18.7.2020

Current international developments

We follow current international developments in the tax world for you. The focus here is specifically on the EU, the OECD, the USA and other international bodies.

EU

27.05.2020

The EU Commission is providing billions of euros in aid to countries particularly affected by the coronacrisis. According to the draft of the EU's new financial plan, which Ursula von der Leyen presented on 27 May, these aid packages are to be financed by means of new taxes and levies. These new taxes are to be directed primarily at digital companies and users of plastic. Another possible source of income in the future could also be coming from the trading of emission certificates.

18.02.2020

The British Cayman Islands, Palau, Panama and the Seychelles have been put on the "black list" of EU tax havens, in addition to American Samoa, Fiji, Guam, Oman, Samoa, Trinidad and Tobago, the American Virgin Islands and Vanuatu. The countries have not met the standards required by the EU to combat tax evasion, tax avoidance and tax fraud within the given deadlines. Further possible targets are Turkey, for which a grace period currently still applies, and the United Kingdom, depending on the future Brexit tax arrangements that still have to be made.

31.01.2020

After a long debate about the UK's exit from the EU, Brexit finally took place on 31 January 2020. A hard Brexit was averted thanks to the ratification of a withdrawal agreement, so that the United Kingdom did not become a third country overnight, as had been expected until then. This would have had fatal fiscal consequences, especially with regard to imports and exports, which would have noticeably impaired free trade. A transitional phase in which future trade agreements are to be concluded is now expected to last until at least 31 December 2020. Until then, the UK will remain part of the European Customs Union and the Single Market. Until that date, the bilateral agreements with Switzerland will also remain in place. Switzerland has already concluded a trade agreement with the UK for the following period, probably from 1 January 2021. The trade agreement with the EU is to be modelled on the EU-Canada free trade agreement or the loose EU-Australia agreement, according to Boris Johnson. Furthermore, the UK wants to severely restrict entry and the issuing of work permits. In the future, good English language skills, special competences and a job offer must be presented.

10.10.2019

After more than ten years of tax disputes with the EU, Switzerland, together with Albania, Mauritius, Serbia and Costa Rice, was definitely removed from the "grey list" of tax havens from the EU. Switzerland has been removed from the list, as it was possible to implement all necessary tax reforms before the given deadline. The United Arab Emirates (UAE) and the Marshall Islands were also removed from the "black list", the EU list of non-cooperative countries for tax purposes. The latter were put on the "grey list", and thus remain under observation. However, as a result, both are no longer subject to the strict transaction controls seen through by the EU. Still on the "black list" remaining are American Samoa, Fiji, Guam, Oman, Samoa, Trinidad and Tobago, the American Virgin Islands and Vanuatu.

12.03.2019

Switzerland was not placed on the "black list" by the EU finance ministers, but has until the end of 2019 to abolish the tax regimes that are frowned upon. Until then, it will remain on the "grey list" together with 34 other countries. The "black list" no longer includes five but 15 countries that have not kept their promises to the EU to abolish frowned-upon tax practices (including the United Arab Emirates, Oman and the Bermuda Islands). In contrast, 25 states have adapted their tax legislation to the EU's demands and have been removed from the lists (including Hong Kong, Panama and Liechtenstein). In a year's time, the EU finance ministers will re-evaluate whether the countries on the "grey list" have kept their promises. If Switzerland does not manage to adjust its controversial tax regimes by then, it will be placed on the "black list" of tax havens in 2020.

NZZ article of 12 March 2019

08.03.2019

On the following Tuesday, March 12, 2019, the EU finance ministers will once again decide on the tax regimes that have been condemned, with a division into a "black list" and a "gray list". According to the EU, those countries that have adjusted their controversial tax regimes/tax privileges by the end of 2018 would definitely be removed from the "gray list". If the states remain inactive, they would be placed on the "black list". From the outset, there were doubts that the "gray list" could definitely be eliminated with this clean-up campaign. Both developing countries and Switzerland could hope for longer deadlines from the EU. Finance Minister Ueli Maurer recently explained the longer legislative period in Switzerland to the ministers in Brussels - primarily with the possible seizure of the popular referendum. The probability is thus high that Switzerland will be left on the "gray list" in the future debate - at least until the referendum of May 19, 2019 on the Tax Bill 17 / TRAF.

