Sin-type taxes around the world

Transcription

1 Sin-type taxes around the world Colleen Freeburg Global Director Indirect Taxes General Motors Company Tel: Jeff Smith Manager, Indirect Tax Pembina Pipeline Corporation Tel: Ela Choina Tax Principal Central Region VAT practice Leader Ernst & Young LLP Tel:

2 Disclaimer This presentation is provided solely for the purpose of enhancing knowledge on tax matters. It does not provide tax advice to any taxpayer because it does not take into account any specific taxpayer s facts and circumstances. These slides are for educational purposes only and are not intended, and should not be relied upon, as accounting advice. The views expressed by the presenters are not necessarily those of Ernst & Young LLP. This presentation is 2018 Ernst & Young LLP. All Rights Reserved. EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms, of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the US IPT s Value Added Tax Symposium 2

3 Session objectives Understand different types of sin-type taxes and other indirect taxes such as carbon taxes and turnover taxes and their global footprint Learn how different sin taxes are imposed and calculated Understand possible basic planning techniques to reduce the related tax burden 2017 IPT s Value Added Tax Symposium 3

4 Consumption taxes Consumption taxes: - General taxes on goods and services: VAT, sales tax, etc. - Taxes on specific goods and services: customs duties, excise and luxury taxes - (sin taxes), taxes on insurance premiums and financial services Consumption taxes (VAT and excise taxes) account for roughly a third of total tax revenues in the OECD countries 2017 IPT s Value Added Tax Symposium 4

5 Excise duties The etymology of the word excise is derived from the Dutch accijns, which is presumed to come from the Latin accensare, meaning simply to tax. Excise was introduced in the mid-17th century under the Puritan regime. It is imposed on certain, typically socially proscribed goods, such as alcohol, tobacco, drugs, fuel, mineral oils, energy and soft drinks. Recently, it has been often imposed on luxury goods, such as cars, furniture (Uganda), air tickets (Egypt, Iraq) and juice (Madagascar). EXCI'SE. n.s.... A hateful tax levied upon commodities, and adjudged not by the common judges of property, but wretches hired by those to whom excise is paid (Samuel Johnson, 1755 Dictionary) IPT s Value Added Tax Symposium 5

6 Main differences between VAT and excise duties Levied on limited range of products Not normally due until the goods enter free circulation (often a later stage in the supply chain) Calculated based on weight, volume, strength or quantity, sometimes combined with value Unlike VAT, a small number of taxpayers at the manufacturing and wholesale stage (but sometimes also levied at the resale stage) May cover a wide range of products like salt, sugar, matches, fruit, juice or chocolate in addition to taxes imposed in order to discourage harmful behavior (tax on alcohol or tobacco) or to encourage responsible behavior toward collective welfare and environment (tax on fuels, cars, etc.) 2017 IPT s Value Added Tax Symposium 6

7 Excise and luxury tax map examples Tax rate up to 10% Tax rate up to 10% Tax rate up to 40% Tax rate up to 40% Tax rate up to 60% Tax rate up to 60% Tax rate up to 365% Tax rate up to 365% Tax rates based on Tax rates based on specific circumstances specific circumstances Other Other USA USA Belgium Belgium Argentina Argentina Bolivia Bolivia Denmark Denmark Korea Korea China China Austria Austria Brazil Brazil Finland Finland Malaysia Malaysia Ecuador Ecuador Colombia Colombia Brunei Brunei Germany Germany Nicaragua Nicaragua Paraguay Paraguay India India Egypt Egypt Hungary Hungary Turkey Turkey Russia Russia Spain Spain Greece Greece Ireland Ireland South Africa South Africa Indonesia Indonesia Italy Italy Peru Peru Luxembourg Luxembourg Thailand Thailand Netherlands Netherlands Venezuela Venezuela Norway Norway Portugal Portugal Switzerland Switzerland 2017 IPT s Value Added Tax Symposium 7

