Direct Tax
Tobacco taxation reforms are needed to reduce tobacco use in Latin America and the Caribbean
Excerpts from oecd.org Dated 28 Oct, 2024
Countries in Latin America and the Caribbean (LAC) could reduce the widespread consumption of tobacco and its cost to society by better design and administration of tobacco taxes, according to a new OECD report.
Tobacco Taxation in LAC finds that the social and economic costs of tobacco use across LAC countries significantly outweigh the revenue raised from tobacco taxes. Well-designed tobacco taxes are a cost-effective policy tool for counteracting the impact of tobacco consumption, and countries in LAC have significant scope to improve their design and administration.
“Taxes play a vital role in limiting the social and economic costs of smoking,” OECD Secretary-General Mathias Cormann said. “Governments should be sure to maintain, and where necessary strengthen, the stringency of tobacco taxation.”
While countries in LAC have gradually, albeit partially, aligned their tobacco tax policy with the World Health Organization (WHO) best practices, progress on tobacco excise tax reform has stagnated since 2012 and significant scope for improvement remains. The most common policy gaps include the lack of mechanisms to ensure that a minimum amount of tobacco excise tax is paid and that taxes are not applied consistently across different tobacco products, including new tobacco and nicotine products.
More than 350 000 people across LAC countries died in 2021 as a result of tobacco use or second-hand smoke, and over 40% of respiratory cancers in the region were attributable to tobacco use (Global Burden of Disease Study, 2021). The smoking-attributable medical costs can reach up to 1.5% of GDP per year on average.
Tobacco use remains widespread with 12% of the population currently using tobacco in LAC. It is particularly high among men, whose tobacco use prevalence is three times that of women. In half of the LAC countries, tobacco use prevalence among people aged 13-15 is higher than amongst the adult population.
Cigarettes, which are the most widely consumed tobacco product in the region, are in general highly affordable and have become more so over time.
Effective tax rates on cigarettes remain below the WHO’s recommended tax rate of at least 75% of the retail price of tobacco. In the short run, a tobacco tax increase will tend to have a positive impact on tobacco tax revenue, even if tobacco use would decrease, because smokers tend to adjust their smoking behaviour slowly over time. In the longer run, the reduction in health, economic and social costs would outweigh the drop in tax revenue, thereby resulting in a positive impact for the government budget and improved health outcomes.
To improve the effectiveness of tobacco tax policy and administration, the report recommends that LAC countries increase tobacco excise tax rates, seek to account for the strategic responses of the tobacco industry when designing tobacco tax policy, strengthen tobacco tax administration, introduce accompanying measures to tackle illicit tobacco trade, ensure that tobacco excise and income tax policies are coherent, and strengthen domestic and regional tobacco tax co-operation.
The report provides detailed information on tobacco taxation in 18 countries in LAC (Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, the Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru and Uruguay).
Transfer Pricing
UAE transfer pricing disclosure
The Federal Tax Authority (FTA) has updated the format of the UAE Corporate Tax return, which now has a specific portion on Transfer Pricing (TP) related disclosure. Following are the highlights of the TP disclosures, inter-alia, required in the tax return
- Separate schedule for related party and connected persons,
- Suo-moto adjustments
- Gross income
- Tax residence of related party
- Reporting of transaction type
- Attachments
A brief of the disclosure requirements is provided in this article – Click Here
Cyprus issues additional FAQs on new transfer pricing rules
The Cyprus Tax Department has released additional frequently asked questions (FAQs), i.e., 25 – 43, clarifying certain provisions of Articles 33 and 33C of the Cyprus’s Income Tax Law (ITL), concerning the adoption of Transfer Pricing legislation in Cyprus as made applicable from 1 January 2022. The additional FAQs provide further guidance on certain matters, interalia, relating to the completion of the Summary Information zTable (SIT), the use of safe harbors, Simplified Transfer Pricing Documentation (STPD) and the quality assurance review confirmation issued by licensed firms with respect to local files.
Few key take aways from the FAQs are as follows:
#25 addresses the question as to whether the interest-free payable balances should be reported in SIT and whether the same should be considered while assessing the threshold of Article 33(7) of the ITL. The FAQ clarifies that taxpayers should not take these balances into account when assessing the threshold and should not report them in the SIT for the years 2022 and 2023. However, for 2024 and onwards, the same should be taken into account when assessing the threshold of Article 33(7) and should be reported in the SIT.
#41 addresses the options of a company in case it has controlled transactions in a particular Category that cumulatively do not exceed the required threshold on the basis of the arm's length principle in a tax year for the purposes of transfer pricing documentation. In such a scenario the company can opt for one of the following three options:
- Meet the minimum STPD requirements; or
- Make use of the safe harbor rules for categories ’Financial Transactions’ and ’Low Value Adding Services’ and comply with the minimum STPD requirements; or
- Prepare a Transfer Pricing Study / include the controlled transactions in a Cyprus Local File (if applicable).
Italy transposes EU’s public country-by-country reporting
EU’s public country-by-country reporting (EU’s public CBCR) requires all MNEs with consolidated revenues exceeding EUR 750 million and operations in multiple EU member states to annually disclose certain income tax information on a country-by-country basis to the general public. EU Member States had until 22 June 2023 to transpose the EU’s public CbCR Directive into their respective national legislation. As at 8 October 2024, 24 Member States have passed legislation transposing the Directive into national law. Italy being the latest entrant in this list published a decree on 12 September 2024 implementing the EU public CBCR directive into Italian law. The new provisions apply to financial years beginning on or after 22 June, 2024.
Indirect Tax
Thailand exempts VAT on Cryptocurrency and Digital Token transfers w.e.f. 1 January
Excerpts from globalvatcompliance.com
The Thai Official Gazette released Royal Decree No. 788 to exempt VAT on transfers of cryptocurrencies and the utilization of digital tokens w.e.f 1 January 2025. The Decree came into effect on 25 September.
Slovakian Parliament approves 3% VAT hike from 2025 along with new 19% reduced rate
Excerpts from various sources
The Slovakian Parliament, the National Council, has voted in favor of increasing the VAT rate from 20% to 23% from 2025. In addition to the standard rate rise, there will also be a new 19% reduced rate (replacing the existing 10%) with no change to the super reduced rate of 5%.
Further, overseas companies without a registered office or permanent establishment in Slovakia will be required to register for VAT if they perform taxable transactions within the country. On the other hand, small enterprises with a permanent establishment in the EU and possessing a Slovak VAT identification number ending with ‘EX’ will have the option to opt out of VAT registration.
Peruvian Congress considers Bill to repeal tax on digital services
Excerpts from globalvatcompliance.com
The Peruvian Congress has accepted to consider Bill to repeal the application of 18% general sales tax (IGV) and the selective consumption tax on digital services used within the country and on the importation of intangible goods over the internet.
Saudi Arabia announces criteria for sixteenth wave of e-invoicing integration
Excerpts from globalvatcompliance.com
The Saudi General Authority of Zakat and Tax Authority has announced the criteria for the 16th wave of integrating taxpayer VAT e-invoicing systems with its Fatoora platform. The integration will commence on 1 April 2025, and targets businesses with VAT taxable revenues exceeding SAR 3 Million (approximately USD 800,000) in either 2022 or 2023.