On January 9th the US Internal Revenue Service (IRS) announced that it has initiated another Offshore Voluntary Disclosure (OVD) program for taxpayers to declare their hidden offshore assets in exchange for lowered penalties.

The new program started on the day of the announcement, and will continue indefinitely. Taxpayers making use of the OVD will be required to reveal detailed information regarding their previously undisclosed assets and capitals hidden in offshore bank accounts.

In exchange for revealing the information, taxpayers will avoid the possibility of criminal prosecution, and will face a penalty rate of 27.5 percent of the highest amount held in the bank account during the last 8 years. Additionally, participants will be required to pay all back taxes owing and any applicable interest charges. Under current US tax regulations, the penalty rate levied by the IRS may be as high as 150 percent.

Individuals whose undisclosed assets and capitals did not exceed a maximum value USD 75 000 in the last 8 years can be qualified for a reduced rate of 12.5 percent.

According to the Commissioner of the IRS Doug Shulman, the last two OVDs have already netted over USDD 4.4 billion in recovered tax revenues and penalty fees, and the collections are expected to increase as investigations continue into taxpayers who came forward in the 2011 program. The last two disclosure programs saw over 33,000 US taxpayers come forward with details on their offshore bank accounts.

Photo by OECD

In a television interview with the BBC held on January 9th the Prime Minister of the UK David Cameron said that the country’s top marginal tax rate, which is currently set at 50 percent, is still regarded as a “temporary measure”, but indicated that it would not be removed in the next few years.

David Cameron said that he does not want to see the UK maintain such a high marginal tax rate, but the measure were necessary at the present economic situation. Before the government could scrap the tax, evidence will need to show that the tax is damaging the economy.

The HM Revenue and Customs is currently preparing a report on the effectiveness of the 50 percent top marginal tax rate since its implementation in 2010. Some experts have indicated that the report is likely to show that the tax has proven to be a powerful revenue raising tool, and should not be removed any time soon.

The Prime Minister’s words come in response to an article published by The Daily Telegraph, which claimed that the government would not be removing the top marginal tax rate before 2015. The article also suggested that cutting the tax would be a politically difficult move for the Prime Minister, as it will lead to allegations that the government is catering to the richest people in society.

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On December 31st the National Assembly of Korea voted in a bill to introduce a new income tax bracket and a higher rate of income tax for the country’s highest earning taxpayers. The new tax rate of 38 percent will apply to individuals earning in excess of KRW 300 million annually. Previously, the highest individual income tax rate in Korea was 35 percent. It is currently estimated that the new tax will raise an additional KRW 770 billion in tax revenues per annum.

Approximately only 0.17 percent of the Korean population will have to pay the new tax, and some Korean politicians have already criticized the new rule, saying that it will be ineffective, as it does not target enough Korean taxpayers. Political analysts have suggested that the new tax was instated in order to improve the image of the ruling Grand National Party ahead of the country’s upcoming general election in April. However, representatives of the Party have said that the tax can be optimized in the future, and the applicable rate and payment threshold will be adjusted in order to target more taxpayers.

Photo by Zhang Erning

At a session of the Senate of Italy on December 22nd, Italian policymakers gave final approval to a proposed austerity package aimed at eliminating the country’s budget deficit by 2013 and injecting new life into the economy.
The austerity measures will include a new tax on all real estate in Italy, including residential and commercial properties.

Also, the national retirement age will be raised to 66 for men and 62 for women.

The government will also implement several new initiatives and programs aimed at curtailing the occurrence of tax evasion in Italy.
In an effort to directly stimulate the economy and raise employment levels, the government will now offer tax incentives to businesses which offer permanent employment contracts to women or people who are under 35.

According to the Prime Minister of Italy Mario Monti, the new austerity package applies new tax burdens equally across all taxpayers. He also explained that the measures are aimed at not only cutting down spending but also spurring growth in Italy, and will allow the country to “hold its head high” in the new year and throughout the ongoing economic crisis in Europe.

Photo by FriendsofEurope

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.

Photo by pinkfrangipani