NZZ article of 8 March 2019

02.10.2018

The EU finance ministers have removed Liechtenstein and Peru from their «grey list» of tax havens, as they have carried out the necessary reforms. They also moved Palau from the «black list» of non-cooperative countries and regional authorities to the «grey list». The reason for this was that Palau had made promises at a high political level to remedy the shortcomings identified by the EU. This leaves American Samoa, Guam, Namibia, Samoa, Trinidad and Tobago as well as the American Virgin Islands on the «black list». By the beginning of 2019, the EU finance ministers intend to decide who will definitely be removed from the «grey list». Should a country fail to honour its commitments, it would even be moved to the «black list». For Switzerland, which is also on the «grey list», time is therefore starting to run out, as the Steuervorlage 17 / TRAF is unlikely to be finalised by then.

HZ article of 2 October 2018

05.05.2018

French President Emmanuel Macron has announced that in 2019 he will abolish the so far ineffective and inefficient exit tax, which is designed to discourage wealthy shareholders and bondholders from relocating to low-tax countries. Additionally, Macron wants to reduce the corporate profit tax from currently 33.3 to 25% by 2022. Whether this will help to render France more tax attractive in international comparison remains questionable.

NZZ article of 5 May 2018

13.03.2018

EU finance ministers have adopted a directive aimed at combating aggressive cross-border Tax Planning by increasing transparency, in line with the OECD'sBEPS project. The directive aims to oblige intermediaries such as tax advisors, accountants and lawyers to report, under threat of penalty, cross-border tax planning strategies designed or offered by them that are considered potentially aggressive. In addition, Member States, for their part, are to be required to automatically exchange information obtained in this way with each other via a central database. Member states have until December 31, 2019 to implement the directive in their national legislation. The new reporting obligation will then apply from July 1, 2020. The directive will also have an indirect impact on Switzerland. Namely, if the advisor of an EU client is based in a third country, the described reporting obligations, according to the directive, will be transferred to the client.

NZZ article of 13 March 2018

13.03.2018

The EU finance ministers have once again adjusted the blacklist of tax havens: Bahrain, the Marshall Islands and Saint Lucia have been removed from the list. These countries have pledged to correct their tax regimes and have therefore been placed on the "grey list" of countries that will remain under observation until the implementation of pledges. At the same time, the ministers have added the Bahamas, the US Virgin Islands and St. Kitts and Nevis to the black list.

NZZ article of 13 March 2018

23.01.2018

EU Finance Ministers have moved eight countries (Barbados, Grenada, South Korea, Macao, Mongolia, Panama, Tunisia and the United Arab Emirates) from the black list to the grey list because they made commitments to reform their tax practices.

Spiegel article of 23 January 2018

05.12.2017

The Council of EU Finance Ministers (Ecofin) has published a "blacklist" of 17 third countries that the EU considers "uncooperative" in tax matters. The countries on the blacklist are: American Samoa, Bahrain, Barbados, Grenada, Guam, Republic of Korea, Macau, Marshall Islands, Mongolia, Namibia, Palau, Panama, St Lucia, Samoa, Trinidad and Tobago, Tunisia, United Arab Emirates. A further 47 states, including Switzerland, agreed in the course of the procedure to address objectionable points within certain deadlines and were placed on a so-called "commitment list". The EU expects these states to implement the commitments by the end of 2018 (developing countries by 2019).

NZZ article of 05 December 2017

31.10.2017

By the end of the year, the EU wants to draw up a first version of a "black list" of tax havens ("non-cooperative tax jurisdictions"). The tax experts of the member states are currently preparing this list on behalf of the EU finance ministers. Although the finance ministers still have the final say, Switzerland has been given the all-clear for the time being: the group of experts will not propose Switzerland for this list.

NZZ article of 31 October 2017

20.10.2017

France abolishes wealth tax. President Macron got the abolition through parliament with 77 to 19 votes. Macron and his government are confident that the rich will return to the country with their wealth, thus causing an increase in investments and jobs. The government is pursuing a similar goal with a new flat-rate tax of 30 per cent on capital gains (so-called «flat tax»), which was approved by the National Assembly on Thursday.

NZZ article of 20 October 2017

OECD

We follow the OECD Tax Talks and summarise them for you on an ongoing basis.

OECD Tax Talks Summaries

17.06.2020

The USA suspends negotiations on the taxation of digital companies. The US Treasury, Steven Mnuchin, justifies this by saying that for the time being, the countries should focus on combating the coronacrisis. It is questionable, however, whether the reduced tax revenues that the USA will face when introducing global digital taxation did not also have an essential impact on this decision. Under threat of punitive tariffs, Mnuchin further warns that countries should not impose their own digital taxes, as these might be considered to be discriminatory practices. The background to this threat is the fact that such a tax would affect mainly American digital companies such as Facebook, Amazon, Google or Apple.

