In an interview conducted earlier this week, the Minister of Finance Xie Xuren described the intentions of the government of China to implement new proactive policies throughout 2012 to improve the national tax system, to increase the incomes and improve the livelihoods of taxpayers of China, and to expand the country’s investment infrastructure.

One of the primary goals of the Chinese government over 2012 is to improve the efficiency and structure of the national tax system in order to provide better economic conditions for small and medium sized enterprises in China, and as an initial step, the government plans to raise the value added tax payment threshold for businesses.

According to the Minister, in 2012 the government will revise the implementation of value added taxes on the transport and service industry Shanghai, in a trial aimed to expand and modernize these sectors while, at the same time, raising tax revenues. If the pilot program proves successful, similar initiatives may be started in other large cities around the country.

The government will also continue to operate and expand the property tax system that was implemented across selected urban areas in China over 2011.

Tax incentives will also be offered to enterprises in China to encourage them to upgrade and restructure their industrial facilities.

In an effort to raise the incomes of low paid workers around China, the government plans to implement tax changes aimed towards low income earners and also expand the current social pension system to cover a greater number of citizens.

In order to improve the living conditions of taxpayers the government will also work to further stabilize the prices of essential commodities and foods.

In his interview the Minister added that the government of China plans to maintain a steady level of investment in infrastructure development, especially for housing projects, water conservation and treatment facilities, and for the development green technologies.

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The Kenya Revenue Authority (KRA) recently released its latest Revenue Performance Report, detailing the country’s tax collections during the first half of the 2011 – 2012 financial year, and showing that the government’s cumulative tax revenues in the time period were below previous projections by KES 45 billion, reaching a total of KES 345 billion.

The Commissioner General of the KRA Michael Waweru suggested that the lower than expected tax revenues were a result of an economic slowdown caused by high inflation, rising interest rates, significant fluctuations in the value of the national currency and by increasing oil prices. He also said that the unfavorable economic conditions which led to the revenue drop would persist throughout the third quarter of the financial year.

Tax experts in Kenya have noted that part of the decrease in revenues was also caused by tax changes introduced by the government, particularly due to a hike in the rate of excise duties on alcoholic beverages, which led to significant drops in sale of alcohol.

In the second quarter of the financial year, Kenya also saw a KES 10 billion drop in funds received from international donors. According to the opinion of experts of the Institute of Economic Affairs of Kenya many international financial organizations believe that the government has not adequately met its obligations to release the funds to development projects in Kenya.

The decreased tax revenues have raised public concerns that the government will soon need to scale back its own funding of infrastructure development around the country until economic conditions improve.

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According to the latest Financial Statements of the government of New Zealand, which were released on February 20th by the Treasury of New Zealand, tax revenues in the country over for the six month to December 2011 were 1.4 percent below forecast, but 3.3 percent greater than in the same period of the previous year.
The total tax revenues collected in New Zealand during the six months were NZD 26.4 billion, while the government’s forecast for the time period was NZD 26.8 billion. Under the current economic conditions the government now expects to see cumulative tax revenues for the 12 months ending June 2012 reach approximately NZD 55.5 billion.

According to the Treasury, the lower than expected tax revenue were largely a result of a drop in personal income tax collections in the country, however, the decrease is believed to be a seasonal effect, which will be reverse in the second half of the year.

The revenues raised from Goods and Service Taxes were also below forecast, due to a higher than expected number of tax refunds paid to insurance companies which made payments for claims related to the Canterbury earthquakes, which occurred throughout the last year.

The Financial Statements also noted that the lower than expected tax revenues were offset by the economic measures taken by the government to cut spending by NZD 887 million to a total of NZD 34 billion.

Commenting on the Financial Statements, the Minister of Finance of New Zealand Bill English said that the latest tax revenues result “…reinforces the need for the Government to be disciplined in its spending and stick to its plan to get back to surplus in 2014/15.”

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A meeting between the Prime Minister of Greece Lucas Papademos and leaders of 17 countries of the European Union to discuss the conditions of the new bailout for Greece is set to take place in Brussels today, on February 20th.

The bailout currently being debated is worth approximately EUR 130 billion in payments from the International Monetary Fund and the European Union, and was tentatively agreed to in October 2011. However, before the conditions of the bailout can be finalized and the payment completed, the IMF and the EU are seeking assurance that the money would be used effectively and will actively aid Greece in reducing its external debts and liabilities.

Amongst the points being discussed at today’s meeting is the possibility of instating an escrow account for the bailout payment, which would be under the control of an independent third party. The account would prioritize payment of external debts over spending on Greek government services, and would ensure that Greece follows its own austerity plans. It is thought that the account will also reduce the destabilizing economic effects of a potential debt default by Greece. Some political experts have suggested that Greece might also be asked to transfer at least part of its tax revenue collections into the escrow account.

At today meeting the leaders of the EU will also discuss further measures which can be implemented to speed Greece’s debt reduction. In October 2011 the IMF set an economic target for Greece to reduce its own debt levels to 120 percent of GDP by 2020, from the current level of 160 percent. However, the latest forecasts from the IMF and the European Central Bank indicate that under the present economic conditions the country will only be able to lower debts to 129 percent of GDP in the set time limit.

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The Financial Action Task Force (FATF) issued a new public statement on February 16th, listing countries around the world which have significant deficiencies in their anti-money laundering regulations.

The FATF has identified Iran and North Korea as having serious shortcomings in their regulations against money laundering and terrorist financing. According to the FATF, the governments of North Korea and Iran have both repeatedly failed to take adequate steps in addressing their serious shortcomings in the fight against money laundering and terrorist financing.

Iran was urged by the FATF to immediately criminalize terrorist financing in national legislation and implement internationally accepted requirements for reporting of suspicious financial transactions.

The Task Force also offered direct assistance to North Korea in addressing its legislative shortfalls.

The FATF called on all its member countries to apply new counter-measures to protect national and international businesses from the continued and substantial risk of money laundering stemming out of Iran and North Korea.

The Task Force also identified several other countries which have already begun taking steps to combat terrorist financing and money laundering, but have yet to make sufficient progress in addressing the deficiencies.

The list presented in the latest FATF statement consists of Bolivia, Cuba, Ethiopia, Ghana, Indonesia, Kenya, Myanmar, Nigeria, Pakistan, São Tomé and Príncipe, Sri Lanka, Syria, Tanzania, Thailand, and Turkey. However, attention was drawn to Cuba, which, the Task Force says, has not yet engaged in any dialogue regarding its regulations to fight money laundering and terrorist financing.

The Task Force identified the exact legislative shortcomings for each country, and warned the international society to consider the risks associated with each specific jurisdiction.

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