The news has been full of stories about how companies such as Amazon, Apple, Google, Microsoft, Starbucks and others are able to shift their profits to low or no-tax jurisdictions by using novel, legally permitted corporate structures and complex internal transactions (known as transfer pricing schemes). Companies are able to do so because they pay taxes at the place of their residence rather than where the underlying economic activity takes place.
Tax the rich and give money to the poor – that is the basis of fiscal policy put forward by the UK Labour Party’s new shadow chancellor, John McDonnell. As well as forcing large corporations to pay their “fair share,” they resurrected the idea of the Robin Hood – or Tobin – tax. However, what actually is it and how would it work?
Concerns about moderating economic growth and rising income inequality in ASEAN economies have brought small and medium-sized enterprises (SMEs) into the policy limelight. Arguing that SMEs have significant potential for creating jobs, some commentators are suggesting a host of industrial policies such as financial subsidies and local content rules to promote SMEs. However, this risks heavy-handed state intervention in SMEs. One possible alternative is to reform access to finance for SMEs — particularly from commercial banks — in ASEAN economies.
The public knows something is “not right” with the tax treatment of family trusts (discretionary trusts). Accountants and tax lawyers working with discretionary trusts know firsthand that the income tax treatment has trouble passing the “smell test”. That is something even the most aggressive tax minimisers would concede.
Yet, the tax treatment of discretionary trusts has had little attention in government tax reviews. The 2010 Henry Review did not consider the appropriateness of the tax treatment of discretionary trusts – this was a shortcoming.
Lending money is a risky business. Since 2010, Bank of England figures reveal that lenders have written off an average of £13.2 billion a year in bad loans. You can never be 100% sure that you will ever get your money back. One way of mitigating that risk is to know as much as possible about the person to which you are lending. Indeed, some financial managers reportedly are now considering the use of personality tests to assess the suitability of borrowers seeking loans or credit agreements.
Around the world, women in developing economies enjoy less access than men do to the banking system.
Bank account opening procedures, especially requirements to produce identity documents, are a major barrier for undocumented women in developing countries. These requirements aim at meeting anti-money laundering and counter terrorist financing (AML/CTF) obligations. But the barriers may be set unnecessarily high for women given their crime risk profile.
George Osborne is in the process of finding £20 billion of savings with his government spending review. As the government searches to balance the budget and reduce public spending, it is worth re-examining an old favourite when it comes to keeping spending off the balance sheet – private finance initiatives (PFI).
This is a dangerously addictive way of financing public spending that rarely has an economical result. In fact, spending cuts put pressure on government departments who have to make fixed PFI payments to the private sector from their reducing budgets.
Domestic banking crises often originate in the real estate sector. Therefore, one might conclude that mortgage lending is negative for financial stability. However, in normal (non-crisis) periods, mortgage lending may actually contribute to financial stability. This is because mortgage loans have different risk properties from other bank assets such as commercial loans, so having some share of mortgage loans in a bank’s portfolio tends to diversify the risk of that portfolio.
In his recent speech on personal income tax cuts, Treasurer Joe Hockey made clear that the “common cause of reform [of the tax system is] to improve the growth trajectory of the Australian economy”. The key to this for Hockey is to ensure the income tax system is not constraining workforce participation and effort, through things such as bracket creep.
Hence the need for a downward revision of personal income tax rates.
It sounds quite straightforward and reasonable, not the least because it addresses the average income earner.
The federal government has given itself until the end of the year to respond to the many recommendations contained within last year’s Financial System Inquiry report, but in one area, it has already decided to act against the Chair David Murray’s advice.
