critical points have been clarified and further discussed with stakeholders, Hasler said.

The "agreement package" is due to be examined by the Liechtenstein parliament in September and is expected to enter into force on January 1, 2014.

France Revamps Dreaded Carbon Tax

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Exhuming the idea of the dreaded carbon tax, French Ecology Minister Philippe Martin has announced plans recently to introduce a new "climate energy contribution" in France, within the framework of the Government's 2014 finance bill.

Determined to reassure households, already "fed up" with taxes, French Prime Minister Jean-Marc Ayrault has stepped in, however, insisting that this will not mean the creation of a new tax. The level of taxes in France will not be affected by the introduction of the contribution, Ayrault made clear.

Although the Government has not finalized details of its plans, the new climate energy contribution is expected to be based on a proposal put forward at the beginning of the summer by economist Christian de Perthuis, Chairman of the French committee on ecological taxation (CFE). In its June report, the CFE suggested that a carbon tax be introduced within the framework of the domestic tax on consumption (TIC), thereby enlarging the base of an existing tax, while at the same time taking into consideration the carbon footprint or content of the different types of energy.

France's TIC tax includes, for example, the domestic tax on the consumption of energy products (TICPE), the domestic tax on natural gas (TICGN), and the domestic tax levied on the consumption of combustibles, including coal, lignite, and coke (TICC).

The CFE recommended that the tax be introduced progressively, rising from a starting point of EUR7 (USD9.3) per tonne of carbon in 2014 to EUR20 per tonne in 2020. The measure would directly impact on fuel prices at the pump.

The Government is expected to put forward a raft of additional environmental tax initiatives in its September finance bill. It must find EUR3.5bn by 2016, via so-called "green" tax measures, to finance the competitiveness and employment tax credit (CICE). The Government intends to abolish certain tax breaks deemed to be anti-environmental. It is examining the idea of progressively aligning the taxation of diesel and petrol and of imposing a tax on refrigerants, used in fridges and air conditioning systems.

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.