The OECD Project on the taxation of multinational digital enterprises (BEPS) consists of two pillars. The first pillar involves the taxation of digital firms at the place where revenue is generated instead of the place of its headquarters, with the USA in particular among the big losers. The second pillar comprises a global minimum taxation to avoid international profit shifting and thus tax avoidance. The USA has agreed to press ahead with the second pillar in order to instate it by the end of 2020, if the negotiations of the first pillar are temporarily paused. The BEPS project is therefore not yet doomed to failure, but the risk of trade conflicts is increasing dramatically.

06.04.2020

The Global Forum on Transparency and Exchange of Information for Tax Purposes of the OECD, which examines transparency and the exchange of information upon request for tax purposes by states, has given Switzerland the rating "largely compliant" for the second time. After the first round of peer reviews on this topic, Switzerland has introduced various OECD-recommended measures to improve the transparency of information for tax purposes through the Federal Act on Transparency and Exchange of Information for Tax Purposes, which came into force on 1 November 2019. Among other things, it was determined that in future, bearer shares will only be issued by listed companies or as intermediated securities. Further recommendations for Switzerland, which have been made by the Global Forum, relate to improvements in confidentiality requirements, rights of natural and legal persons affected by requests for administrative assistance and availability of information on beneficial owners. The second round of peer reviews is expected to be completed for all countries by 2023.

The second round of peer reviews is expected to be completed for all states in 2023.

27.02.2019

On 27 February 2019, the Federal Council opened the consultation processes on the amendment of the Federal Act as well as the Ordinance concerning the International Automatic Exchange of Information in Tax Matters (AEOI) by which the Federal Council wants to implement the recommendations which the Global Forum on Transparency and Exchange of Information on Tax Purposes (Global Forum) has issued for Switzerland.

22.11.2018

The Federal Council has adopted the Dispatch on the Implementation of the Global Forum's Phase 2 Recommendations for Switzerland. The Global Forum had published these recommendations in a report on 26 July 2016. The draft law that is now to implement these recommendations provides, among other things, for the conversion of bearer shares into registered shares or for them to be structured as intermediated securities and for the introduction of a sanction system for breaches of duty. The bill has been critically received in the consultation process. However, the Federal Council intends to adhere to the above-mentioned main points, as otherwise Switzerland could receive an unsatisfactory overall rating in the Global Forum's next country review (end of 2018), which would not only result in considerable reputational damage, but Switzerland would also run the risk of being placed on a list of non-cooperative countries by other states. The bill is expected to be discussed in parliament in spring 2019.

USA

17.06.2020

The USA suspends negotiations on the taxation of digital companies. The US Treasury, Steven Mnuchin, justifies this by saying that for the time being, the countries should focus on combating the coronacrisis. It is questionable, however, whether the reduced tax revenues that the USA will face when introducing global digital taxation did not also have an essential impact on this decision. Under threat of punitive tariffs, Mnuchin further warns that countries should not impose their own digital taxes, as these might be considered to be discriminatory practices. The background to this threat is the fact that such a tax would affect mainly American digital companies such as Facebook, Amazon, Google or Apple.

The OECD Project on the taxation of multinational digital enterprises (BEPS) consists of two pillars. The first pillar involves the taxation of digital firms at the place where revenue is generated instead of the place of its headquarters, with the USA in particular among the big losers. The second pillar comprises a global minimum taxation to avoid international profit shifting and thus tax avoidance. The USA has agreed to press ahead with the second pillar in order to instate it by the end of 2020, if the negotiations of the first pillar are temporarily paused. The BEPS project is therefore not yet doomed to failure, but the risk of trade conflicts is increasing dramatically.

25.11.2019

US President Donald Trump and the Republicans wanted to prove to the people that a tax cut is self-financing through subsequent growth and increasing investment, and as such bring large corporations that have previously migrated back to the USA. As part of the US tax reform, the corporate tax rate in the USA was reduced from 35 percent to a low 21 percent. That the resulting gap of USD 1.5 trillion is not so easy to fill again, it now becoming more and more evident. The economic growth is currently only two percent. Contrary to forcasted the three to six percent, this result is rather weak and will increase the national deficit by around USD 1 trillion. Rather than the expected increase in investments by established companies, a decrease in such is showing. Instead, higher dividends were paid out and share buybacks were carried out. It remains unclear whether the implemented tax measures will eventually succeed in the future.

22.12.2017

US President Donald Trump signs the US tax reform and thus it will come into force on 1 January 2018. The Senate passed a bill called the Tax Cuts and Jobs Act by 51 votes to 48 and the House of Representatives by 224 votes to 201.

