Persuading the banks to lend more to businesses is still high on the agenda for George Osborne and he is now considering imposing additional taxes on them.

The chancellor said that the EU was talking about a ‘financial activities tax’ which would tax profits and bonuses rather than transactions. The Committee of European Banking Supervisors is currently considering a multiple salary cap on bonuses which would restrict cash bonuses to a maximum of 30% of salary and defer 40% of that bonus.

Osborne has already announced a bank levy and by imposing additional taxes the new government is showing that our financial institutions and business bank accounts are no longer going to receive preferential treatment.

During the Conservative party conference, the chancellor informed the banks that he would not tolerate them paying exorbitant bonuses when small businesses were struggling to obtain finance.

The first two months of next year are bank bonus season and the prospect of City traders raking in massive bonuses will not be welcomed by the ordinary man on the street who will be paying more VAT and possibly losing housing and child benefit.

However, the CBI is worried that the EU proposals will hurt households and businesses and cause the banks to relocate. The Confederation’s director of competitive markets, Matthew Fell, said that taxing financial services companies would not make the sector more resilient or encourage lending to companies. In fact, he believes it would have the opposite effect.

The financial services sector is such an important part of our economy and Fell explained that the International Monetary Fund has already rejected a global financial transactions tax because the burden would ultimately fall on households and businesses. But, imposing a European ‘FAT’ could encourage financial services companies to relocate outside the Union; a move that would hit undoubtedly reduce London’s importance as a world-wide financial centre, Fell concluded.

Dominique Strauss-Kahn, chief of the IMF, is concerned that without closer supervision, the banks will return to ‘business as usual’ which could lead to a further economic crisis.

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Image: Decisions by katietower

Contractor accountants and small businesses could benefit from a new invoicing directive from the Council of the European Union.

The new system, which will simplify VAT invoicing processes, must be in place by 2013. At that time, tax authorities must accept and handle electronic invoices in the same way as the current paper documentation.

Electronic invoicing experts at Deloitte welcomed the announcement saying that computerised financial systems already store invoice documentation securely and so it makes sense to acknowledge the new technology is secure when it comes to tax audits. However, they would prefer to see the directive implemented before 2013 if possible.

The UK and the Netherlands already have a system whereby companies can make arrangements to make sure all the necessary procedures have been followed in order to produce a correct tax return.

The directive also contains anti-fraud measures and deadlines for the issuance of invoices which are aimed at speeding up the exchange of data on intra-EU supplies of goods and services.

The European Union will also need to provide new standardised instructions regarding the archiving of accounting documents. Currently, UK companies and limited company contractors must retain e-documents for at least 6 years but other member states have different retention requirements.

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Image: 088.365 – March 29, 2010 by meddygarnet

The European Commission is inviting contractors and contractor accountants who have suffered double taxation to share their experiences in a new consultation. The public have until June 30 to share their views with the EC.

Double taxation occurs when somebody is taxed by two, or even more, EU member states on income or profits. This could occur when a person crosses the border every day to get to work, or if they receive income from another country, and the EC believes that this acts as a deterrent to cross-border activity. The consultation covers all forms of direct tax including capital gains, corporation tax, inheritance tax and income tax.

The Commission wants to find out the real scale of the problem and determine its financial impact. Although there are already measures in place to prevent double taxation, it is not clear if they are working effectively.

A spokesman from the EC said that they would particularly like to know how long it took for a tax appeal decision to be made. They are also inviting taxpayers and online accountants who have been operating across country borders to contribute their ideas on how to stop the problems occurring in the first place.

After the consultation is complete, the EC will hold a debate to consider whether action should be taken to eliminate certain cases.

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Image: seeing double. by :moolah