Welcome to the VAT Blog!

Thank you for joining us here on the VAT Blog. This is one of the leading resources of Value Added Tax (VAT) news, and you will find that most of what we do here applies similarly to Goods and Services Tax (GST, the VAT in Canada, Australia and Singapore).

Mark Houtzager, the principal blogger here, is based in Brooklyn, NY. Mark is one of the handful independent VAT consultants in the U.S. His clients are big brand multinationals, online businesses and also smaller companies that have limited operations overseas, yet require practical, hands-on and timely tax advice. Many VAT Blog readers have found that Mark is always happy to get on the phone and provide a helping nudge in the right direction, whether you are a client or not.

More information is on Mark’s homepage at www.us-vat.com.

If you want to connect in person, there are plenty opportunities to reach out to me – I am only a click away.

You can send an email to mark@us-vat.com, or give me a call on 646-397-5855.

Please make sure to sign up for my email list (under “Subscribe” in the right column) if you are interested in Value Added Tax in general, and its impact on U.S. companies in particular.

Also, because there are almost 600 entries on this blog, you will want to use the search function. It is in the right column, under “Search here”.

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Singapore studying GST on imported services

The “Netflix tax” is doing the rounds – first in Europe, now in South-Africa and Russia and on to Asia and Australia.

Singapore is gearing up to extend the scope of their GST to include the “import of services”, which is currently not taxed for both businesses and consumers.

Businesses would potentially see a reverse charge, as we know in the EU and other countries. This would be a ‘wash’ for businesses that normally provide taxable services – they would have a right to recover the reverse charge (self-assessment of tax). But for GST exempt businesses, most notably in the financial services industries, the import of services into Singapore would cost 7% Singapore GST. This will have a cash impact on Singapore-based financial institutions that acquire services from outside Singapore.

Similarly, taxing the import of services that are delivered to consumers, like online movies, music, apps, games etc., will force online service providers to collect, report and remit 7% Singapore GST.

Don’t underestimate the downside of non-compliance: these countries may not have the manpower to go after each and every delinquent e-seller, but whenever the non-compliant business gets an internal audit or other due diligence review, it will be blatantly obvious when no tax has been remitted. In that case, the overseas sales will have been overstated with the tax percentage.

Also see page 17 of the overview below:

Download (PDF, 2.15MB)

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The future of the tax team – KPMG

“Tax leaders’ top three priorities for new investment are additional personnel, tax technology and process optimization.”

A couple of months ago KPMG released their annual Global Tax Benchmarking Survey – see the pdf below. As in every year, this is required reading for every tax practitioner – my main takeaway is that tax departments will increase their headcount, despite significant increases in technology spending. Centralization (shared service centers) and standardization of processes and procedures (think Tax Control Framework) are other important future goals.

Still, with all these glowing goals, most of my clients complain bitterly about the lack of funding and the difficulty in hiring top talent. Increasing Big 4 salaries and career perspectives seem to create an increasing gap with the more inert industry salaries and careers. This is a almost insurmountable challenge – experienced tax talent sometimes makes more than twice in a Big 4 environment from what they make in industry – with hardly anything to make up for it.

Would be interesting if KPMG would also do a look back of for example a 5 year old global survey – what happened since and did anyone see their tax department dreams come true?

Download (PDF, 734KB)

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Understanding the Border Adjustment

Kyle Pomerleau from the Tax Foundation writes a comprehensive overview of what the House Republicans want with the “Border Adjustment” legislation.

I have now officially given up on explaining to my fellow Americans that businesses have a right of input tax reclaim under a common VAT. So if the House proposal does not  provide for a VAT on domestic sales, then the border adjustment is definitively NOT similar to a VAT as we know it.

Download (PDF, 554KB)

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Happy Valentine’s Day!

Think of VAT (in the UK) when you’re buying for your Valentine!

Also: item classification for VAT in the UK is crazy.

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Border tariff and/or an export exemption?

President Trump seems to warm to a broad-based tariff…

But according to his advisers, all options for tax reform are still on the table:

“Cohn said all options for corporate tax reform are on the table, including the border adjustment levy, which taxes imports. He stressed that no decisions have been made on particular provisions.”

http://www.cnbc.com/2017/02/03/trump-advisor-gary-cohn-everything-were-doing-is-to-promote-growth-and-job-creation.html

It almost looks like Trump wants the tariff as a trade negotiating tool, or as a way to make someone (the American people) pay for the Mexican border wall. It looks like he separates the tariff (and the proposed income tax exemption for exports) from the much broader tax reform discussion.

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Russia now taxes foreign B2C e-sellers

Russia is now ready to receive your VAT registration application, if you are a foreign (i.e. US-based) seller of online services (i.e. videos, apps, games, subscriptions etc.).

Dentons has the details and challenges of registering and filing Russian VAT in this article here: http://www.dentons.com/en/insights/alerts/2017/january/13/registration-with-the-rf-tax-authorities-aimed-at-payment-of-vat-by-foreign-e-services-providers

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U.S. tax reform: No way out anytime soon

Tax reform is a royal pain – as Puerto Rico, Malaysia, Brazil, India and the Gulf countries have recently found out. Here in the U.S., tax reform has been an on-and-off hot topic, and over the past couple of weeks politicians, academics, journalists and traders have engaged in a Babylonian war of words and intentions.

The waterfall of issues cascades through the media: Must tax reform be budget-neutral? Should tax reform pay for “The Wall”? Are we not punishing ourselves – instead of Mexico – if we impose a tariff? Will we have agreement on a new tax system by August or will it take much longer?

Greg Mankiw, the conservative professor of economics at Harvard, summed it up very succinctly:

“1. Impose a retail sales tax on consumer goods and services, both domestic and imported.
2. Use some of the proceeds from the tax to repeal the corporate income tax.
3. Use the rest of the proceeds from the tax to significantly cut the payroll tax.”

He says that this is in effect what the Republicans are proposing.

See (a little) more here: https://gregmankiw.blogspot.com/2017/01/a-three-point-tax-reform.html.

Mankiw also says that the retail sales tax is collected not collected at retail level, but along the “chain of production” (I think he means supply chain).

I don’t quite understand how a tax that is not collected at retail level, can be a retail tax. Also, how is this a VAT, if the tax is actually paid along the supply chain (and there is no offset / input tax mechanism). Third, if there is no offset, the import tax is a real business tax.

 

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