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Labuan continues to grow as offshore financial center

Indian and Pacific Ocean Tax & Money Havens,

The Labuan Financial Services Authority (FSA) has released its 2011 Annual Report which shows continued growth in the key business sectors of the Labuan International Business and Financial Centre (IBFC).

In that Annual Report, it was noted that, supported by its strategic location and financial infrastructure, the business activity and financial service sectors in the Labuan IBFC continued to record positive growth, with strong growth seen in the banking, insurance and reinsurance, captives and leasing sectors.

At the same time, it was pointed out that the regulatory and supervisory framework has been continuously strengthened by the FSA so as to promote the integrity and resilience of the Labuan financial sector.

A total of 651 new companies were incorporated in Labuan in 2011, representing an increase of 8.1% over 2010. By the end of the year, out of the total of 8,655 Labuan companies, 72% were from the Asia-Pacific and Far East region, followed by 13% from Europe and the 10% from the Americas.

The leasing sector was one of the most vibrant sectors in Labuan during the year, with a strong increase in the number of leasing companies to 227 and accumulated assets leased of USD 27.6 bn. The focus of the leasing companies in the highly specialized areas of aviation and oil and gas provided strong support for the growth and development of the oil and gas sector in Labuan.

The Labuan banking sector also reported a steady rise in total assets by 13% to USD38.3bn as at end-2011. Two new banks from Australia and Ghana obtained licences to operate, bringing the total number of Labuan banks to 57.

The insurance sector in the IBFC remained resilient despite various episodes of natural disasters within the region during the year. Total insurance assets increased by 16.1% to USD3.6bn and total earned premium income for the sector also grew by 45.1%.

In addition, total Islamic assets registered a growth rate of 15.4% to USD1.5bn, reflecting the strong interest in Islamic finance. Total Islamic bank financing increased significantly to USD294.6m as at end-2011, with strong demand from non-residents.

Since the introduction of the Labuan Global Incentives for Trading (GIFT) programme in September 2011, five trading licences had been issued, enabling Labuan International Trading Commodity (LICT) companies to benefit from incentives under the programme.

The key incentives offered through the LICT under the GIFT programme include a flat corporate tax rate of 3% of chargeable income, a 100% exemption on directors fees paid to non-Malaysian directors, and a 50% exemption on gross employment income for non-Malaysian professional traders and managers of LITC companies. There is also an exemption of stamp duties on documentation for such business activities, a tax exemption on dividends received by or paid from LITC companies, and all of the other fiscal incentives that are attached to operating a Labuan entity.

As part of its internal organizational programme, the FSA continued to enhance its capacity and capability to regulate and supervise the IBFC, particularly in ensuring that key risk areas are addressed promptly. Moving forward, the FSA confirmed that it will implement plans to realize the strategic potential of the IBFC to serve the needs of domestic and regional businesses, complemented by a continuous strengthening of its regulatory and supervisory framework to meet international standards and best practices.

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Europe – Desperate tax authorities is raiding chic ski resorts

European Tax & Money Havens

Italian tax agents donned skis, gloves and goggles to launch an unusual blitz in the chic ski resort of Courmayeur, two months after a similar raid on another playground of the rich, Cortina d’Ampezzo.

The crackdowns were launched at opposite ends of the Alps – Courmayeur is on the French border while Cortina is in the Dolomites range in north-eastern Italy – and are part of a growing campaign against tax evasion by prime minister Mario Monti’s government.

The raid on Courmayeur, which sits in the shadow of Mont Blanc, involved 70 agents carrying out spot checks on 30 businesses.

Inspectors in skiing gear took ski lifts up to altitudes of 3,000m to check the books of bars and restaurants, while their colleagues targeted upmarket boutiques and shops in the town.

Hanging around unobtrusively in shops and restaurants, the plain-clothes officials observed whether business owners were issuing receipts to customers or, as has been found in similar raids in Cortina, Milan, Rome, Naples and the fashionable Riviera resort of Portofino, were omitting to give out receipts in order to under-declare their earnings and cheat the tax man.

In previous raids over the last few weeks, the appearance of tax authorities prompted a sudden bout of honesty among business owners – the issuing of receipts jumped a staggering 1,000 per cent in Naples.

See the full article in The Telegraph here.

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Isle of Man plan to introduce Foundations

European Tax & Money Havens, ,

The Isle of Man’s Treasury Minister Eddie Teare has welcomed the announcement of Royal Assent to new legislation that would permit the establishment of foundations in the territory, enhancing its position as a centre for international wealth management.

The Foundations Act provides for the establishment of foundations, which are an alternative to trusts as vehicles for holding assets. While foundations resemble trusts in many respects, they also have separate legal personality, like a company. Their existence will be recorded on a public register and each must have a local registered agent accountable to the authorities.

“The Manx Foundation will be a bespoke product that will provide our financial services industry with an additional tool to open up new business opportunities,” Teare explained. “The world of wealth management is highly competitive so it is vitally important that the government keeps working in partnership with the private sector to enhance the island’s offering to international clients.”

