Tag Archives: Domicile

Malta reduce taxes for both local citizens and foreign investors

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.


Mexico and Chile have OECD’s lowest tax burden

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.


Hong Kong Tops Economic Freedom Index

Hong Kong has once again topped the Fraser Institute’s Economic Freedom Index, which measures the degree to which the policies and institutions of countries are supportive of economic freedom.

According to the report, Hong Kong scored highly across all of the five categories which are used to calculate index scores, including size of government, legal structure and security of property rights, access to sound money, freedom to trade internationally, and regulation of credit, labor, and business.

Hong Kong has topped the Fraser Institute’s 141-country ranking every year for the past three decades. This year, Singapore, New Zealand, Switzerland, and Australia were placed after Hong Kong in the top five.

The United States experienced one of the largest drops in economic freedom, according to the report, falling to 10th place overall from sixth in 2010. Much of this decline is attributed to higher spending and borrowing on the part of the US government, and lower scores for legal structure and property rights.

“The link between economic freedom and prosperity is undeniable: the countries that score highly in terms of economic freedom also offer their people the best quality of life,” said Fred McMahon, vice-president of international policy research at the Fraser Institute, a Canadian public policy think tank.

Commenting on this year’s index results, Hong Kong Chief Executive Donald Tsang remarked that economic freedom was “part of Hong Kong’s DNA”.

“In such testing times, it is important for an externally oriented economy such as Hong Kong to remain true to our philosophy. That means strong fiscal discipline, low taxes, open markets, free flow of information, goods and capital, clean government and a level playing field for business,” Tsang said in a speech September 20.

“The fact that we have held true to these beliefs for decades is no doubt one reason why Hong Kong has consistently ranked so highly in the league tables of economic freedom. As the old saying goes: ‘If it ain’t broke, don’t fix it.'”


Zug Switzerland a crowded tax haven

Zug, Switzerland: Developed nations from Japan to America are desperate for growth, but this tiny lake-filled Swiss canton is wrestling with a different problem: too much of it according to Deborha Ball in Wall Street Journal.

Zug’s history of rock-bottom tax rates, for individuals and corporations alike, has brought it an A-list of multinational businesses. Luxury shops abound, government coffers are flush, and there are so many jobs that employers sometimes have a hard time finding people to fill them.

Before Zug became Switzerland’s premier spot for the wealthy and corporations it was known for its picturesque views along the lake of the same name.



Image: Bloomberg News

If  Switzerland is the world’s most famous tax haven, Zug amounts to a haven within a haven. It has the highest concentration of U.S.-dollar millionaires in Switzerland, a country where nearly 10% of households meet that standard, according to Boston Consulting Group. The highest personal income tax anyone in Zug has to pay is 22.9%, and companies pay an average of just 15.4%—rates lower than Switzerland’s average and far below top rates in the U.S.

Thanks in large part to such policies, Zug now boasts the headquarters of big companies ranging from construction firm Foster Wheeler Ltd. to commodities trader Glencore International PLC, and branches of many more. When Transocean Ltd., a drilling contractor known for its tax planning, decided two years ago to move its headquarters from the Cayman Islands and Houston, it picked Zug.

But lately, the place has become something of a victim of its own success. It is grappling with the consequences of the wealth it has attracted, now crowding out the non-rich and squeezing companies looking for space and talent. But when Stefan Hurschler, a man who works with the disabled, and his schoolteacher wife decided to expand their family and wanted a bigger house, they found nothing in Zug they could afford. They moved to Zürich, and Mr. Hurschler now commutes back to the town he grew up in.

“There are older people who still live [in Zug] because they bought their homes in the 1960s,” said his wife, Lilian. “Or there are the very rich. But there isn’t much of a middle class.”  Here is a link to the full story.


Prague Russians new Zurich

Today’s Czech Republic, firmly anchored in the NATO and European Union, the richest former Communist country in central Europe, and boasting low inflation and a stable currency. Mix in the country’s natural beauty, the Russian-Czech language proximity and the fact that it takes under three hours to fly from Moscow to Prague. It then becomes little surprising that the Czech Republic has attracted large numbers of Russian expatriates according to Wall Street Journal.

Prague Photos
This photo of Prague is courtesy of TripAdvisor

According to official statistics nearly 32,000 Russians with either temporary or long-term     residency permits live in the Czech Republic. This isn’t a lot in a country of 10 million but the official number is swelled by thousands more who commute between Moscow and Prague while taking with them some of their hard-earned money away from what they see as unstable Russia into the safety of Czech-based banks.

“Ordinary Russians move in the Czech Republic because they view the country as safe and because they want their children to live in a stable society,” Alexej Kelin of the Prague-based Russian Tradition expatriate organization was quoted as saying last night by the CT-24 Czech television news channel.

Russians are mostly concentrated in Prague and the western Czech spa town of Karlovy Vary. Most are professionals with incomes above the Czech average of about $1,500 a month. The wealthiest Russians in the Czech Republic have made several local banks offer private banking services by Russian-speaking staff.

One of them is Raiffeisen Bank International, an Austrian retail lender. It has recently begun offering its top private banking services under the Friedrich Wilhelm Raiffeisen moniker, or FWR, in Prague and Brno, the second-largest Czech city, some two hours by car south-east of the capital. FWR has branches in only a few other places, including Vienna and Budapest.

FWR opens accounts for clients with at least EUR 500,000 in assets. The bank doesn’t disclose details on its clients but people familiar with its services say that well-to-do Russians account for a large customer segment of its Prague branch. These Russians picked the Czech capital as one of several places outside Russia from where they can manage their wealth, having already stashed some money away in Switzerland, the U.K. and offshore tax-havens.

“Among the former Soviet-bloc countries, Prague is something like Zürich for well-off Russians,” says one person familiar with the Czech banking sector catering for Russian clients. See the full article in Wall Street Journal.