KPMG’s June 30 webcast: GST in India

As I suggested in an earlier blog post (see here), GST is getting more traction in India. They are looking at an implementation date of April 1, 2016 – which seems a bit tight to me.

KPMG India is organizing a webcast on Tuesday,  June 30 2015  at 3pm GMT – 10am Eastern with the following agenda:

  • Is 1 April 2016 deadline for implementation of GST realistic, given that the bill has been now referred to a select committee?
  • Likely timelines for critical milestones such as draft GST legislation, setting up of IT infrastructure, etc.
  • Impact of GST on businesses and how corporates should plan for this transition?

Register here: http://kpmg.wstream.net/30062015/register.asp
Sorry to report that KPMG has not scheduled a similar webcast at a more West Coast-friendly time.

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Why no VAT in the U.S.?

Earlier this week I attended a speech by Professor Michael Graetz from Columbia Law School. Mr. Graetz is one of the developers of a framework for a VAT or GST in the U.S.. It comes down to a broad-based GST like in New Zealand, with added support for lower incomes, to combat the regressive effect of a VAT/GST. (Regression here means that the burden of the tax is disproportionately carried by the lower incomes, because the spend (not save or invest) a high percentage of their income.)

One of the questions, of course is why there is no VAT/GST in the U.S., given that every other country has a VAT/GST?

The answer is that VAT/GST or similar consumption taxes became popular after the Second World War in countries that urgently needed money to rebuild their society. The U.S. was rich at the time, both in absolute terms as relative to other countries’ economies. So the U.S. missed the boat on implementing a consumption tax, which later on became politically unacceptable.

The reason why there is no VAT now is only politically driven. Politicians are concerned that introducing a federal consumption tax would be extremely unpopular – even when included in a major overhaul of both personal and corporate income taxes. From Graetz’ proposal, however, it is clear that the introduction of a VAT/GST would not have a major economical impact on consumers.

As Graetz put it, the Democrats have to understand that VAT/GST is not regressive, and the Republicans have to understand that VAT/GST is not a major money maker to fund a big government.

Slides similar to those presented are here: http://www.law.yale.edu/documents/pdf/News_&_Events/Graetz_Tax_Plan.pdf

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The Dutch revolt on VAT rates

The Dutch political scene is still very much governed by the so-called “polder model” (have a look at Wikipedia if you are interested in the background), and as it turned out the Dutch government is contemplating limiting the extent of the lower VAT rate (currently 6%) to food only.

It comes down to a move to the standard rate (currently 21%) for books, clothes, alcoholic drinks and some entertainment services, as well as the services of hairdressers.

Although the Dutch are throwing a fit, the government’s proposal is not that surprising, given that earlier this year they were thinking of integrating the lower rate with the standard rate, and have a single VAT rate of 17-or-so %.

The current proposal would create a nice and useful windfall. There is not much chance that the proposal will live through the parliamentary approval process, but the writing is on the wall – something will happen with the VAT rates either now or soon after…

For a little more info see here: http://www.dutchnews.nl/news/archives/2015/06/dutch-tax-reforms-may-mean-rise-in-value-added-tax-to-raise-e5bn/ – this is an interesting website to browse anyway.


Fruit stand on the Koornbrug, Leiden, The Netherlands

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EU VAT refunds for U.S. companies

It’s that time of the year again – June 30 is coming right up. Two more weeks to submit your VAT refund in any EU country except the UK (they have odd refund deadlines).

EY has a nice and comprehensive overview – linked below.

A couple of additional notes:

  • You will need a Form IRS 6166 to show that you are a U.S. company registered with the IRS. This will take some time to acquire from the IRS. If you don’t have the form in hand, make sure to file the refund request without it to preserve the firm deadline, and submit the 6166 as soon as possible. Some countries accept this, other don’t.
  • Similarly, not all countries accept VAT refunds from U.S. based companies. Italy and Spain are the biggest culprits.
  • Don’t file for refunds that would expose you to a registration requirement. For example, if you purchased goods locally for onward local delivery, you will have incurred VAT on the purchase. If you request a VAT refund, the answer will be that you are liable for local VAT registration.

I do not file VAT refunds on clients’ behalf – that is too easy and you should be able to do that yourself. But I am always happy to help – let me know!

Download (PDF, 141KB)

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June 28: IPT’s annual conference in San Diego

As a rookie member I will attend the annual conference of the Institute of Professionals in Taxation (IPT), on June 28 in San Diego, CA.

The agenda is here: https://tinyurl.com/noy7skn
(sorry – had to shorten the web address)

I will be presented with the VAT Article of the Year – for more see here: http://www.us-vat.com/blog/?p=970. The article is in pdf below.

Let me know please if you are planning on attending as well – would love to meet up!

Download (PDF, Unknown)

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VAT audits and controversy revisited

Risk management and internal controls seem to be the flavors of the year – here is a “thought piece” by EY about managing VAT audits. As I mentioned before – this is nothing new, but good to see a comprehensive summary of do’s and dont’s.

EY discusses:

  • The nature of modern indirect tax audits and the rise of the electronic audit (e-audit)
  • Common errors and audit triggers as well as practical suggestions for reducing the risk of unexpected assessments, penalties and sanctions by actively preparing for tax and customs inspections
  • Ways in which taxpayers can avoid assessments and sanctions by removing uncertainty, preparing for audits and improving end-to-end compliance
  • How taxpayers can resolve disagreements with tax and customs authorities, both in and out of court

See here for the website (it is sometimes a bit challenging to read on my Chrome browser): https://webforms.ey.com/GL/en/Services/Tax/VAT–GST-and-other-sales-taxes/ey-managing-indirect-tax-controversy-home

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“VAT, the only answer that is a real answer”

Join me at this seminar featuring Professor Michael Graetz (Columbia Law School). He will speak in the Grand Hyatt in NYC on Wednesday, June 17, 2015.

Synopsis:

Representatives of large U.S. MNCs are pressing Congress to lower the corporate tax and exempt dividends received from foreign subsidiaries. Tech firms want to add a special low tax rate on innovation income to the list. Representatives of small businesses, notably the politically powerful NFIB, object to funding these changes by base broadening unless individual income tax rates—applicable to partnerships, LLCs, and subchapter S corporations—are also reduced significantly.

Democrats in Congress insist that these measures cannot be funded by cutting spending on health insurance, social security, food stamps, or assistance to needy families.

So while the direction of income tax reform is clear, paying for it currently seems impossible. There is, however, one clear path, one taken by more than 160 other countries around the world: enact a national tax on sales of goods and services. In fact, this may be the only way to overcome the current stalemate.

See http://www.internationaltaxinstitute.org/

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