John Rimmer, a partner at the law firm Appleby, welcomed the announcement that foundations would soon be added to Isle of Man financial services providers’ suite of offerings, stating: “The island needs to offer decent solutions for all those whose custom we want to attract. Trusts form a key part of our offering, but they are not the answer for everyone. Foundations offer greater familiarity and comfort for individuals and families from civil law countries, as well as interesting opportunities in commercial legal structures.”

“The Treasury have shown real commitment in bringing this offering to the statute books in response to an initiative from the Isle of Man branch of the Society of Trust and Estate Practitioners. The Foundations Act is another good example of what cooperation between government and private sector can achieve.”

Annemarie Hughes, senior associate within Dougherty Quinn’s specialist trust team, added: “Having recently returned from the STEP Asia Conference in Singapore, where Foundations and estate planning formed a key part of that conference, I am confident that the Isle of Man’s new sophisticated yet flexible Foundation vehicle is ideally placed to service the numerous opportunities and growing demand in the international market.”

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Malta reduce taxes for both local citizens and foreign investors

European Tax & Money Havens, , , , , , ,

Malta’s Minister of Finance, Economy and Investment Tonio Fenech has announced numerous tax measures in the territory’s budget for 2012, many of which reduce the tax burden on islanders and enhance the island’s appeal to international investors.

Among the latest changes, royalties income derived from copyright-protected books, film scripts, music and art will now be tax exempt in Malta. The announcement follows the decision in the 2010 Budget that royalties on patents would receive an exemption.

To further promote Malta as a hub for innovation and product development, the 15% personal income tax scheme – aimed at attracting skilled persons engaged in certain fields to Malta – is to be extended to include international professionals specializing in the development of digital games.

In addition, Maltese companies which commission educational digital games will be given a tax credit up to a maximum of EUR 15,000 (USD 20,000).

The government has also announced significant tax cuts for parents with the introduction of a new ‘parent computation’ in addition to the current single and joint computation. This will apply to taxpayers who are a parent of at least one child under the age of 18 (or 21 if the child is in tertiary education) and entitle claimants to a 0% income tax rate on the first EUR 9,300 of income. A taxpayer newly transferring to parental computation and with an income of EUR 21,200 would for instance see a reduction in income tax payable of EUR 420 per annum compared to the single computation system, according to Fenech.

In addition, tax allowances for parents sending their children to private, fee-paying schools will be significantly increased.

Other measures include the introduction of a new car scrapple scheme, worth 15.25% of the value of the new car when trading in an older model, with the benefit capped at EUR 2,000. Registration taxes for older vehicles will be hiked from January 1, 2012.

Tax concessions are also to be introduced for property owners for the restoration of certain buildings.

Excise duty on cigarettes and tobacco will increase by 5.8% and 8.5%, respectively, and tax on bunker fuel and cement is also due to rise.

The government also intends in the new year to merge the Inland Revenue Department and value-added tax department, and to hold a VAT amnesty to allow taxpayers to regularize their tax affairs.

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Mexico and Chile have OECD’s lowest tax burden

Central and South American Tax & Money Havens, , , ,

The Organization for Economic Cooperation (OECD) and Development has published its annual report on the tax burdens in place in 2010 among its members, which shows that Mexico had the lowest tax-to-GDP ratio at 18.7%.

OECD data in the annual Revenue Statistics publication shows that the majority of OECD governments have stabilized the tax burden in place with the tax-to-GDP ratio increasingly nominally from 33.8% in 2009 to 33.9% in 2010. This however is still down from 34.6% in 2008 and below the most recent high point of 2007 when the tax-to-GDP ratio averaged 35.2%

Commenting on its report, the Organization said the underlying message from these comparisons is complex, as changes in tax revenues reflect not only changes in economic activity but also policy measures.

“In those European countries most affected by the financial crisis and subsequent recession there was an initial sharp fall in tax revenues, but then a small recovery in the tax to GDP ratio in 2010,” the OECD stated.

“The data collected also shows that in a period when all levels of government have seen pressure on expenditure and revenues, the average tax ratio for state, regional and local governments has remained steady since 2007 while that for central government has declined,” the OECD explained.

The report’s salient findings include that:

  • Out of 30 OECD countries for which provisional 2010 figures are available, tax-to-GDP ratios rose in 17 and fell in 13.
  • Compared with 2007 pre-crisis tax-to-GDP ratios, the ratio in 2010 was still down more than 3% points in six countries. In Spain it declined from 37.2% to 31.7% and in Iceland from 40.6% to 36.3%. Chile, Israel, New Zealand and the United States showed declines of 3-4% over the same period.
  • The tax burden increased from 31.4% to 34% between 2007 and 2010 in Estonia. Two other countries; Luxembourg and Turkey showed increases of 1-2 percentage points over the same period.
  • Denmark has the highest tax-to-GDP ratio among OECD countries (48.2% in 2010), followed by Sweden (45.8%).
  • Mexico (18.7% in 2010) and Chile (20.9%) have the lowest tax-to-GDP ratios among OECD countries. The United States has the third lowest ratio in the OECD region at 24.8% with Korea at 25.1% and Turkey at 26.0%.
  • The proportion of tax revenues accounted for by social security contributions rose from 25% to 27% between 2007 and 2009 whereas the share of taxes on corporate income and capital gains fell from 11% to 8% over the same period. The share of the other major tax categories were largely unchanged.

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