Election time in the Netherlands
On the 12th of September the Netherlands will hold elections. As we have seen in other European countries, extremes on the left and right are likely to gain by proposing an alternative to the Europhilia so prevalent in establishment parties. However that does not guarantee a better outcome. What we witnessed in France and in Greece is that a victory of the extreme left will make matters worse. And most so-called right-wing parties only disagree with the left on immigration policies, but subscribe to similar flawed economic models.
In the Netherlands, the ruling conservative Christian coalition has proven that they are incapable of reducing the size of government and resort to crude tax increases that hurt businesses and consumers but still fall short of balancing the budget. Few political parties hold views that will actually improve the troubled Dutch economy. Here lies a difficult task ahead for our Dutch newsletter readers. To aide you in your decision, we found you links to election programs of all participating political parties. Good luck.
Partij voor de Dieren
Mens en Spirit
Democratisch Politiek Keerpunt (in PDF)
Anti Europa Partij AeuP
Soverein Onafhankelijke Pioniers Nederland SOPN
Partij van de Toekomst PvdT
FATCA compliance problematic for Bahamas and Panama
The Foreign Account Tax Compliancy Act, known as FATCA, is causing problems for banking jurisdictions such as Cayman Islands, Panama or the Bahamas. Although the law is targeted at American citizens, it can have many unwanted implications for non-US citizens alike.
Under FATCA, any bank anywhere in the world serving US citizens will be required to report on US account holders and disclose their balances, receipts, and withdrawals to the US tax authorities or face a 30% withholding tax on financial assets held in the US by the said bank.
Obviously, the goal is to increase tax compliance of American owned bank deposits abroad, but what it in effect does is attempting to regulate sovereign (banking) jurisdictions, requiring them to amend laws and change procedures.
This does not sit well with many countries, though few have objected on moral grounds. Some countries, such as the Bahamas, simply lack the legal framework to comply. Under FATCA The United States Internal Revenue Service (IRS) shall conclude Inter Governmenal Agreements (IGA’s) to facilitate automatic exchange of information with foreign tax authorities, but the Bahamas do not have tax authorities because they have no income tax. Instead the Bahamas have to make a decision
whether to take the individual route through foreign financial institution agreements (FFI) or to comply on a collective basis. The IRS obviously prefers a collective approach, otherwise some banks might opt-out of FATCA and neutralize the desired result.
Panama is facing a similar problem. Although the country has tax authorities (as well as an income tax), Panama has nothing to gain by exchange of information because of its territorial tax system where all forms of foreign income are tax exempt. The Panamanian government already concluded some tax information exchange agreements but the regulatory framework is rudimentary at best. There are also many legal and constitutional questions regarding such agreements that remain unanswered. So far Panama has not exchanged any information based on these treaties and politicians are keen on delaying implementation until the elections of 2014. Panama leans on financial services for more than 70% of her exports and dancing to US requests is not a popular tune here.
In the end, the costs for the US economy will be higher than the gains. Especially American expats who already experience difficulties opening a bank account abroad will find it nearly impossible once FATCA is enacted. It does not matter how many countries give in to these demands, or even if countries such as Switzerland give up their banking secrecy. Increased tax compliance will simply not offset the costs of compliance banks face and the United States are risking financial isolation.
But up until countries start to turn their backs on the US and other greedy high tax nations, our company and our clients will be confronted with ever more paperwork, bank fees and bureaucracy.
Succession clause in Dutch inheritance law might violate EU law.
In the Netherlands, corporate funds have been partly exempt from inheritance tax since the ‘Successiewet’ of 1956. Over the years, the exemption increased for 30% initially to the present situation of 100% on the first €1,006,000 and 83% thereafter. The provision is meant to prevent liquidity problems associated with company inheritance.
But an exemption of more than 75% is discriminatory in comparison to other sources of inherited funds. An aggrieved heir demanded equal treatment at the court of Breda, and the judge agreed. Every heir has a right to a similar 100% exemption. Naturally the tax authorities dispute this and will seek a ruling of a higher court in the Netherlands.
By the looks of it, this case could go all the way to the European Court of Human Rights. Experts agree that an exemption of 75% or more does violate article 26 of the International Covenant on Civil and Political Rights (ICCPR) as well as article 14 of the European Convention on Human Rights (ECHR) which condemns such discrimination. The inheritance tax exemption must apply to everybody equally.
Should the court of Breda ruling stand all the way to the European Court of Human Rights, it could cost the Dutch government many millions. Although likely they will make rapid amendments in the inheritance laws to prevent this scenario. If not, relatives of recently deceased will be entitled to some monetary comforts.
Slow tax news season
Usually there are few legislative changes during the summer months. But football competitions have started and the law makers have returned. Here’s a summary of what they came up with:
Remember last months’ article about the new French president Francois Hollande and his socialist plans of introducing a 75% income tax rate? Well it gets worse. French Budget Minister Jérôme Ćahuzac has announced plans to cap tax breaks
in France at €10,000 per household per year. Tax breaks are currently capped at €18,000 annually plus 4% of income. With over 500 tax breaks available, limiting these will be easier than trying to abolish them.
But wait, there’s more: earlier
French finance minister Pierre Moscovici (in France they have two ministers for the same job) announced he would like to abolish a tax exemption on overtime enacted under Sarkozy, repeal a law which shifted labour charges onto a rise in VAT sales tax and double the financial tax. Together with the increased income tax and one-off taxes on large banks and energy firms the total tax bill is at least 7.2 billion Euro on an already over-leveraged economy.
Did you ever dream of having your own private island? Perhaps with some debt-slaves to prepare your meals and bathe you? Then you won’t have to wait any longer: the Greek fire sale has begun
. The Greek government is now willing to sell state owned property including uninhabited islands.
Greek prime minister Antonis Samaras told Le Monde that some isles that pose no problems to national security can be sold for commercial use. Samaras is currently touring Europe in an effort to convince northern European states once more that Greece can pay off her debt.
In order to meet the conditions of last years’ bailout, Greece has to raise 50 billion Euros from state- asset sales by 2020, half from company-stakes sales and half from real estate. So far it has only brought in about 1.8 billion Euros.
Perhaps the Greek government should also consider selling inhabited islands. The islanders of Hydra, once a notable commercial and naval power, decided they would not put up with an audit by mainland tax inspectors. An angry mob stoned the terrified taxmen
who sought refuge in the island’s police station. The islanders then proceeded to lay siege to the police station and cut its power & water supply. The siege was broken when riot police from the mainland landed on Hydra the next day.
Business in Hydra relies heavily on tourism and annual income has to be pulled in during several summer months. The tax audits and drop in tourism following the riot will see many businesses go bankrupt this winter.
The Association of British Travel Agents has been campaigning for months to have the Air Passenger Duty for UK passenger flights reduced and levied more logically. APD was introduced in 1994 with a £5 rate for the UK/EU and £10 elsewhere. Since then, it’s seen several increases and now stands between £13 and £184 (€16.5 to €232.5) depending on flight destination.
A successful petition and a parliamentary inquiry have given the organization the ammunition needed to have APD reduced or abolished. According to the parliaments own findings air passenger duty “kills economy” and is “a barrier to inward business”.
You can support the reform effort and sign the petition on the ABTA facebook page