BDO is glad to present the latest issue of Indirect Tax News.
BDO Ireland's Indirect Tax Partner Ivor Feerick writes in the Editor's Letter:
Welcome to the latest edition of BDO’s Indirect Tax News.
Over recent years, and particularly during the economic downturn, governments across the globe have opted to increase indirect tax rates — as opposed to personal tax rates — to help shore up deficits in their annual budgets, and it is my expectation that indirect taxes will become the main focus for increasing tax revenues in quite a number of countries going forward.
The main reason behind this approach is that, whereas personal tax liabilities are based on individual’s earnings and it is mandatory to pay any taxes based on personal earnings, individuals potentially have an option as to what they spend their money on, so they could potentially lower their tax burden if they focus personal expenditure on goods and services which are not liable to VAT and GST.
Although the reality is that it is necessary in most instances for consumers to buy goods and services that attract positive indirect tax rates, it is generally more politically acceptable for economies to foster lower personal tax rates, as this, in turn, can lead to increasingly incentivised employees with increased spending powers and this, in turn, helps increase overall productivity.
I’ve just returned from a meeting with the Managing Partners of the BDO Member Firms in the Gulf States where VAT regimes will be introduced over the next 18-24 months to help to alleviate budgetary deficits partly contributed to by the sharp decrease in the price of oil over the past two years.
Whereas the indications are that the initial rate of VAT to be introduced will be to around 5%, once this system is implemented it will be relatively easy for the authorities there to increase the rate of VAT as required in future years.
It’s encouraging to see how focussed the Managing Partners of BDO Gulf Member firms are in ensuring that they adopt a leadership role in guiding their clients and contacts through the introduction of a Value Added Tax system as this will obviously have a knock-on effect to other related services including basic accounting, software and ERP systems as well as on the way that businesses in the Gulf States contract with businesses and consumers both internally and externally.
If this matter is relevant to you, please contact your local BDO partner and he/she will make the necessary introductions.
Kind regards from Sunny Dublin!
Chair – BDO International VAT Centre of Excellence
Ireland – Dublin