UHY’s Global Transfer Pricing Guide 2015

The UHY network has released its 2015 “Global Transfer Pricing Guide” to assist tax and finance professionals responsible for cross-border tax planning and compliance with their enquiries.  Given the complexity of transfer pricing issues, the guide provides in the first instance a country-by-country summary of major transfer pricing requirements, including pricing methods, documentation and penalties…

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New Zealand’s Low Tax Burden for High Earners

Service graphic_corporate tax_1_RGBEastern Europe and emerging economies offer most generous tax regimes for highest earners.

New Zealand has one of the lowest tax burdens for high earners of any major economy, according to a new study by UHY, the international accountancy network.

New Zealand has the 8th lightest tax burden out of 25 countries, ranked by UHY according to how much tax and social security it takes from its highest earners’ wages (on a salary of US$1.5m – see table below).

UHY notes that New Zealand is making itself more attractive to high earners than neighbouring Australia, which levies 46% in tax on a salary of US$1.5m, compared to New Zealand’s 32.6%. However, UHY also notes that New Zealand does not have a compulsory retirement savings scheme and individuals do not make social security contributions other than as part of normal Income Tax and ACC levies. Instead, individuals have the choice not to participate in KiwiSaver or choose to contribute 3%, 4% or 8% of their gross earnings. The data used in this survey assumes that the individual has chosen not to participate in KiwiSaver, even though there are significant incentives for participation. Furthermore, retirees’ are also entitled to a state-funded pension and any savings amassed through KiwiSaver are intended to supplement the pension.

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Introducing Capital Gains Tax Into New Zealand

UHY Haines Norton Managing Director Grant Brownlee considers the implications of a Labour government introducing Capital Gains Tax.

We recently asked Labour’s Phil Twyford, MP for Te Atatu, whether Labour would introduce a Capital Gains Tax (CGT) if they are elected.  Phil indicated a CGT would be introduced within the first 100 days of their first term.

So what might a CGT look like in New Zealand?  To provide an answer to that question I thought it would be a good idea to look across the Tasman and pose a few questions to Bill Charlton, a Partner from UHY Haines Norton in Brisbane.

Question 1: When CGT was introduced into Australia, what impact did it have on the property market?

When CGT was introduced, and in its first one or two years, it had very little influence on the property market at all.  There were two main reasons for this.  First, prior to the introduction of CGT, Australia already had a system of taxing property transactions where the property was sold within 12 months of its purchase.  This was deliberately done to eliminate any debate about whether a sale was of a revenue nature (and taxable) or of a capital nature (and not taxable).  So, short term property transactions were already caught in the tax net.  Investors were aware of this tax and had already taken it into account.  The CGT rules merely replaced these existing rules and CGT had no impact at all on short term sales.

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Corporate Tax Competition Heats Up

By Jim Martin, Tax Manager, UHY Haines Norton, Email jmartin@uhyhn.co.nz

In an increasingly globalised world, governments are under pressure to find ways to attract and retain businesses to their country and then to help those businesses compete against their international competitors.

An increasing number of government’s now realise that one powerful tool they have to achieve those goals is lowering the level of corporation tax that they impose on business profits.

Clearly a high corporation tax rate can make one business location unattractive compared to overseas economies with lower tax rates. A high corporate tax rate can also suppress a corporate’s growth by taking money out of a business and its shareholder’s pockets that could alternatively be invested in marketing or R&D to further grow the business.

The latest research project from UHY’s international network has found that some developed nations are still dragging their economies down and hitting businesses with far higher corporation tax rates than faster growing emerging economies.

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Brazil and India hit businesses with highest sales and consumption taxes

High sales and consumption taxes in UK and Europe threaten consumer recovery
Lack of federal sales tax keeps US sales taxes low

Brazil and India hit consumers with the highest levels of consumption and sales taxes in the world, according to new research by UHY, the international accounting and consultancy network.

UHY adds that behind India and Brazil, European countries impose the heaviest sales tax burden, which threatens to undermine recoveries in consumer spending by putting pressure on disposable incomes.

UHY tax professionals studied data from 22 countries* across its international network, including all members of the G7 and the developing BRIC economies. UHY calculated the percentage of the total price of a representative basket of goods and services that was made up of taxes and duties.

The Brazilian and Indian governments take 28.7% and 38% respectively of the total price of the basket of goods and services through taxes. On average, European governments are responsible for 15.5% of the price of UHY’s basket of goods and services.

This compares to an average of 13.8% for all countries, an average of 8.1% in the Asia-Pacific countries, 12.1% in G7 countries.

Ladislav Hornan, chairman of UHY, says: “Brazil and India, like many developing economies, rely far more on sales taxes than income taxes compared to their more economically developed counterparts. Lower income taxes can have a positive effect on productivity, as it encourages individuals to work harder and entrepreneurs to generate more wealth.

“However, questions remain as to whether these high consumption taxes have hindered the growth of vibrant consumer element of those economies.”

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