Over the weekend the Prime Minister of Fiji Frank Bainimarama made his annual budget address in Suva, announcing a number of tax changes aimed at lowering tax burdens for the majority of taxpayers, and raising taxes for the country’s highest earners.

From the start of next year the tax threshold in Fiji will be raised to FJD 15 600, from the current level of FJD 15 000. All earnings above the threshold, and up to a level of FJD 22 000 will be taxed at a new rate of 7 percent, compared to the current rate of 25 percent. Earnings exceeding FJD 22 000 will be levied at a rate of 20 percent. Corporate income taxes will be also reduced to 20 percent, down from 28 percent.

In his speech the Prime Minister claimed that the new tax changes would directly improve the financial situation of 99.4 percent of Fijian taxpayers. By the government’s estimates, the alterations to the personal income tax rates will result in approximately FJD 53 million of reductions in individuals’ personal tax obligations.

The tax reductions were instated with the explicit aim of lowering inequality and poverty levels in Fiji. The Prime Minister announced that in order to further this goal, from the start of 2012 all taxpayers with incomes exceeding FJD 270 000 would face a social responsibility levy on their incomes. The revenues garnered from the levy would be used to compensate the government for revenue losses arising from the tax reductions, and would also contribute to expansion in national anti-poverty campaigns.

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Months of political debate came to an end on November 24th when the Lower House of Parliament of Japan approved new legislation which paves the way for the government to hike some tax rates as a means of raising revenues to fund earthquake recovery programs.

The legislation allows the government to instate an increase to the country’s personal income tax rate, for a period of 25 years starting from 2013. The extra funds raised by the tax rate increase will be used exclusively to service the government’s sovereign debts. Prime Minister Yoshihiko Noda has repeatedly maintained that the government will not issue any significant amounts of extra bonds without first finding new revenue streams to address the resulting interest and servicing payments.

The newly passed legislation will also allow the government to temporarily reduce the country’s corporate income tax rate. The rate cut is aimed at boosting capital spending, and easing conditions for businesses suffering from the effects of waning domestic demand and a rising national currency.

Before any changes can be implemented, the new legislation still needs to be approved in the Upper House of Japan, where the national opposition holds a majority. Political analysts in Japan have said that the approval could come as early as next week, as both the ruling Democratic Party of Japan and the major opposition seem to have come to an agreement over the necessity for raised taxes. The exact rate at which both taxes will be changed has not yet been decided, and discussions will begin once the legislative change is approved.

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In a new report examining corporate tax rate in the US, the Tax Foundation has blasted back at claims that US corporations are not paying enough taxes, saying that the country has one of the highest statutory corporate income tax rates in the developed world. The analysis, which was published in September 13th, also showed that the country’s effective tax rate is also far above the average rate seen in OECD nations.

According to the authors of the report, the statutory income tax rate in the US is currently at 39.2 percent. The study also took into account potential tax breaks available in the US, which could lower a company’s tax liabilities. Data contained in the report indicates that the US’s average effective corporate tax rate could be as low as 29.8 percent. However, it was shown that even the lowered rate is still 7.4 percent above the average effective tax rate paid by companies in OECD countries.

The authors of the report acknowledged that the issue of corporate tax payments in the US is currently highly debated topic in social and political circles, however there is still a lot of misinformation and over exaggeration in the media regarding this controversial issue. The report is intended to highlight the realistic tax burdens faced by national corporations.

Since 1997 30 out of the 34 OECD member nations have lowered their corporate income tax rates, bring the average rate from 36.5 percent to 25.1 percent. The authors suggested that the only country with a higher effective tax rate than the US is Japan.

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According to new research conducted by Het Financieele Dagblad, a leading Dutch financial newspaper, the Netherlands are quickly becoming one of the most popular jurisdictions used by multinational corporations for international tax planning. The report shows that out of the 100 largest companies in the world, 80 make use of Dutch entities for tax planning.

The detailed analysis, which was published by the newspaper on September 12th, claimed that Dutch special financial institutions (BFI) are the most widely used entity in international tax structuring. By the end of 2010 nearly 13 000 such companies had been registered in the Netherlands by entrepreneurs from around the world. In the same year, the flow of cash through the BFIs had reached EUR 10 trillion, in comparison, in 2004 the figure had only stood at EUR 4.4 trillion. The authors of the report estimated that the current cash flows in BFIs are approximately 17 times larger than the Gross Domestic Product of the Netherlands.

The international acceptance and utilization of Dutch BFIs has been attributed to the practice of exploiting tax loopholes in Dutch tax legislation, and to the tax breaks offered by national tax authorities.

Despite the colossal level of funds flowing through the entities in 2007 the government of the Netherlands saw only EUR 1 billion in tax revenues collected from the BFIs, with an additional EUR 500 million arising in associated economic activity. However there is no way to gauge the cumulative tax benefits seen by multinational companies utilizing BFIs. The significant number of entities registered in the Northlands by foreign entrepreneurs purely for the purpose of tax planning gave reason for US President Barack Obama to call the Netherlands a tax haven. However, according to international analysts the Netherlands will continue to maintain adequate levels of tax controls to prevent the misuse of national entities, but will encourage large multinational corporations to move their headquarters into the Netherlands.

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According to a statement made by the director general of the Revenue Department of Thailand Satit Rungkasiri on July 25th, the Department is now ready to implement a cut to the country’s corporate income tax rate, as was proposed by the newly elected Pheu Thai Party. Although, the Revenue Department is also recommending that an increase to the national value added tax (VAT) rate be instated, in order to compensate for any losses in revenue.

On July 3rd the Pheu Thai Party of Thailand won the country’s general election, gaining 265 of the 500 seats in the House of Representatives. The party campaigned on a promise of slashing the national corporate tax rate if it wins the election.

In line with the ruling party’s promises, Satit Rungkasiri said that the Revenue Department is ready to immediately cut the corporate tax rate from the current 30 percent to 23 percent. Preparations are also underway to carry out the long term plan of cutting the rate by an adittional 3 percent when economic conditions allow.

According to the Revenue Department’s estimates, the rate cut will result in tax revenue losses of approximately THB 150 billion (USD 5.04 billion), although the move would improve the national economy and greatly increase levels of foreign direct investment into Thailand. Satit Rungkasiri recommended that the government should also consider raising the current 7 percent VAT rate, as the economy expands. He added that since many consumer necessitates are already VAT exempt, a tax increase would not have a large negative effect on low income earning taxpayers.

In conjunction with the impending tax changes, the Revenue Department is also planning to increase tax collections efficiency and national tax compliance, by establishing new information infrastructure between the Bank of Thailand and the Commerce Ministry. Once the project is complete the Revenue Department will have real-time information regarding business transactions carried out in the country.

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