Tax on bank interest to be deducted at source
The UK government is set to announce that all of its dependent territories have agreed to comply with the rules of the European Savings Tax Directive, a report by news service Reuters has revealed.
A Treasury source said: "This completes the process we began in 1997. We have not only stopped a damaging agreement to harmonise a with-holding tax, but now all European businesses can enjoy a competitive and level playing field."
UK Ministers are likely to confirm the position of the dependent territories at the regular monthly "Ecofin" meeting (European Council of Finance Ministers) in Brussels soon.
Swiss secret. An agreement between the European Union and Switzerland over the EU Savings Tax Directive appears a distant prospect after the Swiss Finance Minister, Hans-Rudolf Merz, announced that his country has no intention of relinquishing banking confidentiality.
The German tax authority late last month released a notice clarifying the classification of limited liability companies, or LLCs, as partnerships or corporations for tax purposes.
The Cayman Islands Financial Services Association has expressed support for the government's decision to opt for exchange of banking information when the European Savings Tax Directive comes into force, scheduled for January 2005.
The European Commission has rejected corporate tax reforms planned by the Gibraltar government, effectively suggesting that for taxation purposes, the jurisdiction should be considered as part of the United Kingdom.
On March 22, 2004, the Executive Board of the International Monetary Fund (IMF) concluded its Article IV consultation with Panama, which found that the economy grew approx 4% in real terms last year following 2 years of weak growth.
What are the changes?
Summary of allowances and tax rates & bands
Personal allowances are up to 4,745 from 4,615 [2003/2004]
Rent a room scheme stays the same at 4,250 exempt pa
Income tax % and rates:
10% on first 2,020 of taxable income pa over 4,745 as above
22% on next 29,380 of taxable income pa
40% on everything above 31,400 of taxable income pa
National insurance % and rates
Employed personnel will pay the following:
- First 91.00 per week is NI exempt
- 11% of earnings from 91.01 up to 610 per week
- 1% of earnings on everything above 610 per week
Do you know the implications on you?
OECD warns on UK budget deficit:
- 2002: 1.53% of GDP
- 2003: 2.91% of GDP
- 2004: 2.94% of GDP
- 2005: 3.23% of GDP
What is the OECD?
OECD stands for Organisation for Economic Co-operation and Development, based in Paris, it comprises 30 countries which share a commitment to democratic government and the market economy.
For more information, see Link
What is the FATF?
FATF stands for Financial Action Task Force on Money Laundering and is a department within the OECD, also based in Paris, and was founded in 1989. They monitor members' progress in implementing necessary measures, reviews money laundering and terrorist financing techniques and counter-measures, and promotes the adoption and implementation of appropriate measures globally. It is under this last part that they maintain a blacklist of countries whose banking laws either do not meet up to international expectations, or have banks resident in those countries who do not follow international guidelines.
For some reason, the word 'offshore' is seen as synonymous with money laundering and terrorism by the FATF and a huge amount of pressure has been brought upon member and tax haven countries, like Isle of Man, Channel Islands, Switzerland, the Caribbean Islands, Cyprus, Malta, Gibraltar and others. Their blacklist amounts to a form of economic sanctions as countries [member] are not supposed to engage with those on that list. The list is referred to as the NCCT, Non-Cooperative Countries and Territories and can be viewed here.
What is the CFATF?
CFATF stands for Caribbean Financial Action Task Force being an organisation of thirty states of the Caribbean Basin, which have agreed to implement common counter-measures to address the problem of criminal money laundering and the financing of terrorism. It was established as the result of meetings convened in Aruba in May 1990 and Jamaica in November 1992.
Currently, CFATF members are Antigua & Barbuda, Anguilla, Aruba, The Bahamas, Barbados, Belize, Bermuda, The British Virgin Islands, The Cayman Islands, Costa Rica, Dominica, Dominican Republic, El Salvador, Grenada, Guatemala, Guyana, Republic of Haiti, Honduras, Jamaica, Montserrat, The Netherlands Antilles, Nicaragua, Panama, St. Kitts & Nevis, St. Lucia, St. Vincent & The Grenadines, Suriname, The Turks & Caicos Islands, Trinidad & Tobago, and Venezuela.
FATF satisfied with Bahamas' progress, March, 2004
The Bahamas has been considered to have made satisfactory progress on the matter of legal assistance treaties by the FATF (Financial Action Task Force), the Attorney General Alfred Sears said.
Channel Islands & Isle of Man still offshore?
The Channel Islands and the Isle of Man have lost their 'offshore' name to a degree, as have many other former tax havens. The recent implementation of laws / agreements for the exchange of information in relation to bank clients, also the potential for imposing a with-holding tax on bank deposits unless the bank's client can demonstrate that deposited amounts have been declared on a tax return in the 'home' country [effective Isle of Man from January 2005], have greatly eroded their former status as such. Switzerland is still holding out along with a few others.
Heard of St.Kitts
St.Kitts & Nevis
The international financial services sector really commenced in Nevis in 1984. During the course of the following years, the Nevis Island Government expended a lot of time and resources aimed at developing recognised expertise in the financial services sector. The resulting effect is that Nevis has become known as a viable, vibrant and reputable jurisdiction from which to incorporate international business companies, set up limited liability companies, register international exempt trusts and establish offshore banking institutions.
The four major parts of the Nevis International Financial Services industry are the Nevis Business Corporation Ordinance, 1984 (NBCO); the Nevis International Exempt Trust Ordinance, 1994 (NIETO); the Nevis Limited Liability Company Ordinance, 1995 (NLLCO); and the Nevis Offshore Banking Ordinance, 1996 (NOBO).
The official St.Kitts & Nevis website: Link.
Employee Benefit Trusts - still useful?
There has been a lot of media coverage regarding the Inland Revenue's frequent attacks on EBTs in recent months. Following the outcome of the Dextra Caudwell case in July 2002 (in which the Inland Revenue lost on all 4 counts), new legislation affecting the tax treatment of contributions to an EBT was introduced in the Pre-Budget Statement (November 2002). Whilst the new legislation was not retrospective, it brings a contribution made to an EBT within the definition of a 'potential emolument'. This means that if Corporation Tax relief is to be claimed for the accounting period in which the contribution is made, the trustees are required to provide 'qualifying benefits' to the company's employees within that period - or within nine months of the end of that accounting period or pay qualifying expenses. If the trustees do not provide such benefits or incur such expenses, the Corporation tax relief will be deferred until the date the employee suffers a tax charge on a payment received or a benefit provided.
It is getting harder and harder to work tax free by legitimate means as the economic powers try to level the tax playing field. Should they be successful at shutting down tax havens or converting them all to operate the same tax laws as the economic powers, then there would be no tax competition and it is likely they would over burden businesses and the working population.