What’s happening in the world of VAT? Our Global Managing Editor gives her daily round-up.
India
India's GST Bill cleared its first hurdle today with Lok Sabha, the lower house, voting in favour 336 votes to 11, with 10 abstaining. The Bill now moves to Rajya Sabha for approval; it needs a two-thirds majority in both houses to pass. The government aims to introduce GST from 1 April next year. This new indirect tax regime will subsume central indirect taxes such as Central Excise and Additional Excise Duty and Service Tax besides others into Central Good & Service (CGST) and state kevies such as VAT and entry tax besides others into States Good & Service Tax (SGST). Source.
EU
The European Union’s Working Party on Tax Questions – Indirect Taxation (VAT) has set its next meeting for 13 May in Brussels. It will debate the proposal for a Council Directive amending Directive 2006/112/EC on the common system of value added tax “as regards the treatment of vouchers”. We’ll bring you more as it develops. Source.
Brazil
The state of Minas Gerais has announced a plan to support the development of solar energy in the region with funding worth BRL 1 bn (US$324m). The first state auction to select companies to produce energy for 120,000 households will be held in August this year, with the solar energy parks expected to be in operation by 2017. The government is also creating measures to ensure the factories producing solar photovoltaics (PV) modules are installed in the state. Source.
Still on PV and Brazil, the states of Goias, Pernambuco and Sao Paulo have been authorised to grant a VAT tax exemption on all distributed generation using the net-metering system in their regions from 1 September 2015. The three states can now legally and without questioning define their own policies for PV in terms of tax exemptions. This would allow them to increase the competitiveness of the net-metering system in their region by at least 30-40%. Other states will also want to join this new trend to provide tax incentives to distributed generation in the region. Source.
UK/Australia
The UK and Australia are to create a joint working group to develop initiatives on diverted profits by multinational enterprises. The plan was announced during the G20 meeting in Washington DC by the UK’s Chancellor of the Exchequer, George Osborne, and the Treasurer of Australia, Joe Hockey. Source.
Romania
The European Commission’s spring forecast, released yesterday, raised the projection for Romania’s economic growth to 2.8% for 2015 and 3.3% for 2016 on the back of strong private consumption and recovering investment. Romania's government budget deficit is expected to widen slightly to 1.6% of GDP in 2015, as a reduction in the tax revenue-to-GDP ratio more than offsets the reduction in the expenditure ratio. For 2016, the headline deficit is expected to sharply deteriorate to 3.5% of GDP. This forecast incorporates the new draft fiscal code that was adopted by government in March but is still awaiting parliamentary approval, the Commission said. Annual average inflation is forecast to slow down further to a record low of 0.2% in 2015 due to a cut in the value added tax rate for food, low energy prices and the persistence of low inflation in the EU. Source.
Still in Romania, the government has said it will support an amendment to reduce the VAT on water for domestic consumption to 9%, from 24%. It has already issued an Emergency Ordinance to cut the VAT on food and non-alcoholic beverages by the same amount, starting in June. Source.
Ireland
Ireland is outperforming expectations according to data released yesterday, although performance did slow slightly in March due to weaker than expected monthly income tax and VAT receipts. The tax take was 4.2% above target and 11% up year-on-yaer at the end of April. Tax revenue had been 5.5% ahead of target in the first quarter, with government spending in the first four months of the year 1.6% lower than anticipated. Ireland’s budget deficit, set to fall below 3% of GDP this year stood at EUR 2.3bn at the end of April, down from EUR 4.8bn a year ago- and, of course, five years after its bailout by the EU and the IMF. Source.
China
The Political Bureau of the Communist Party of China (CPC) held a meeting last week regarding the country’s economic situation and policies, and laid down the guidelines for the government’s economic work in the next several months. Chairing the important meeting, President Xi Jinping urged serious attention to the economic slowdown pressure as well as the rollout of more easing measures and reforms to facilitate stable economic growth. At the meeting, top leaders also passed the coordinated Beijing-Tianjin-Hebei development plan to accelerate the integration of the three areas and to facilitate the industry transfer or relocation from Beijing to Tianjin and Hebei. Source.
South Africa
South Africa and Swaziland have signed a Memorandum of Understanding on VAT, intended to operationalise how Swaziland handles VAT incurred on the purchases in South Africa. The VAT agreement recently went into effect at South African and Swazi border posts, streamlining goods declaration and tax collection procedures so Swazis purchasing goods in South Africa need not be taxed twice on their purchases. Source.
US (Texas)
The state’s House has preliminarily approved a $4.9bn tax cut package featuring the first sales tax reduction in Texas history. Passed Tuesday after a shorter-than-expected debate, the House’s two-pronged tax cut would slice sales taxes and business franchise taxes. The cuts will impact all Texans of all income levels. The tax savings will increase the state’s economic output while boosting Texans’ personal income. Source.