June 9, 2024

TAX POLICY BREW FOR June W1 2024

TAX POLICY BREW FOR June W1 2024

Qatar’s Expanding Tax Treaty Network

  • Qatar signed its first-ever income tax treaties with Saudi Arabia and the United Arab Emirates, while the pending income tax treaty with Estonia was approved by the Estonian government. These developments demonstrate Qatar’s efforts to strengthen its international tax cooperation and prevent double taxation.

Pillar 2 Global Minimum Tax Implementation Gains Momentum

  • Turkey is in the final stages of preparing for the implementation of the Pillar 2 global minimum tax, with the government recognizing the importance of adopting the rules to avoid losing taxing rights to other countries.

  • The Bahamas announced plans to introduce an International Business Income Tax, including a Qualified Domestic Top-Up Tax for in-scope Pillar 2 multinational entities, as part of its 2024/2025 budget, aiming to align its tax system with international standards.

  • Spain‘s Council of Ministers approved the draft bill for the implementation of the Pillar 2 global minimum tax, which includes the introduction of the income inclusion rule (IIR), the undertaxed payment/profit rule (UTPR), and a qualified domestic minimum top-up tax (QDMTT).

  • Germany published a draft global minimum tax return for consultation, demonstrating its commitment to the timely implementation of the Pillar 2 rules and providing an opportunity for stakeholders to provide input on the proposed reporting requirements.

OECD BEPS Developments Advance Global Tax Cooperation

  • The BEPS Inclusive Framework committed to resolving remaining issues to start the signing of the Multilateral Convention for Amount A of Pillar One by the end of June 2024, marking a significant milestone in the implementation of the two-pillar solution to address the tax challenges arising from the digitalization of the economy.

  • Azerbaijan‘s ratification of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI) showcases the country’s commitment to implementing BEPS measures and enhancing the integrity of its tax treaty network.

Targeted Tax Incentives and Relief Measures Support Sustainability and Individual Taxpayers

  • The United States‘ proposed regulations on the Clean Electricity Production Credit and the Clean Electricity Investment Credit aim to incentivize the development of clean energy facilities and technologies, aligning with the country’s sustainability goals.

  • New Zealand‘s Budget 2024 includes targeted tax relief for individuals, such as increased income tax bracket thresholds and an expanded eligibility threshold for the independent earner tax credit, supporting taxpayers in the post-pandemic recovery.

  • Italy‘s further extension of the suspension of the plastic tax and sugar tax demonstrates the government’s efforts to balance environmental objectives with the need to support businesses and consumers during challenging economic times.

Tax Authorities Enhance Compliance Measures and Taxpayer Services

  • The Australian Taxation Office (ATO) provided a summary of changes made to non-individual tax return forms and schedules for the 2023–24 income tax reporting period, ensuring taxpayers are informed of the latest reporting requirements.

  • The Inland Revenue Authority of Singapore (IRAS) introduced a new Exchange Rate Search Function tool to assist taxpayers in preparing their tax computations, demonstrating the authority’s commitment to providing user-friendly resources for tax compliance.

  • Poland‘s approval of the Act implementing the DAC7 rules on the exchange of information on income generated by sellers through digital platforms highlights the country’s efforts to combat tax avoidance and ensure fair taxation in the digital economy.

  • The launch of the Honduran Tax Authority’s new Virtual Office signifies the country’s commitment to digitalizing tax services and improving taxpayer experience. (Article 15)

Insights:

The tax policy updates this week underscore the growing global consensus on the need for international tax cooperation, the implementation of the Pillar 2 global minimum tax, and the alignment of domestic tax systems with OECD standards. Qatar’s expanding tax treaty network, coupled with the progress made by Turkey, the Bahamas, Spain, and Germany in implementing the Pillar 2 rules, demonstrates the increasing momentum behind these global tax reforms.

The advancements in OECD BEPS developments, such as the commitment to start signing the Multilateral Convention for Amount A of Pillar One and Azerbaijan’s ratification of the MLI, highlight the ongoing efforts to create a more transparent and fair international tax system. These developments are expected to have a significant impact on the way multinational enterprises structure their operations and report their taxes.

The targeted tax incentives and relief measures introduced by the United States, New Zealand, and Italy reflect the delicate balance governments must strike between promoting sustainability, supporting individual taxpayers, and ensuring the competitiveness of their tax systems. As countries navigate the post-pandemic economic landscape, these measures will play a crucial role in fostering recovery and driving long-term growth.

The initiatives undertaken by tax authorities in Australia, Singapore, Poland, and Honduras to enhance compliance measures and taxpayer services emphasize the importance of maintaining a robust and efficient tax administration in an increasingly complex and digitalized economy. By providing clear guidance, user-friendly tools, and improved digital services, these authorities are working to reduce the compliance burden on taxpayers while ensuring the integrity of their tax systems. I guess we can expect soon Tax Administration 4.0!

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