Richard Cornelisse

OECD – Consumption Tax Trends 2016

In Indirect Tax Strategic Plan on 03/12/2016 at 9:18 pm

Tax revenues collected in advanced economies have continued to increase from last year’s all-time high, with taxes on labour and consumption representing an increasing share of total tax revenues, according to new OECD research.

The 2016 edition of the OECD’s annual Revenue Statistics publication shows that the OECD average tax-to-GDP ratio rose slightly in 2015, to 34.3%, compared to 34.2% in 2014. This is the highest level since the Revenue Statistics series began in 1965. An increase in tax-to-GDP levels was seen in 25 of the 32 OECD countries that provided preliminary data in 2015, while tax-to-GDP levels fell in the remaining seven countries.

Consumption Tax Trends 2016 highlights that VAT revenues are the largest source of consumption tax revenues in the OECD, and have now reached an all-time high of 6.8% of GDP and 20.1% of total tax revenue on average in 2014.

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Modernising VAT for cross border e-Commerce

In Indirect Tax Strategic Plan on 01/12/2016 at 4:46 pm

The European Commission released legislative proposals to remove VAT obstacles for e-commerce to realize fair competition between traditional business and e-commerce.

The Commission has proposed practical new measures to support the digital economy when it comes to VAT compliance, which can currently place heavy burdens on small companies operating online.

The new rules should help to accelerate growth for online businesses, in particular startups and SMEs.

Proposals include:

  • New rules allowing companies that sell goods online to take care of all their VAT obligations in the EU through a digital online portal (‘One Stop Shop’), hosted by their own tax administration and in their own language. These rules already exist for online sellers of electronic services (‘e-services’);
  • To support startups and micro-businesses, the introduction of a yearly VAT threshold of €10 000 under which cross-border sales for online companies are treated as domestic sales, with VAT paid to their own tax administration. This goes hand in hand with other initiatives such as same invoicing and record keeping rules. Our aim is to make trading in the single market as similar as possible to trading at home for these companies;
  • The removal of the current exemption from VAT for imports of small consignments from outside the EU, which leads to unfair competition and distortion for EU companies;
  • A change to existing VAT rules to enable Member States to apply the same VAT rate to e-publications like e-books and online newspapers, as they apply to their printed equivalents.

These new rules will have a major effect for companies selling goods and services online that will now be able to benefit from fairer rules, lower compliance costs and reduced administrative burdens.

Member States and citizens will benefit from additional VAT revenues of €7 billion annually and a more competitive market in the EU.

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VAT expected to benefit United Arab Emirates

In Indirect Tax Strategic Plan on 27/11/2016 at 10:37 pm

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Abu Dhabi: The implementation of Value-Added Tax (VAT) in the UAE in 2018 is expected to benefit the country’s financial markets by boosting the earnings of publicly-listed companies, according to a top spokesman from the Abu Dhabi bourse.

Rashed Al Beloushi, chief executive officer of Abu Dhabi Securities Exchange (ADX), told reporters he was bullish on the impact of VAT on the UAE’s overall economy and on financial markets.

“We’re talking about nearly Dh12 billion [in government revenues] that will be gained from the implementation of VAT, and this Dh12 billion will be reinvested into the UAE’s infrastructure. As a financial market, we have public companies whose investments are in that very infrastructure be it in real estate, health, or other sectors. So, public companies will inevitably be part of these new investments, which will then translate to higher corporate profitability and higher dividends to shareholders,”  Source: VAT expected to benefit UAE bourses, ADX CEO says | GulfNews.com

According to surveys not many businesses have an adequate accounting systems to deal with VAT. Besides that lots of businesses lack the VAT knowledge of how a VAT works. Investments and training are needed to be ready in time.

To get VAT ready the following actions should be considered.

  1. Assess the business impacts
  2. Amend IT systems and business processes to the new situation forecasted and
  3. Review existing contracts and set rules for new contracts

How to get VAT ready in time

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