Archive for U.S. VAT?

A hybrid SUT / VAT for Puerto Rico?

I know that more than a few clients of mine are trying not to lose track of the developments in Puerto Rico. The various proposals for indirect taxes that have been doing the rounds recently are all very interesting, but the key for businesses is how all this can be timely implemented in the ERP / accounting system.

Grant Thornton produced a brief less-than-one-page overview – this is the current position and there is nothing more to say at this time…

Download (PDF, 149KB)

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Puerto Rico tax now 11.5% – but still a VAT?

As I mentioned earlier, developments are following fast in the VAT world of Puerto Rico. This week’s proposal is for 11.5% tax on sales and 10.5% tax on imports.

“Essentially, the plan would increase the existing 7% sales & use tax (IVU by its Spanish acronym) to 10%, while adding 1.5% for municipalities. Meanwhile, the tax collected at the ports, currently at 6% and charged through PICO (Spanish acronym for Integrated Merchant Portal), will increase to 10%, plus a 0.5% for municipalities, according to Treasury Secretary Juan Zaragoza.

The hike to 11.5% would to be completed in “30 days to 45 days” after legislative approval, which the governor said he expects “within the next few days.””

Now, are we still talking about a credit-invoice based VAT, or is this proposal simply an increase of the existing sales tax and port tax rates?

See for more here: http://www.caribbeanbusiness.pr/news/legislative-conference-agrees-on-11.5-percent-sales-use-tax-110335.html

and if you read Spanish:

http://www.elnuevodia.com/noticias/politica/nota/vaelivuagrandadode115-2047587/

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Little hope for Puerto Rico VAT

Without much support from the legislature, the Puerto Rico governor is fighting for the life of a new Value Added Tax.

Developments are going fast: first a 16% VAT was rejected by parliament, then a new proposal a 14% VAT looked feasible but could not get the required votes. More is in the link below, but this news may be outdated by the time you read it!

https://news.yahoo.com/puerto-rico-governor-revives-value-added-tax-proposal-150024311.html

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Puerto Rico: 16% VAT from April 1, 2015

Tax-News.com reports on Puerto Rico is taking bold steps towards tax reform: lower income tax rates and a real VAT from April 1, 2015.

“In addition, it is proposed that those on incomes below USD35,000 would get a refund of VAT, and those on incomes below USD20,000 would receive a full refund. Prescription medication, groceries, private property leasing, and public schools would be exempt from all taxes, [said Puerto Rico’s Governor, Alejandro García Padilla].

“With this tax system overhaul we can help direct the island’s revenues towards the future, and ensure that we will borrow less, pay our current debts, and pay down the debt previous administrations committed to without the appropriate means for repayment,” he concluded.”

See more at: http://www.tax-news.com/news/Puerto_Rican_Income_Tax_Rates_To_Fall_Under_VAT____67265.html

Quite a few people that are involved with or affected by this tax reform have been critical of the chances of success – nevertheless it would be great to see how this all works out.

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TGIF: A VAT for the U.S.?

Today is Friday December 12, 2014 and the Progressive Consumption Tax Act has seen the light of day!

But wait – is it a VAT? I will have a look at the bill text (see below) and let you know. There is no rush; this is just a discussion document and won’t get any serious consideration any time soon.

The press release is here: http://www.cardin.senate.gov/newsroom/press/release/cardin-introduces-a-comprehensive-progressive-pro-growth-approach-to-tax-reform

Pundits did not take long to take a VAT entirely out of its context – see http://www.prosperousamerica.org/

“If US producers sell to other countries most charge a consumption tax when the US producers have already paid US taxes.  If we ever want to come out of our current economic malaise we need  to make more of what we consume and make our products globally competitive.”

Click here for the pdf of the bill text: http://www.cardin.senate.gov/download/progressive-consumption-tax-113th-congress

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U.S. Lawmaker to Release VAT Legislation

“Senate Finance Committee member Benjamin L. Cardin, D-Md., told Tax Analysts December 8 that he will release legislation later in the week proposing a U.S. VAT that he hopes will prompt serious discussion on the matter in the 114th Congress.
 
“It’s finished,” Cardin said of the bill, adding that he will likely release it on December 10.
 
Cardin said he is not seeking cosponsors on the bill at this time since it will have to be reintroduced next year but noted that he’s worked with many lawmakers who are interested in the legislation.”

The link is here: http://www.lexisnexis.com/legalnewsroom/tax-law/b/newsheadlines/archive/2014/12/09/u-s-lawmaker-to-release-vat-legislation.aspx

So the Senator releases legislation now, to be discussed next year. I will let you know when it’s time to wake up.

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The prospect of VAT in the U.S.

Reuven Avi-Jonah (Irwin I. Cohn Professor of Law, the University of Michigan) writes about the great consumption vs. income tax debate from a historical perspective.

The focus here is not on which tax base is better, but rather on how this debate evolved over time inside and outside legal academia. As we shall see, there was one point in which the consumption tax came close to being adopted – in 2005, when it was one of two alternatives recommended by the Bush tax reform panel. But the moment passed, and it seems unlikely to return.

Download his paper here

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2523941

(oddly the paper is marked as a draft)

Hat-tip to Peter Devlin.

And a couple of years ago I co-authored a book on US VAT – feel free to download from the link below.

Download (PDF, 1.69MB)

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