On February 1st the Financial Secretary of Hong Kong John Tsang outlined the budget plan for the 2012 – 2013 financial year, containing several tax changes which are expected to benefit more than 1.62 million taxpayers.

One of the primary changes outlined in the budget plan is a 75 percent reduction to profits taxes and salary taxes for the 2011 – 2012 financial year. If approved, the changes will cut the government’s revenues by approximately HKD 10.02 billion in the coming financial year.

In order to further reduce tax burdens , the basic allowance, married couple allowance, and dependant allowances have been increased. The deduction limit for elderly residential care expenses will be lifted. Homeowners in Hong Kong will also see a 5 year extension to tax deductions for home loan interest payments.

To increase the level of business activity, the new budget proposed waiving the business registration fee for a period of one year for all locally registered companies in Hong Kong.

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In the face of intense public pressure, on January 31st the Prime Minister of the Palestine National Authority Salam Fayyad scrapped the government’s proposal to raise income taxes in Palestine.

According to a recent research by local analysts, only 12 percent of Palestinians currently support the government’s proposal to double the rate of income tax to 30 percent. Amongst other measures to reduce the budget deficit, the government has also proposed including a greater number of business and operations in the tax net, and actively cutting government spending. The combined measures were expected to raise approximately USD 450 million in extra tax revenues per year.

The results of the survey also indicated that for nearly 54 percent of Palestinians further increases to foreign aid and assistance remained the preferable option to address the government’s financial struggle. The current budget for the 2012 year stands at USD 3.5 billion, with approximately USD 1 billion covered by foreign aid, and with estimated tax revenues of approximately USD 750 million, resulting in a budget deficit exceeding USD 1.1 billion.

Palestine is currently seeing its foreign aid revenues dwindle, as some foreign governments deliver less aid than Palastenian authorities requested. In 2011 less than USD 750 million of foreign aid payments were made to Palestine, while the government budgeted for over USD 1 billion.

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According to the report published on January 30 by UK Taxpayers’ Alliance, the members of an average UK family will pay more than GBP 656 000 in direct and indirect taxes over their lifetime, with over GBP 250 000 payments for income taxes, and an extra GBP 101 000 in Value Added Tax payments. Council tax and national insurance contributions were the next biggest liabilities faced by taxpayers.

The highest earning families in the UK will face cumulative tax liabilities of approximately GBP 1.3 million, while the families with the lowest earnings will see total obligations of GBP 235 000.

The results of the research are based on currently applicable rates of taxes and other fiscal contributions in the UK, and are calculated for an “average” family having a gross annual income of GBP 36,372, with a working lifespan of 40 years and an additional period of 15 years of retirement.

Commenting on findings, the director of the Taxpayers’ Alliance Matthew Sinclair, said that “…households in the UK now pay an incredible amount in tax over a lifetime, handing over a hefty slice of their income” and suggested that “… Chancellor needs to deliver a tax cut in the Budget, to ease the burden and help the economy to grow”.

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The government of the Philippines is initiating a new project to ensure that small business owners and stall operators across the country are complying with their tax obligations. The new initiative was revealed by Commissioner of the Bureau of Internal Revenue (BIR) Kim Jacinto Henares while speaking at a press conference on January 29th.

Under the new regulations BIR investigators will be tasked with carrying out “tax mapping” operations across public markets in the Philippines, predominantly to ensure that all small businesses issue official receipts and record their sales.

The BIR agents taking part in the operations will be granted powers to inspect business premises, to investigate the accounts and records of the businesses, and to monitor the operators to see if receipts are being issued. Further, the inspectors will provide stall owners with official BIR materials, which must be displayed in the business premise to encourage taxpayers to meet their obligations.

In order to prevent abuse, the “tax mapping” will be restricted to small markets, and all BIR agents will be required to obtain and hold an official BIR investigation order before commencing any inspections.

Any business found to be breaching its filing or tax requirements can be fined PHP 2 000 for a first time offense, and if subsequent breaches occur, the business could be closed down and criminal charges against the business owner could be raised.

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The Tax Foundation has released its latest study of business taxes across the USA, highlighting the difference in tax environments faced by enterprises across the country in the 2012 edition of the State Business Tax Climate Index released on January 25th .

The Index ranks each state based on the taxes applied directly on businesses and working individuals, and on the number of tax credits that tax authorities make available to locally registered companies.

The authors of the report explained that states which choose not to levy some of the most common taxes will be seen as being more competitive and having a friendlier business environment. The Index placed a negative weighting on excessive tax breaks, as they were deemed to introduce bias into the tax system.

Wyoming, South Dakota and Nevada were the top three ranked states, with each region not levying any additional corporate or personal income taxes on top of federal income taxes. Alaska and Florida, which were ranked 4th and 5th, also levied no individual income taxes, and had relatively minor corporate income taxes.

The lowest ranked state in the Index was New Jersey, and the states of New York and California were ranked just marginally better. The Tax Foundation’s report explained that the lowest states had high tax rates and unnecessarily complicated tax rules for businesses. In order to improve their standing, the states will need to simplify their tax systems and rebalance all tax rates to remove distortions, making them neutral.

Commenting on the result of the report, Mark Robyn, one of the authors, explained that it is vital for state policymakers and politicians to be aware of the direct tax competition the state faces from neighboring states, and to ensure that the local tax systems are optimized and do not put unnecessary strain on entrepreneurs.

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