Tax is in the News!

accounting and tax

Tax Is In The News- Australia, India, USA and more….

accounting and taxThe Indian government has issued guidelines to clarify controversial tax-avoidance rules that it released last week, just two days after Prime Minister Manmohan Singh took his place in the finance ministry following the resignation of Pranab Mukherjee.

General Anti-Avoidance Rules (GAAR), that was introduced in the budget in March, has been criticized by the industry and investors for its lack of investment-friendly provisions. The new rules on taxes, intended to eliminate tax evasion by Indian companies routing their investments through tax havens, lacked clarity in several aspects and had caused concern among foreign investors at a time that the country needs capital inflow.

India’s finance ministry has since clarified that foreign institutional investors that do not opt for treaty benefits, and instead are ready to pay taxes, will not fall under the GAAR regulations. However, those who do choose to make use of dual taxation avoidance agreements will come under the purview. Furthermore, The government will also spare investors of foreign institutional investors (FIIs) who route their investments through tax havens, provided the FII is a genuine resident the jurisdiction.

The European Commission is another body implementing strategies to tackle tax evasion.  Amongst the proposals are minimum penalties for tax crimes, stronger cooperative action against tax havens and a common tax ID that could be used within the EU.

Down under in Australia, Sunday saw the introduction of the controversial carbon tax designed to tackle climate change, with Prime Minister Julia Gillard hailing the move despite warnings from different parties that it could stifle certain Australian business sectors.

The new carbon taxation law is expected to hurt retailers who have significant costs for electricity, refrigeration, transportation and garbage disposal. The plan is to start with a fixed price and transition to a market-based emissions trading scheme after three years, similar to that adopted by the European Union. The rate will start at $23 a tonne for the first year and increase to $24.15 a tonne in 2013-14 and $25.40 the year after. As a result, Treasury modeling predicts average household electricity prices will rise by $3.30 a week as a result of the increased carbon price and $1.50 a week on the average gas bill.
In the USA, tax payers are bracing themselves for a major change next year when tax cuts put into place under the Bush administration are due to expire.

The Bush administration had heavily reduced rates on capital gains, dividends, and personal income. The social security payroll tax cut is another that is due to expire in 2013. Continue reading about the impact of these US tax changes here.

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