8 Excise and luxury tax rate per country examples Country Tax rate Tax rate up to 10% USA 4.4% 10% Tax rate up to 40% Belgium 8.5% 40% China 1% 40% Ecuador 5% 35% Paraguay 10% 20% Russia 15% 30% South Africa 25% Tax rate up to 60% Argentina 16% 60% Austria 13% 47% Colombia 20% 55% India 15% 55% Spain 0% 51% Tax rate up to 365% Bolivia 0% 80% Brazil 0% 365% Brunei 0% 100% Egypt 50% 200% Greece 5% 85% Indonesia 10% 125% Peru 10% 300% Thailand 0% 87% Venezuela 15% 70% Country Tax rate Tax rates based on specific circumstances Denmark Vehicle: 30% 180%/alcoholic beverages: EUR1.09 EUR per hl/tobacco: 53.75% Finland Vehicle: Co 2 oriented registration tax/alcoholic beverages: EUR399 EUR411 per hl/tobacco: 29% 60% Germany Vehicle: Co 2 oriented tax emission tax/alcoholic beverages: EUR51 EUR133 per hl/tobacco: 21% Hungary Vehicle: various registration type taxes based on age, engine size and emissions/alcoholic beverages: HUF9,870 HUF16,460 per hl/ tobacco: 31% Ireland Vehicle: 14% 36%/alcoholic beverages: EUR0 EUR848 per hl/tobacco: 50.38% Italy Luxembourg Netherlands Norway Vehicle: registration tax, based on the KW of the car and the region/alcoholic beverages: EUR37.75 EUR88.76 per hl/tobacco: 52.41% Vehicle: registration tax, based on weight, fuel type, region, emissions, including CO 2/alcoholic beverages: EUR9.92 EUR47.10 per hl/tobacco: 48.14% Vehicle: registration tax, based on CO 2 working with brackets and fuel type/alcoholic beverages: EUR28.49 EUR per hl/tobacco: 55.09% Vehicle: registration tax, based on :components CO 2, NOx, curb weight, output in kw/alcoholic beverages: NOK3.34 NOK21.72 per liter/tobacco: 48.83% Portugal Vehicle: ISV and IUC based on fixed value given by government/alcoholic beverages: EUR8.22 EUR417 per hl/tobacco: 38.81% Switzerland Vehicle: 4% of import price + CHF5/alcoholic beverages: CHF0 CHF116 per hl/tobacco: 28.79% Other Korea Malaysia Nicaragua Consumption tax from 0% 6% plus surtax Subway bond from 4% 20% Annual vehicle tax from W80 W220 Excise tax Excise tax Turkey Special consumption tax 45%, 90%, 145% Import tax 10% 2017 IPT s Value Added Tax Symposium 8

9 Environmental taxes Environmental tax type Emission taxes Product taxes Transportation taxes Energy taxes Resource taxes Other Examples Greenhouse gases (GHG) Dust from stationary sources Batteries Lighting Other non-green products Vehicle taxes Registration taxes Taxes based on EU Energy Directive Nuclear fuels Aggregates and gravel Mineral extraction taxes Water Packaging and waste Noise pollution Others 2017 IPT s Value Added Tax Symposium 9

10 Environmental taxes Carbon tax form of carbon pricing where tax is levied on the GHG emissions associated with the combustion of fossil fuels Cap-and-trade system for CO 2 and other GHGs introduced first in the EU but now also in California, South Korea and China, for example 2017 IPT s Value Added Tax Symposium 10

11 Canadian Carbon Taxes Regimes Cap & Trade Quebec Ontario Carbon Tax / Levy Alberta British Columbia No System Saskatchewan Manitoba NWT, Yukon & Nunavut Nova Scotia, New Brunswick, PEI & NFLD 2017 IPT s Value Added Tax Symposium 11

12 Cap & Trade and Carbon Tax Cap & Trade Emission credits are allocated, purchased or given to emitters by governments Emission credits are reduced over time Emitter can buy and sell emission credits if they need or have credits Often bought/sold through an auction process or from the government Encourages free-market principles Encourages technological improvements and the benefactor accrues the economic benefit Carbon Tax A tax or levy based upon some measure of emission output (i.e. CO2) Exceptions available to emitters facing international competition Revenue Neutral Most programs introduced have been represented as revenue neutral (i.e. not a tax grab) Anticipate decreases to personal and corporate taxes 2017 IPT s Value Added Tax Symposium 12

13 British Columbia Introduced Carbon Tax July 1, 2008 Originally $10 / ton CO2e increasing to $30 in Rates frozen for 5 years by current BC government in Effect of revenue neutrality results in an effective cap on rates. Carbon Tax Review Announced in 2012 Review ongoing as part of holistic climate policy review. Climate Leadership Team recommendations released November 2015 Decrease PST to 6% Increase Carbon Tax by $10 / ton CO2e per year beginning 2018 No indication yet that BC will act on any of these recommendations. No Carbon Tax on emissions or fossil fuels not combusted 2017 IPT s Value Added Tax Symposium 13

