Tag Archive | "EU"

Report Suggests All British People Should Pay UK Tax

In a new report by the Chartered Institute for Securities and Investment, or the CISI for short, it has been suggested that all people who have a British passport should pay UK income tax, no matter where they are living in the world. The main thinking behind this kind of move would be to stop those millionaires and billionaires who take up residence in places such as Monaco or Switzerland in order to avoid paying tax in the UK altogether.

I for one would be in favour of doing something like this in order to stop people cheating the system,. Let’s face it, if you own a business in the UK and the majority of your income comes from UK consumers, then you should have to put money back into the system by paying tax in this country and not pretending to live somewhere else so you can enjoy a tax free lifestyle. It just isn’t right.

Actually, this kind of system is not a new idea, as in the US all citizens are expected to pay taxes to the IRS, even if they are not currently living in the country or are working elsewhere. At the end of the day, if you want to enjoy the benefits of being a US citizen and you are the proud holder of a US passport, then why shouldn’t you be expected to pay into the system? If changes are made in the UK then we could soon be seeing something along the same lines.

Not everybody will be supporting these kind of changes though, and it’s not just the super rich who would against it. Contractors and freelancers who spend time working abroad could find themselves in a bad situation where they might be expected to pay income tax twice…once to the country they are working in and then again to the UK government. For somebody who doesn’t make millions, or billions, this could be a disaster and would mean earning a decent income becomes too much of a struggle.

In turn, this would discourage freelancers from seeking work outside the UK, which then leads to Britain becoming even more isolated from the EU and the rest of the world. After Brexit there are already enough people saying that we are heading in the wrong direction…and a move such as double taxation could make it even worse.

So what is the solution? Obviously, an easy way to make this kind of system fairer would be only tax UK residents living abroad that earned over a certain amount. This would surely put an end to tax dodgers living in the sun, while it would reward genuine and hard working people who are just trying to earn a decent income.

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EU struggles with corporate tax avoidance

Much like here at home in the UK, member states of the European Union can’t seem to get a handle on how to manage corporate tax avoidance.

It’s one thing to have MPs here at home argue for and against any number of tax avoidance measures to curb corporate tax dodgers.We’re used to Her Majesty’s Revenue & Customs talking big but then backing down at the last minute, instead leaving self-employed blokes like personal service company contractors and freelancers to shoulder the tax burden that should be rightfully laid at the feet of multinationals sheltering their taxable income in overseas havens.

Meanwhile, it turns out that things aren’t that different when it comes to the European Union, with EU ministers again talking a good game to curb corporate tax avoidance. Will this actually materialise into real change? Most likely not. I mean let’s just be honest here.

The big brouhaha at the moment is all about the Panama Papers, those cleverly leaked documents highlighting just how many massively rich corporations and individuals are making use of international tax shelters to avoid paying their fair share. Public outrage is high, and as a result everyone is clamouring for something, anything, to be done.

The leaked documents were called a “game changer” by Alexander Stubb, the Finnish finance minister. His French counterpart, Michel Sapin, likewise called the revelations “intolerable” for citizens of the EU. Yet at the same time German finance minister Wolfgang Schäuble expressed his reluctance to sign on to a plan that would make large companies required to disclose their taxes paid and their profits made internationally, citing concerns about leaving companies and individuals on display in a “public pillory.”

Well you know what I say? Maybe dragging these bastards out into the light and forcing them to confront public scrutiny would be a good thing for once. Maybe it’s just me but I think we’ve all become too afraid of offending these big multinationals because they threaten to pull up their tent stakes and relocate offshore to countries with more amenable tax laws. That’s extortion, plain and simple, and it’s time we stood up to these companies – not to mention the finance ministers and other professional politicians that they have in their back pockets, constantly writing and passing legislation that benefits only the top income earners around the world instead of the rest of us. Change needs to happen, and not just here at home but in the EU, in the US, and around the damned world.

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Are online accountants ready for cross-border invoicing?

You may be aware that new EU cross-border invoicing and VAT directives come into force in 2013, but there is now concern that these are open to interpretation.

According to figures from HMRC, UK businesses rely heavily on business from the EU so it is imperative that accountants keep their clients updated with any changes to the legislation or cultural requirements. Strong processes will also need to be put in place to ensure e-invoice documents are protected.

The new EU directives are supposed to simplify invoicing legislation and remove existing barriers. Paper and electronic invoices will be treated in the same way and companies will have the choice of which method to use.

The legislation addresses the need for invoices, the content, invoicing electronically and invoice storage. It also provides recommendations for a modern set of VAT invoicing regulations.

EU countries currently differ when it comes to their expectations regarding invoices. In Southern Europe they rely on PDF formats and place emphasis on design. In Northern Europe, businesses want invoices that can be read by both humans and machines.

The majority of companies will have solid processes in place for their paper based invoicing but there have been problems agreeing electronic processes and these could lead to payment delays. In order to comply with the EU directives, companies will need to set up systems that guarantee invoices cannot be tampered with and that the information stored meets the legal requirements of the country concerned.

If the Revenue does not believe a EU invoice is genuine, the company may have problems reclaiming VAT and may be subject to an in-depth investigation. Other EU tax authorities will also be able to demand access to invoices to verify their integrity.

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Common Consolidated Tax Base would slightly reduce UK GDP

The European Commission wants to reduce significantly the burden of administration, legal uncertainties and compliance costs that face EU businesses and online accountants at present.

It has now published proposals to calculate the tax base of all the 27 member countries under a common system.

The Common Consolidated Tax Base would provide companies with a ‘one stop shop’ system when it comes to filing tax returns. The system would also enable organisations to consolidate all profits and losses incurred across the European Union. EU states would still retain the right to set their own tax rates.

