Scotland’s Vote, FTT Plans and Tax-Cutting Budgets

The International Tax Blog looks at some of the key developments around the world this week…

The world watched closely this week as Scotland voted against independence from the United Kingdom’s 307-year union. Following a week of last-minute campaigning in a hotly-contested referendum, U.K. Prime Minister David Cameron has promised new powers over tax, spending and welfare, to “honour in full” a pre-referendum pledge devolving more powers to Scotland.

The Organization for Economic Cooperation and Developmentreleased its comprehensive plan for creating an agreed set of international rules for fighting base erosion and profit shifting by multinationals. Governments welcomed the OECD proposals, which will close loopholes through a number of measures including transfer pricing rules.

Finance ministers from 10 European Union countries tried to push forward plans to adopt a financial transactions tax with a tentative agreement on issuance rules, but remained divided on the scope, especially concerning derivatives, as political commitment remains an issue.

Swiss bank UBS AG awaits to hear the verdict on whether it must post a 1.1 billion euro ($1.4 billion) bond to cover a potential criminal penalty for alleged money laundering. It is already paying a 10 million euro ($13 million) fine for lax controls that may have enabled tax dodging, following French President Francois Hollande's crackdown on tax evasion.

Banks, insurance companies and other financial service firms could face significantly increased value-added tax bills following a European Court of Justice ruling that backed a challenge by the Swedish tax authorities against the U.S.-based subsidiary of Swedish-based financial conglomerate Skandia. It was held that EU VAT law allowing a company and its subsidiaries to be treated as a single taxpayer doesn't apply to those branches if they are based outside the EU.

Budget announcements this week came from the Netherlands on reducing the tax burden on labor; Finland proposed changes in income, corporate and excise tax laws; and Iceland lowered value-added tax rates and abolished commodity taxes.

Malaysia’s Prime Minister announced that tax reforms in April 2015 to introduce the goods and services tax will be imperative, as the sales and service tax is no longer fit for the country’s rapidly growing economy. Currently only one in 10 pay personal income tax and 40 percent of the government’s revenue comes from finite oil and gas resources.

For more information on these developments and other international tax news, sign up for a free trial of the Premier International Tax Library.