The 25th annual 2009 Sales Tax Rate Report, released on March 3rd by the tax software provider Vertex, shows that in an attempt to bolster state coffers and decrease the impact of a weakened economy, the states of California, Delaware, Minnesota, Massachusetts, North Carolina, Utah, Nevada and the District of Columbia increased state sales taxes in 2009. The report shows that no decreases were seen in other states of the US in 2009. The number of states raising their sales tax levels is also the highest on record, with only 4 increases occurring in 2008 and 1 in 2007.

The state sales tax increase has placed California as the region with the highest rates, at 7.25 percent. Indiana, Mississippi, New Jersey, Rhode Island, and Tennessee are ranked second equal, at 7 percent. The report has revealed that the average US county sales-tax rate remained at 1.629 percent in 2009, while the city-rate average dropped to 1.532 percent. The figures indicate that the combined average rate was 8.629 percent for the year, compared to 8.574 percent in 2008. The highest combined rate of 12 percent was seen in Arab, in Cullman County, Alabama. Higher combined rates are typically seen in tourist areas, with the New Orleans International Airport having a rate of 10.75 percent, and the Snowmass Village ski resort in Colorado holding a rate of 10.4 percent.

In an interview regarding the newest findings, John Minassian, Vice-President of Research at Vertex Inc, indicated that the sale-tax rate increases will continue throughout 2010, with 41 states reporting budgetary shortfalls and being faced with the decision of cutting state-sector services or raising taxes. In 2008 state governments reported a combined sales tax collection total of USD 450 billion, nearly two thirds of which was accounted for by state-level sales-tax. Currently, 45 states have state-level sales taxes, with Alaska, Delaware, Montana, New Hampshire and Oregon as the exceptions.

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On March 10th the OECD announced that the Bahamas, a small Caribbean island nation previously regarded as a tax haven and offshore banking center, has entered into TIEAs with Denmark, Finland, Greenland, Iceland, Norway, Sweden and the Faroe Islands. Having passed the OECD threshold of 12 implemented TIEAs, the Bahamas will now be considered a nation that has substantially implemented the internationally agreed upon standards on taxation transparency. The jurisdiction is the 22nd to have made the transfer to the White List since the first OECD progress report was issued in April 2009.

Prior to the latest signing, the Bahamas held TIEA agreements with Mexico, France, Belgium, Netherlands, Argentina, China, New Zealand, the UK, San Marino, Monaco and the US. A further agreement is scheduled to be signed between the Bahamas and Spain on March 11th. On March 9th the Indian Government also stated that it expects an agreement to be completed soon with the Bahamas, with the conditions of the document already having been agreed upon by the two nations. Germany, Canada, Australia, South Africa and South Korea have also given indication that they are willing to sign TIEAs with the Bahamas in the near future. The Bahamas is also a member Global Forum on Transparency and Exchange of Information for Tax Purposes and the Global Forum’s Peer Review Group, and will soon begin participation peer reviews of the progress made towards the implementation of the signed TIEAs.

Commenting on the progress made by the Bahamas, Jeffrey Owens, Director of the OECD’s Centre for Tax Policy and Administration, said, “Given the role that the Bahamas plays in the financial world, I am particularly pleased that they have made significant progress and they continue to expand their network of partners with whom they can exchange tax information.”

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The speech delivered to the Singapore Ministry of Finance’s Committee of Supply Debate 2010 on March 9th, was intended to address the issues raised by members of the Committee on situations faced by Singapore and its Government. Among other topics, the speech sought to quell the concerns of several Members of Parliament (MPs) regarding taxation matters, citing multiple instances which showed that the Singapore Government’s taxation system had already adequately addressed the issue.

In regards to treatment of national businesses, the Finance Minister said that the measures implemented to boost expansion in 2009 have proven to be highly successful. He stated that the claims process which requires no separate application and is included within a company’s end of year filing, has ensured that all applicable businesses have been able to take advantage of the opportunity. He noted further that the Research and Development (R&D) tax deduction instated in 2008 saw R&D activity increase by 50% by the end of 2009.

Lim Hwee Hua said that the Government has no intentions of instating new tax privileges to Singapore’s social enterprises. He claimed that creating advantages will hinder self-sustainability for social endeavors, and that their relatively small size means that reductions in income tax will not have a significant impact on growth.

Addressing local issues, the Minister explained that the property tax increases seen by residents of Housing Development Board (HDB) dwellings were a product of the yearly property value revisal. Further, the Minister pointed to the fact that the Government did not raise property taxes in 2009 on account of the relatively weaker economy, in effect lessening the impact of the tax increases. He reminded the MPs that HDB property residents were still eligible for rebates intended to offset the property-tax revision, and the new progressive property-tax system which could save recipients SGD 240 (approx. USD 172) annually.

In response to concerns raised by several members of Parliament, the Finance Minister laid assurances that Singapore’s tax treatment of vehicles and fuel is already adequate to encourage eco-responsibility. He reminded the MPs that the Government has implemented volumetric taxation of petrol to discourage excessive use, and created several measures to ensure the economic competitiveness of fuel efficient cars, like the Green Vehicle Tax Rebate. He conceded that greater efforts should be made to convert all transport taxes to a volumetric basis, though did not commit to any timeframe for doing so, citing several issues like public transport and taxis as posing problems to the plan.

The speech also covered optimal method for the Government to utilize its resources and maintain efficiency; indentifying measures to assist expansion of national businesses; and, ensuring readiness for future implementation of e-Government initiatives.

Summarizing, Lim Hwee Hua reitatrated the positive state of the country’s tax system, saying: “We also use our tax regime to help promote social and economic objectives. We strive to keep our tax regime competitive to give businesses and individuals incentive for enterprise and effort.”

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According to newly published report released March 8th, Norway had experienced a relatively mild contraction during the economic crisis. National unemployment is expected to peak at no more than 4 percent. The OECD projections claim that economic growth will remain strong in 2010 and improve further in 2011.

Norway’s current economic position has been attributed to the Government’s ability to implement significant budgetary stimulus measures and cutting the central bank interest rates by 450 basis points. Initiatives were also introduced to insure the maintained liquidity of funds for Norwegian banks, despite their heavy reliance on international finance.

To maintain Norway’s current positive standing, the OECD has suggested that a number of the policies legislated during the worldwide recession be retracted, in order to ensure that the economy doesn’t “overheat” in coming years. The primary recommendation for Norway was to withdraw the fiscal stimulus measures originally outlined within the 2010 Budget. The monetary stimulus, which amounted to 0.6 percent of GDP, is considered to be excessive by the OECD, in the light of Norway’s current standing.

The report strictly stated that Norway’s already high levels of personnel taxation should not be raised, and strong encouragement was given to reduce top marginal rates. Further, the OECD reported that the Government’s current treatment of housing taxation is economically unjustifiable and reforms should be led to phase out the current deductibility on interest paid for owner-occupied dwellings, and the discount given to housing in regards to the wealth tax. According to the report, increases to housing taxation would be adequate to balance reduced top marginal rates.

According to the report Norway needs to return to the 4 percent path of Government spending, which stated that the structural non-oil Government deficit should be no more than 4 percent of the Government Pension Global Fund (GPGF). The GPFG was implemented in 2001 for the long-term management of surplus revenues made from petroleum production within the country, and according to the OECD has had major positive effects on public finances and the economy.

Commenting on the report Sigbjørn Johnsen, Fiancne Minister of Norway, said; “OECD’s assessment of the Norwegian economy serves to stimulate the debate on important economic policy issues. We appreciate OECD’s assessment that our macroeconomic framework is serving us well.”

Photo by Peter Nijenhuis