Under the current system, companies trading across borders could be dealing with 27 different rules for tax calculations, including a complex way of working out the taxation on intra-group transactions.

The commissioner for taxation, customs, anti-fraud and audit, Algirdas Šemeta, said the CCTB will make doing business with the EU cheaper, easier and convenient. It will also benefit SMEs that want to expand outwith their domestic market. The proposal will benefit business and improve the EU’s global competitiveness.

However, research conducted by the Oxford University Centre for Business Taxation has found that the UK’s GDP would fall by 0.05% if these plans are implemented.

The ICAEW has said that the idea of a consolidated tax base if good and will make it easier to trade, minimise disputes and reduce compliance costs. But the new system will run alongside the old model and therefore administrative burdens will be increased. The Institute is therefore calling for the scheme to be voluntary.

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Are contractor accountants held back by employment legislation?

Contractor accountants should be aware that the government is planning to overhaul the UK’s employment laws in order to help the economic recovery.

One of the proposals, which has already provoked fury, is to allow firms to fire employees who are underperforming during their first two years of employment, without the threat of facing an unfair dismissal tribunal. Under the current regulations, an employee can seek redress from an employment tribunal if they are sacked after 12 months.

The coalition is also looking into the system of tribunals at present. Business groups, such as the BCC are urging for immediate reform but the TUC suggested that workers could be discouraged from seeking justice if major changes are implemented.

Union leaders are also concerned that increasing the qualifying period to two years could give a green light to unscrupulous employers to break the law.

The coalition is likely to launch a consultation into the future of tribunals after business groups complained that there was a 56% increase in the number of cases in 2010.

One possible solution would be to charge claimants a deposit of up to £500 which would be refunded if the case was successful. But the TUC argues that this will deter low-paid workers from seeking justice.

Meanwhile, Vince Cable, the business secretary, has been asked to look into whether small businesses could be exempted from some employment regulations but any such changes could see the government in hot water from the EU.

David Cameron wants to see new jobs created this year in order to boost the economic recovery and whilst large companies have promised to do exactly that, smaller firms need more encouragement. Reforming the employment tribunal system and reducing the red tape for small businesses could go a long way towards providing it said David Frost from the BCC.

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EU pensions proposals are rejected by the government

The Department of Works and Pensions has rejected EU proposals to set up a defined benefit pensions solvency regime.

The minister for pensions, Steve Webb, said he did not think that one European model would fit all the EU pension systems as there is a rich diversity of pension provision across the member states.

The European Commission launched its pensions consultation in the summer saying that there is now a massive strain on national retirement systems because of the ageing population and the economic crisis has added yet more pressure.

The National Association of Pension Funds believes that EU plans to ensure pension fund solvency would have undermined pension provision. One proposed solution to the pension’s problem was to mirror the system the EU adopted for the insurance industry. NAPF says this was not a workable solution because of the differences in the ways the two industries operate.

NAPF’s chief executive, Joanne Segars, pointed out that the pension system in the UK already has strong protection through the employer covenant, the Pensions Regulator and the Pension Protection Fund. She said that adding additional requirements could have the opposite effect of promoting adequate pension provisions and lead to defined-benefit schemes closing.

On the other hand, the Investment Management Association has claimed that a single European pensions market could bring significant benefits to freelance savers.

The Association made its statement in response to the European Commission green paper calling for the views of stakeholders on the best ways to create sustainable, stable pensions. The IMA did point out that, whilst it backs the single market idea, existing retirement funds should not be damaged if one were to be established.

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Who needs an IT industry anyway?

I’ve written before about the confusion in the debate about immigration and the constant refusal of government and the press to separate genuine immigration from abuse of the system, especially the misuse of the ICT programme. That debate has been raging for a while now and remains unresolved, although we did think we might be getting the message across.

Then, all of a sudden it seems we have a major triumph. We, via our fiends (sic) in Brussels, have just signed a trade agreement with India. Nothing much wrong in that by itself, we need to trade and India is a growing economy. But look a little deeper…

In exchange for India relaxing its import rules so the EU can sell into that market, we have apparently agreed to give their engineers, IT workers, project managers and other skilled trades virtually unlimited access to our market. OK, so it’s a free world and we all have to get work where we can at the best rate we can. But given that India’s official language is English, and there aren’t that many English-speaking countries in the EU – even if you count Scotland – I somehow get the feeling that the traffic in this direction will be rather heavily biased in our direction.

Again, not a problem, except that, as with the ICT scam, these aren’t likely to be long-term immigrants. Some will no doubt be here for a long time, and some will genuinely contribute to the UK economy. But I have a nagging feeling that an awful lot of them will be here to learn how to do the job we’re doing for ourselves and then move it back home where the labour rates are considerably cheaper. That might cut the bottom line but it is a horribly short-term view of things. It won’t take too long before all the real work in IT, for example, is offshored and our service economy – once one of the world’s strongest – has gone the way of the Dodo.

So if this is good news, I would really hate to see a tragedy.

And what really annoys me is that one part of Government is talking about limiting immigration, another part is making positive noises about ICT use and abuse while another part is selling us down the river. Well thanks, guys, great job.

And let’s be clear here. I have absolutely no problem with India or the Indians and never have done. I have no objection to skilled people coming into the country and benefiting us as a whole. I don’t even have a problem with the ICT system, which allows the simple transfer of key staff for shot term purposes.

But I do have a problem with our government doing all they can to close down the industry I’ve been working in for the last 35 years.

Someone has got this badly wrong. And I don’t think it’s me…

Alan Watts can found at LinkedIn.
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