In a concentrated effort to quash criticisms of the government’s handling of the country’s overwhelming debt levels, the Finance Minister of Italy Giulio Tremonti outlined the government’s plans for changes to the national tax system. The new policy was revealed in an address to the joint session of the Budget and Constitutional Affairs committees of Italy’s Chamber of Deputies and the Senate on August 11th.

In his speech the Minister said that Italy must overcome its “rigid, centralized system”, in order to deal with its debt levels, which have now reached 120 percent of the national GDP. To achieve this goal the government is now investigating several tax system changes which could be carried out soon. He revealed that an increase to the national capital gains tax is the most likely measure to be implemented first, with the rate rising to 20 percent from the current rate of 12.5 percent. The Minister is expected to discuss the tax increase with the Italian President Giorgio Napolitano within a few days, and the Cabinet will vote on the proposal as early as the end of this week.

In order to ease the government’s restricted cash flows, Italy could also instate a once-off solidarity contribution. The Finance Minister opted not to reveal the details yet, but was quick to point out that it was not a wealth tax, as has been repeatedly called for in recent months.

The new tax measures are intended as a beneficial accompaniment to the government’s planned EUR 20 billion of austerity measures, which are expected to be voted on by the Cabinet on August 18th.

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In a statement issued on July 20th in New Delhi, the Secretary of the Department of Industrial Policy and Promotion (DIPP) Rajinder Pal Singh revealed that the Revenue Department of the Finance Ministry of India has given initial support for a newly proposed policy to grant exemptions from capital gains tax liabilities for small and medium enterprises.

According to the Secretary, the policy would be expanded to also allow individuals to sell off personal assets and be exempt from capital gains tax on the sale, as long as the proceeds were being used as an investment into a small enterprise operating in India. It is believed that the proposed policy would spur greater numbers of national taxpayers to start their own businesses. If the proven to be effective, the new policy will have a significant positive effect on the economy, and would also boost employment levels. Rajinder Pal Singh added that if the proposal is passed, it would greatly reduce the “intrusion” of government departments and tax authorities into the affairs of businesses.

The exact details of the tax are yet to be finalized and confirmed, with the Revenue Department and DIPP needing to complete projections of the proposal’s effect on India’s tax revenues. Once the departments complete the estimates, the proposal will be moved further up the process towards official government approval.

Currently India’s tax rate on long term capital gains is 20 percent, and the profits from short term capital gains are added to the seller’s personal income.

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The Finance Minister of Kenya Uhuru Kenyatta is scheduled to release the national budget plan this afternoon, June 8th. The Treasury of Kenya has indicate that the budget will outline an approximate KES 1.2 billion (USD 13.68 million) in government spending. It has also been revealed that in order to support the government’s expenditures, new foreign borrowing will be taken on. The proposed borrowing plan has sparked wide ranging debate in Kenya on what improvements can be made to the tax system to boost government revenues and decrease reliance on foreign aid.

On June 7th the governor of the Central Bank of Kenya Njuguna Ndung’u, suggested that the government should investigate the possibility of increasing the tax rate on luxury goods. He said that a small rise in the tax would not have any strong negative effects on the economy, but would serve well to support national growth and development projects.

Calls have also risen to instate a capital gains tax into the Kenya’s national tax system. According to the opinions of several local experts expressed in the national media, a capital gains tax is a perfect means to increase government revenues from high performing sectors of the economy, while imposing no extra tax burden on the country’s lowest income earning taxpayers.

The speculative debates have risen steadily in the last two months, after the Finance Minister did not present budgetary estimates for government and public comment, as required by law. The Minister was mandated to table a draft budget outline at least two month before its official release. House Speaker of the Kenyan Parliament Kenneth Marende has said that Uhuru Kenyatta will be required to officially explain his actions in the near future.

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The Organization of Economic Cooperation and Development (OECD) has completed its annual Economic Survey of New Zealand, advising that the country needs to instate a capital gains tax and overhaul the tax system to encourage savings and investments in sectors of the economy, other than property.

The new report suggested that the country’s capital markets are “shallow”, resulting in over-investment in the housing sector, and excessive dependence on foreign debt via bank mortgages. It is expected that as New Zealand’s economic growth increases, consumer demand for real estate investment will also rise, leading to even greater levels of foreign debts. The OECD suggested that any further growth in overseas borrowing will put the country in an even riskier economic position.

In order to address the over-reliance on property investment, the government needs to instate a comprehensive capital gains tax on profits earned from property investment. Such a move would greatly reduce the investment bias towards private housing. In lieu of a capital gains tax, the government should investigate the possibility of designing a system of increased land and property taxes.

The government has already repeatedly state that it will not introduce a capital gains tax into the New Zealand tax system. Earlier in April Prime Minister John Key said that recent changes to loss attribution rules will be enough to address the country’s level of housing investment.

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On June 22nd the UK’s Chancellor George Osborne presented the national Emergency Budget. The new Coalition Government’s budget aims to bring the UK out of its current recession, and address the country’s growing deficit and cut it to a neutral level.

In regards to business taxation, the budget statement was headlined by the announcement of a reduced corporate tax rate. On April 1st 2011, the current 28 percent corporate tax rate will be cut by 1 percent. An additional three 1 percent cuts will be carried out for the next three years, ultimately bringing the tax rate to 24 percent. The Government has also confirmed that it will instate a Bank Tax in the UK, taking effect from January 1st 2011. The new tax will be levied on the adjusted balance sheet of national banks, building societies and foreign banks operating within the UK, and is expected to raise GBP 2 billion (approx. USD 2.68) annually. The Government has also committed to carrying out an investigation on possible reforms to the treatment of research and development activities carried out by national businesses. Additionally, the Government has pledged to engage in consultation on possible new measures to battle tax evasion, with the intention of implementing new legislation by April 2011.

The Government has confirmed that increase to the levied rate of National Insurance Contributions (NIC) will not be carried out, and a NIC-holiday system will be created for new businesses. Under the holiday scheme, new businesses in selected regions of the UK will not be required to pay the first GBP 5 000 (approx. USD 7407) of its employer NIC contributions for the first 12 month of employment for newly hired staff. The exemption will only apply for the first ten staff members hired in the first year of the business’s operation. Contrary to media predictions, the Government will not lower the payment threshold on CGT, leaving it at the current level of GBP 10 100. However, the CGT rate will be increased by 10 percent to a level of 28 percent, for gains made after June 23rd 2010. The increased rate will only apply to individuals with total taxable incomes and capital gains in excess of GBP 37 400 (approx. USD 55 404).

The Budget also confirmed the widely-expected VAT rate increase. From January 4th 2011 the VAT rate will increase from 17.5 percent to 20 percent. The VAT-base will not change, with no alterations to exempt and low-rated VAT items. The move is expected to raise an estimated GBP 54 billion (approx. USD 80 billion) over the next five years.

George Osborne has admitted that the measures outlined in the Budget combine to make a “drastic” changes, but with the current state of the economy drastic actions were needed. Andrew Smith, chief economist at KPMG, summarized the general sentiment, saying, “…this is a kill or cure budget.”

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