NZZ article of 21 December 2017

An analysis of the US tax reform

02.12.2017

US President Donald Trump signs the US tax reform and it will therefore enter into force on 1 January 2018. The Senate adopted the draft bill called «Tax Cuts and Jobs Act» with 51 to 48 votes and the House of Representatives with 224 to 201 votes.

NZZ article from 2 December 2017

28.11.2017

The US Senate has approved its draft bill on the controversial tax reform with 51 to 49 votes. Now the procedure to reconcile differences with the House of Representatives begins. Therefore, there is a good chance that President Trump will have an adjusted bill on the table for Christmas.

NZZ article from 28 November 2017

17.11.2017

On 16 November 2017, the House of Representatives and the Senate's Finance Committee each adopted a draft law on the planned tax reform. The Senate's version will now be submitted to the second chamber of Congress for a vote. According to a study by the Tax Policy Center, however, the planned tax reform could mean that half of the US population will have to pay more taxes in 2027 than in the current year.

Spiegel Online article of 21 November 2017

09.11.2017

After four days of debate, the US House of Representatives committee responsible for tax policy passed its version of tax reform by 24 votes to 16. At the same time, the Republicans in the Senate launched their own bill. This also provides for a reduction of the corporate income tax from 35% to 20%, but in contrast to the House of Representatives, would wait until 2019 before implementing it. There are also considerable differences between the two bills in other respects, so it seems likely that the two chambers will each pass their own version of the tax reform and that it will then come to a difference settlement procedure.

NZZ article of 9 November 2017

NZZ article of 8 November 2017

02.11.2017

The Tax Policy Committee of the US House of Representatives has launched its first bill for the new tax reform. The centrepiece of the Republican draft is a reduction in corporate income tax from 35% to 20%. Taxes for small businesses will also be reduced. How the tax reform is to be financed has not yet been clarified, however, as the US budget is still highly deficient.

NZZ article of 2 November 2017

20.10.2017

The Senate voted 51 to 49 to allow an additional burden on the federal budget of up to 1.5 trillion dollars within ten years. In this way, it should be possible to co-finance the tax cuts promised by the government for companies and private individuals as part of the new tax reform. The draft also provides for a simple majority vote on tax legislation. President Donald Trump's tax plans have thus cleared an important hurdle in the Senate.

HZ article of 20 October 2017

Other international bodies

18.07.2020

A virtual meeting of the G20 finance ministers took place on 18 July 2020. On the Swiss side, Federal Councillor Ueli Maurer and National Bank President Thomas Jordan took part. The meeting was mainly concerned with the global economic management of the Covid-19 crisis. Because of this, the importance of the Debt Service Suspension Initiative (DSSI) emphasised again. Open markets and globally functioning supply chains play a central role in ensuring a global economic recovery and planning security for companies and investors, says Ueli Maurer.

The next meeting of the G20 finance ministers and central bank governors is scheduled for October. By then, the OECD should also have informed the G20 of the next steps of implementation of the BEPS project.

19.06.2020

The Federal Council decides on three financial contributions to the International Monetary Fund (IMF). Firstly, the Swiss National Bank (SNB) was mandated to extend the bilateral credit line of CHF 8.5 billion in favour of the IMF on 1 January 2021. Due to future resource reallocations, the amount will soon be reduced to CHF 3.662 billion. The timely repayment of the IMF is guaranteed by the Federal Government. The second contribution is a guarantee obligation of CHF 800 million for a loan from the SNB to the Poverty Reduction and Growth Trust (PRGT). This fund grants favourable loans to poorer countries so that financial and economic problems can be addressed quickly. The Federal Council is thus reacting to the IMF's appeal to deal with the coronacrisis. The third contribution of around CHF 10 million is for debt relief for Somalia and is part of a multilateral debt relief initiative for which Somalia has qualified in March 2020.

17.04.2020

The virtual spring meeting of the International Monetary Fund (IMF) and the World Bank took place on 16 and 17 April 2020. Switzerland was represented by Federal Councillor Ueli Maurer, State Secretary Marie-Gabrielle Ineichen-Fleisch, representing Guy Parmelin, and Thomas Jordan, Chairman of the Board of the Swiss National Bank. The main focus was the global management of the current corona crisis and the associated economic and political challenges. Switzerland declares its readiness to support the World Bank's package of measures, but at the same time calls for sustainable and focused interventions to be implemented. Furthermore, Switzerland can imagine joining the IMF and World Bank initiative to temporarily suspend the debts of poorer countries.

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Authors
:
Viktor Bucher
Tags:
International Taxation
BEPS