German Bundestag Adopts 2013 Budget

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The German Bundestag, or lower house of parliament, has recently adopted the government’s 2013 federal budget, providing for a reduction in the pension insurance contribution by 0.7% to 18.9%, and for the abolition of the highly unpopular practice fee.

According to the German finance ministry, the Bundestag’s decision underscores the successful strategy implemented by the government, which has managed to achieve an almost balanced structural budget after three years of consistent fiscal consolidation. This has been achieved by maintaining expenditure at an almost constant level and by using rising tax revenues to reduce the deficit.

Germany’s 2013 budget provides for a structural deficit of EUR8.8bn (USD11.4bn), corresponding to 0.34% of gross domestic product (GDP). This will enable the government to adhere to the debt brake rule at federal level three years earlier than required.

Enshrined in basic law, Germany’s debt brake rule provides for a maximum structural deficit from 2016 of 0.35% of GDP. The government aims to completely eliminate the structural deficit by 2014.

Polish President ratifies Protocols amending Poland’s DTAs with Iceland and Luxembourg

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On November 16, 2012, Polish President Bronislaw Komorowski ratified Protocols amending Poland’s double taxation agreements (DTAs) with Iceland and Luxembourg.

Mexico’s new DTAs with Lithuania and Ukraine

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Mexico’s new double taxation agreement (DTAs) with Lithuania and the Ukraine will enter into force on November 29, 2012, and December 6, 2012, respectively.

China opposes European Union (EU) emissions tax

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The European Union’s (EU) tax on non-EU international airlines for their carbon emissions has once again come under fire from China. China’s chief negotiator to the ongoing United Nations climate change talks, Xie Zhenhua, has said that while China opposes the EU’s Emissions Trading Scheme (ETS), it is willing to seek a solution.

Xie Zhenhua, who also serves as deputy head of the National Development and Reform Commission (NDRC), added that the ETS is opposed by most non-EU countries because it fails to comply with relevant international rules and conventions. The ETS was extended to aviation activities from or to European soil in January. Airlines operating into and out of the EU were thus required to surrender varying emission allowances and to purchase any additional permits outside of their free allowance.

However, earlier this month the EU announced that it would defer the international aspects of the ETS for aviation for one year. This would allow the International Civil Aviation Organization to develop a globally-agreed market-based mechanism to tax the emissions of the aviation sector.

Xie Zhenhua said that when the Doha climate conference concludes, China will take part in round table negotiations with the aim of cutting emissions in the aviation sector. He is likely to table proposals to this end, he explained.

Germany announces further tax revenue growth

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Although Germany’s federal government and states will undoubtedly welcome news of additional tax revenues recorded in October, last month’s increase is significantly less than in previous months, due notably to a weakening economy. In its monthly report, the finance ministry explains that the additional tax revenues are attributable predominantly to the ongoing positive performance of the labor market.

In October 2012, tax revenues stood at EUR37.7bn (USD48.9bn), up 2.5% compared with the same month last year (excluding local authority taxes). From January to October this year, cumulative tax revenues were up by 5.4% on the year. In September, the government recorded additional tax revenues of 4.2% compared with the same month in 2011.

The ministry reveals that revenues from wage taxes were up 6.7% in October 2012 over the same month last year and notes recorded increases in tobacco tax (+2%), motor vehicle tax (+11.5%), the country’s solidarity surcharge (+7.1%), and aviation tax (+20.6%).

In contrast, revenue from value-added tax (VAT) was down –3.7% compared with October last year, standing at EUR15.4bn.

Taiwan Announces Income Tax Cuts

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It has been published on 28 November 2012 that the Ministry of Finance has announced that, because of the inflation linkage within Taiwan’s tax code, individual income tax thresholds and brackets will be increased automatically next year.

As inflation has exceeded 3% since deductions and thresholds were last restructured, the government is expected to make changes that will entail a loss of up to TWD7.5bn in revenue, and help some 3.5m Taiwanese taxpayers with the income tax payable in 2014 on their 2013 earnings.

In particular, the personal tax exemption will rise by TWD3,000, from TWD82,000 to TWD85,000, with the tax exemption for those aged 70 or above rising by TWD4,500, from TWD123,000 to TWD127,500. In addition, the increase in the threshold for a couple will be the greatest, increasing by TWD6,000, from the present TWD152,000 to TWD158,000.

Taiwan’s five tax brackets will also be moved upwards, with more of taxpayers’ income thereby being taxed at lower rates. For example, the lowest 5% tax bracket will apply to taxable incomes up to TWD520,000, a rise from the current TWD500,000.

Similarly, the next 12% bracket will stretch from taxable incomes from TWD520,000 to TWD1.17m (up from TWD1.13m), while the highest 40% bracket would then cover annual incomes above TWD4.4m (up from TWD4.23m).

Oman ratifies the pending Oman-Germany DTA

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Oman’s Sultan, Qaboos bin Said al Said ratified the pending Oman-Germany double taxation agreement (DTA) on November 25, 2012.