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This week in tax: India’s crypto tax may ‘kill the industry’

The crypto crackdown is getting harsher

Higher taxes in India may kill the cryptocurrency trade in the country, according to Binance’s CEO, while the UK government faces calls from BT to extend its 130% ‘super-deduction’.

The Indian government has faced fresh criticism from the cryptocurrency industry over its tax policies targeting the market, particularly its capital gains tax and its tax deducted at source regime.

Changpeng Zhao, CEO of global cryptocurrency exchange Binance, claimed that higher taxes on crypto income may “kill the industry” in India at a Singapore fintech conference yesterday, November 3.

The Indian government has imposed a tax rate of 30% on all capital gains made from cryptocurrency transactions. However, the government has also levied a 1% TDS on all crypto transactions.

These changes came into effect from July 2022. The impact has already hit crypto exchanges in India with Wazir X reporting an 88% decline in daily transactions from June to September. Nevertheless, the Indian government shows little sign of backing down.

BT demands extension of ‘super-deduction’ tax break

Broadband company BT’s chief executive Philip Jansen said that a UK ‘super-deduction’ scheme has enabled the creation of thousands of jobs across the BT Group since its launch in March this year.

The 130% super-deduction allowance offers a significant tax break for businesses investing in infrastructure, plants and machinery. This scheme is set to end in March 2023, but BT’s boss is calling for an extension.

“Digital infrastructure is an absolutely certain, unequivocal, no-regrets move,” said Jansen in an interview with the Financial Times yesterday, November 3.

The CEO warned that the rising costs could lead to further job losses in the near future. The company is expected to increase its prices in 2023 due to the increasing inflation rate in the UK, which hit a 40-year high of 10.1% in September.

Deloitte UK replaces half of its executive team

Deloitte UK announced yesterday, November 3, that it will be replacing half of the 16 people in its executive team.

This reshuffle could mean less female representation in top positions at the global accounting and audit firm in future years, according to in-house sources.

Three women are also set to leave their UK leadership positions, including Anne-Marie Malley, head of group consulting, who oversaw a 44% increase in revenues since 2019.

The leadership overhaul is meant to replace older members of the management team with younger partners. This is supposed to be a succession plan for chief executive Richard Houston, who will continue to lead the European practice until the end of his second term in 2027.

The most senior of the eight partners departing the executive team is Stephen Griggs, who took on the role of UK managing partner in September 2020. He will be replaced in June 2023 by Philip Mills, partner in the firm’s global tax and legal practice.

BP expects to pay £693m in UK windfall tax

FTSE 100 energy company BP reported on Tuesday, November 1, bumper profits of £7 billion ($8.2 billion) in the third quarter of 2022 and expects to pay £693 million ($800 million) in the UK windfall tax this year.

Much like other energy companies, BP has seen its profits surge following Russia’s invasion of Ukraine in February. However, the company has also said it expects its oil and gas production levels to be higher in 2022 than in 2021.

UK Prime Minister Rishi Sunak and Chancellor Jeremy Hunt are reportedly planning to raise the windfall tax rate to 30% and extend it until 2028. The energy profits levy was originally set to run until 2025 at a rate of 25% with a considerable tax break for oil and gas investment.

It’s unclear whether this will also mean the end of the tax break. The changes are estimated to raise more than £30 billion in tax revenue for the UK Treasury.

OECD chief warns of trade wars if two-solution not implemented

The OECD’s departing tax chief Pascal Saint-Amans warned on Monday, October 31, that Europe and the US risk engaging in costly and damaging trade wars if they fail to implement the global tax deal.

Saint-Amans brokered the landmark agreement on pillar one and pillar two involving numerous stakeholders, tax professionals and politicians, as well as 137 nations, in October 2021.

“I see some serious risks of unilateral measures, and therefore trade sanctions, at a time when countries which are allies, in a difficult political context, may not want to trigger trade wars for a tax issue,” he told the Financial Times.

The two-pillar solution has faced strong opposition from both business groups and governments.

EU efforts to apply pillar two’s global minimum corporate tax rate of 15% have faced strong objections from member states, including Poland and Hungary.

This has frustrated Germany and France, which have threatened to unilaterally apply the rules in domestic legislation or find ways to bypass dissenting nations.

The Biden administration attempted to pass a scaled down version of a minimum effective tax rate of 15% in the Inflation Reduction Act, but it missed out key elements of the OECD deal.

Biden threatens to impose windfall tax on oil and gas companies

US President Joe Biden has threatened to impose a windfall tax on oil and gas companies unless they boost production and help lower fuel prices for Americans.

The president accused the energy companies of “profiteering” from the Russia-Ukraine war on Monday, October 31.

Oil and gas companies such as Chevron and ExxonMobil have seen profits skyrocket amid the global energy crisis. Meanwhile, the Democrats have faced calls to lower gas pump prices ahead of the November 8 midterm elections.

Biden emphasised that energy companies were making extraordinary profits and that it was “time for these companies to stop war profiteering”.

Biden warned that if oil and gas companies failed to increase output and to help Americans hard-hit by high fuel prices, they would face a higher tax on their excess profits as well as other restrictions.

GRI CEO responds to ‘big four’ transparency insights

Most multinational companies are starting to report tax affairs with the Global Reporting Initiative’s standard, according to insights in KPMG’s corporate transparency survey.

Eelco van der Enden, chief executive of the GRI in Brussels, said on Monday, October 31, that it is now abundantly clear that comparable sustainability reporting is widespread across countries and sectors.

“The GRI offers the only reporting standards used by a majority of companies in all regions,” he said.

“What the survey does not reflect are new developments in the corporate reporting landscape, including incoming sustainability standards from the IFRS Foundation and the EU,” he added.

“I can reassure GRI reporters that we have an essential bridging role across both these initiatives, underlining the growing relevance of our standards.”

Since it was launched in 2019, the GRI standard has been taken up by 78% of the largest 250 multinational companies, but there are plenty of holdouts. Investors at Amazon, Cisco and Microsoft have lobbied for the standard this year.

Next week in ITR

ITR speaks to tax professionals about how the development of new key performance indicators will affect the transfer pricing policies of the companies they work for.

Meanwhile, the ITR team will cover why lawmakers favour carbon border adjustment mechanisms over other carbon pricing systems as the costs of emissions have increased globally.

ITR will also report on the OECD’s Treaty Relief and Compliance Enforcement standard as a possible template in Europe’s incoming blockchain-based withholding tax system. This will make it easier to organise other reporting standards too.

Readers can expect these stories and plenty more next week. Don’t miss out on the key developments. Sign up for a free trial to ITR.

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