14 Alberta Alberta has had a carbon price in place since July 2007 Large final emitters (LFEs) required to meet emissions targets pursuant to Specified Gas Emitters Regulation (SGER) Reporting is by facility where facility exceeds 100,000 tons CO2e/year Four compliance options: Facility Improvements Emission Performance Credits Offset Credits Climate Change and Emissions Management Fund Credits Covers 45% of all emissions in Alberta Economy wide carbon pricing became effective January 1, 2017 Introduces additional layers to existing carbon pricing which will cover 90% of all emissions in the province IPT s Value Added Tax Symposium 14

15 Proposed Canadian Backstop Program Introduced in discussion paper released May 18, No legislation or regulation yet drafted. Industry consultations ongoing. Pricing to be introduced at $10 per tonne/co2e in 2018 to increase to $50 per tonne by 2022 Intended as a backstop to jurisdictions that do not have a minimum carbon price. Saskatchewan and Manitoba are planning court challenges. Proposed as a hybrid model with emissions reporting alongside a consumption tax in the same model as Alberta IPT s Value Added Tax Symposium 15

16 Excise and other indirect taxes examples of recent changes 2017 IPT s Value Added Tax Symposium 16

17 Excise and other indirect taxes upcoming changes Thailand new excise tax computation method (September 16, 2017) The excise tax computation for all goods (including imported goods) will be based on the suggested retail price (SRP). Formula: excise tax payable = SRP x ETR. China Environmental Protection Tax (EPT) Law (January 1, 2018) The EPT Law stipulates that EPT shall be imposed on pollutants generated from urban sewage and household waste treatment plants that exceed the state s or local disposal standards (to replace existing pollutant discharge fees). Under the EPT Law, taxable pollutants are divided into four categories: air pollutants, water pollutants, solid waste and noise. Gulf Cooperation Council (GCC) excise taxes implemented (end of 2017) Excise tax is to be introduced in the United Arab Emirates (UAE) by the fourth quarter (Q4) of 2017 and in the other GCC member states by the end of The UAE is likely to impose excise tax rates of 50% on carbonated drinks, and 100% on energy drinks, tobacco and tobacco products. Excise tax is different and separate from the value added tax (VAT) of 5% that is to be implemented across the GCC countries by IPT s Value Added Tax Symposium 17

18 Challenges for tax planning Some of the consumption/environmental/sin-type taxes are imposed per unit of volume/weight (e.g., alcohol), per engine size (e.g., cars) or per GHG emission rates (e.g., CO 2 taxes), and not correlated to the value of the imported/sold goods. Complex anti-avoidance measures are built into the local legal system. For example, in the case of luxury/excise tax on goods: Ecuador: Taxable base cannot be lower than ex-works/ex-customs price plus a 25% presumptive selling margin. Philippines: Tax base is a Net Manufacturer's/Importer s Selling Price (NMISP) at which imported automobiles are offered for sale by the importer to dealers, or to the public directly or through their sales agents, but: The NMISP shall not be lower than 80% x (suggested retail price excise tax VAT). The NMISP shall also not be lower than the cost of importation plus the industry profit margin of 10% and other expenses incurred before the automobiles are sold to the market IPT s Value Added Tax Symposium 18

19 Excise tax planning unbundling (imported product) Abroad Import of good, including services Current scenario Good and service import 1,000 VAT (10%) 100 Excise tax (15%) 150 Customs duties (20%) 200 Importer Abroad Import of good Future scenario Good import 900 VAT (10%) 90 Excise tax (15%) 135 Customs duties (20%) 180 Importer Services Services 100 VAT (10%) 10 Example provided: tax savings of US$ IPT s Value Added Tax Symposium 19

20 Excise tax planning unbundling (local sales) Basic good price + optional charge 1,000 Current scenario Manufacturer Excise tax (15%) 150 Final good price 1,150 Third-party distributor Basic good price 900 Future scenario Manufacturer Excise tax (15%) 135 Final good price 1,035 Third-party distributor Separate optional charge 100 Excise tax (15%) 0 Example provided: tax savings of US$ IPT s Value Added Tax Symposium 20

21 Multistage tax Current scenario Service provider 2 US$50.00 Service provider 1 US$ Manufacturer Service Service Total service Turnover tax (5%) 2.50 Service Turnover service Turnover tax included in price 7.50 US$50.00 Future scenario Service provider 2 Service provider 1 US$47.50 Manufacturer Service Service Total service Turnover tax (5%) 2.50 Turnover tax (5%) 2.50 Turnover tax included in price 5.00 Example provided: cost savings of US$ IPT s Value Added Tax Symposium 21

22 Questions Any questions? 2017 IPT s Value Added Tax Symposium 22