On the face of it, indirect tax is the better option for companies. Unlike direct taxes on their profits, taxes on consumption can, for the most part, be passed on. As such, companies around the world have welcomed a global trend of falling corporate tax rates offset by higher rates of VAT/GST.
But indirect taxes do pose compliance challenges for companies, which must change the prices they charge for goods and services and update their systems accordingly. As such, above all, taxpayers want to see certainty.
In China, with the VAT pilot being rolled out nationwide, and in Europe, with reforms in 2015 to make the system simpler, more efficient and more robust, taxpayers are getting just that.
But the indirect tax landscape is not quite so certain everywhere. In India, GST implementation continues to face delays because of disagreements between the central government and the states.
Meanwhile, in Australia, the election of a new right-wing government led by Tony Abbott was supposed to bring the certainty of the carbon and mining taxes being scrapped. But with the Green Party still holding the balance of power and committed to the environmentally-friendly carbon pricing mechanism, it does not look as though the new government will be able to immediately achieve its objectives.
Attempting to bring a little more clarity to the ever-changing world of indirect tax, this year's Indirect Taxes supplement from International Tax Review has EY addressing some of the challenges multinational companies face, especially in rapid-growth markets.
ATOZ – Taxand sheds light on the basic principles concerning the VAT situation of holding companies in Luxembourg and their right to recover input VAT.
KPMG takes a look at the proposed VAT reforms in Mexico, at the VAT burden on infrastructure supplies to public authorities in Romania, and at the GST compliance landscape in Singapore.
Deloitte looks at VAT reform in China, while in Germany, küffner maunz langer zugmaier examines a recent case and its impact on partnerships as controlled members of a VAT group.
Indirect Taxes is now in its 11th year. And with indirect taxes continuing to expand across the world, we expect this supplement to be around for many years to come.
International Tax Review