Italy: reduced rate for all digital publications

Never much bothered by case law of the EU court of Justice (ECJ), Italy extended a comprehensive reduced rate on digital “publications” – this not only includes books, but also digital magazines. Italy already had a reduced rate on e-books only.

The ECJ recently ruled that under the current text of the VAT Directive, the reduced rate can only apply on the sale of physical books, not books and magazines in electronic form.

The current dogma is that the Italian authorities can not use the ECJ ruling against taxpayers that claim the reduced rate under Italian local law.

As you know, the EU Commission is working on a EU-wide optional reduced rate for e-publications. I hear that these negotiations are more difficult that initially expected so don’t hold your breath…

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GST in India – probably not in 2016

Even though the local politicians say that GST in 2016 is “certainly doable”, Avalara reports that GST in India is unlikely to happen in 2016:

http://www.vatlive.com/asia-pacific/india-likely-to-miss-2016-gst-deadline/

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EU VAT rates per 1/1/16

The Commission has yet to update their list of VAT rates, but the intrepid folk at Accordance recently published the list – see here: http://www.accordancevat.com/vat-guides/eu-vat-rates/

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50% discount on my VAT webcast – March 9

For my upcoming VAT webcast on March 9, Lorman is offering a 50% discount to the VAT Blog readers.

Click on this link to register: http://www.lorman.com/396169?discount_code=O6094411&p=13389

Outline:

Learn the basics of Value Added Tax (VAT) and Goods and Services Tax (GST). The focus of this topic will be on the taxes levied in the European Union. Because these indirect taxes cover all supplies of goods and services, any company that is doing business, or planning to, outside of the U.S. will benefit from this information. In addition, the topic will address best practices for global VAT management and strategy, and will provide plenty of practical hints and tips. Although the focus is on the EU, we will also highlight the potential of the introduction of a Value Added Tax in Puerto Rico on April 1, 2016.

Learning Objectives:

  • You will be able to describe how VAT works.
  • You will be able to review one step beyond the basics.
  • You will be able to recognize the steps to efficient global VAT management.
  • You will be able to discuss the latest news in the VAT world.

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KPMG on VAT and Customs in China

While China has confirmed that the VAT / business tax integration will be finalized in 2016, KPMG China has set their sights on VAT in the longer term. This is an interesting article where KPMG reviews current international tax trends and applies these to China – recommended reading!

http://www.internationaltaxreview.com/Article/3511718/Indirect-taxes-in-China2020-and-beyond.html

They have also provided an update on the current customs landscape in China: http://www.internationaltaxreview.com/Article/3511737/New-customs-opportunities-and-risks-in-China.html

Both articles are recommended holiday reading!

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India GST: “Certainly doable” in 2016

There is still hope for GST in India: the Finance Minister is working with Congress to get to the required votes.

Have a look at an interview with the Minister here, with more dtails:  http://economictimes.indiatimes.com/news/economy/policy/gst-certainly-doable-in-2016-in-constant-touch-with-congress-fm-arun-jaitley/articleshow/50354896.cms

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Cruz offers a VAT, but not as we know it

It seems like VAT pops up a couple of times in every election cycle. This time it is Ted Cruz, one of the Republican presidential hopefuls, who proposes a “Business Flat Tax”.

Cruz says that:

“all companies will pay a simple, low rate Business Flat Tax of 16 percent. The tax will be based on revenues minus expenses such as equipment, computers, and other business investments.”

The Tax Foundation has reviewed the impact of the entire plan (BFT is just an element of a bigger plan) and says of the BFT:

“Enacts a broad-based, 16 percent “Business Transfer Tax” or value-added tax. This tax is levied on all business profits, less capital investment. This would include the payroll of business, government, and non-profit institutions, as well as net imports. The tax would exempt from taxation the purchase of health insurance.

A business transfer tax is also often known as a subtraction-method value-added tax. While its base is identical in economic terms to that of the credit-invoice VAT seen in many OECD countries, it is calculated from corporate accounts, not on individual transactions.”

The Tax Foundation’s entire analysis is here:  http://taxfoundation.org/article/details-and-analysis-senator-ted-cruz-s-tax-plan.

Interesting!

So, like in sales tax, under BFT we don’t have to deal with the burden of mandatory invoicing – no input tax calculation on purchase invoices and not output tax on sales invoices, but rather Accounts Receivable minus Accounts Payable is the gross tax base, from which some adjustments can be made (the capital investments that may not appear on Accounts Payable, depending on the accounting rules).

Also, we don’t have to worry about tax rules of goods vs. services, inter-state zero-rating, reverse charges, imports and exports, because all these sales and purchases would be included in the company’s accounts, and thus included in BFT’s tax base. The trouble is that exports would be standard rated, but surely these supplies can be simply excluded from the tax base.

However, my main critique is that I can’t see any VAT-like indirect tax without invoices. Sure, not every VAT is as invoice-focused as the European type (think the consumption tax in Japan), but in reality even the auditors of Mr. Cruz’ plan would like to see more support for the input tax credit than simply putting a purchase in the AP account. Or ensuring that every sale is booked in AR. There are plenty of excellent examples in Brazil, China, Taiwan and elsewhere, where invoicing is a key driver for taxability, yet the admin burden can be simplified with online clearing.

The somewhat-optional “fiscal voucher” system that Puerto Rico proposes for the April 1, 2016 introduction of VAT will probably have to get more serious if Puerto Rico wants to improve on anti-fraud auditing and reporting.

The New York Times has a recent article on Cruz’ tax plans – not easy on the eyes because of the staccato writing style of the author: http://nyti.ms/1Ow5jDx

Cruz has always been the enfant terrible of the Republican mainstay and it would be hard to imagine conservatives agreeing on a tax plan like this. But hey, Cruz is a key player at this point of the elections (December 2015) and he even has a good chance of becoming the Republican presidential nominee.

Let’s see what happens – I will keep you updated.

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