Tag Archives: Playground

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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Prague Russians new Zurich

European Tax & Money Havens, , , , ,

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.

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Hong Kong – Adaption to the Chinese Renminbi (RMB) currency

Far East Tax & Money Havens, , , , , , ,

During a speech on the development of the renminbi market in Hong Kong at the China Economic Development Forum, the Secretary for Financial Services and the Treasury, Professor K C Chan, said that RMB internationalization represented the ‘most exciting topic’ in the development of Hong Kong’s financial markets.

He pointed out that RMB internationalization “represents a policy choice in the gradual process of the opening of the capital account. There is no question of whether the capital account will be liberalized. It will. The only question is when.”

He confirmed, however, that: “Even in the current stage of development, if the capital account is closed or mostly closed, there are still many benefits associated with RMB internationalization. As RMB is becoming accepted as an investment asset, in addition to a currency for trade settlement, it leads to a diversification of currency risks for investors as well as Mainland borrowers.”

“The current approach to RMB internationalization is through the encouragement of an offshore market,” he continued. “Although the trade settlement in RMB can be done through correspondent banking arrangement between domestic banks and foreign traders, we won’t have the benefits of having an offshore market that allows foreign traders and investors to trade and invest in RMB. An offshore market will allow market forces to work to build up the demand for RMB as a currency for trade settlement as well as a currency for investment.”

“Hong Kong is the most natural and the most competitive offshore RMB market in our country,” he concluded. “We have been a testing ground for new products and new ideas for China and now we are a testing ground for financial market reform for the country. There is much cooperation between the regulators on the Mainland and Hong Kong, and we can ring-fence the market with the capital flows being regulated to safeguard the financial security of the nation.”

Chan added that he expects there will be further development and more offering of investment products, including RMB-denominated bonds, in Hong Kong, which will contribute to “a much more interesting and diversified investment product market in Hong Kong. These will contribute to the growth of the offshore RMB market.”

To date, there have been 38 RMB bond issues, with a total issuance of over RMB 80bn. The offshore RMB bond market has taken off with the issue of so called “dim sum bonds” issued by a large range of issuers and available to institutional investors. The issuers range from Chinese corporations to bond corporations of foreign agencies.

Chan said that a base case forecast puts the issuance of offshore RMB bonds at RMB 60bn in 2011, as against RMB42bn last year, which would bring the total outstanding “dim sum bonds” to over RMB 100bn.

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Austria – Introduce new taxes on banks

European Tax & Money Havens, , ,

Following the recent banking summit, and Despite bitter opposition from its banks, the Austrian government has announced its decision to enter a bank tax in Austria. According to Finance Minister Josef Pröll, it is Merely a “question of justice”.

Austria’s Chancellor Werner Faymann has confirmed that the introduction of a bank levy is now inevitable, with or without backing from the European Union regarding a Europe-wide tax.

Although the precise details of the tax have yet to be determined, Faymann has made known that the new levy could be introduced from as early as 2011. Determined to consolidate the country’s budget, Pröll is eager to Implement the new levy as quickly as possible.

Proposals put forward by Chancellor Faymann include imposing a levy of between 0.07% and 0.1% on the taxable base. Other details, such as who is to pay the tax, and what the basis for calculating the tax will be, as well as the exact tax rate, have yet to be decided. As a benchmark, has proposed Faymann generating a volume of around EUR 500m annually.

A working group consisting of Representatives from the Chancellery, the finance ministry, issuing banks and other banks, will be set up in order to put forward proposals and to firm up details for the new tax. Nevertheless, Chancellor Faymann has underlined the fact that ultimate responsibility rests with both the government and parliament.

Having agreed in principal to the tax, Josef Pröll once again warned of the dangers of imposing too great a burden on the country’s financial institutions, and reiterates that the burden must not be borne by either borrowers or savers. According to Pröll, the greater the pressure imposed on the banks, the greater the pressure to pass that burden on.

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OECD removed Austria from the grey list

European Tax & Money Havens, , ,

Austria has now officially been removed from the Organization for Economic Cooperation and Development’s (OECD) “gray list” of countries Deemed uncooperative in international tax matters.

Indeed, Austria now appears on the OECD’s much-coveted “white list” of countries that have fulfilled the organization’s 12 official requirement to conclude double tax or tax information exchange agreements, Providing for administrative assistance in tax matters under Article 26 of the OECD Model Convention .

According to the Austrian Finance Ministry, Austria has in fact exceeded expectations, having signed 15 bilateral agreements In accordance with the OECD on tax information exchange standard.

Austria gave the go-ahead for the creation of legislation to relax its traditional banking secrecy laws and conform with OECD standards on tax information exchange at the beginning of the month, and has, since then, been busily Negotiating bilateral agreements ahead of the G20 summit meeting. However, it has made clear that its traditional bank secrecy laws will only be lifted for those accounts held by non-residents who are not subject to Austrian tax.

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