August 14, 2006

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To the Hong Kong government's surprise, there is not a single group that has come out in support of its proposed GST. Even erstwhile reliable toadies such as the Liberal Party have turned their back on the idea. All this less than a month into the nine month "consultation period". The situation is dire, reports the SCMP:

The government will try to rally public support for a broadened tax base following a rethink of its strategy for the consultation on a goods and services tax (GST), which has so far met overwhelming opposition.
The new strategy will be implemented after Financial Secretary Henry Tang Ying-yen returns today from his two-week holiday...

"It is time for us to refocus the discussion on the GST, to make sure people have rational and in-depth debates [on the need for a new tax] in the next stage of consultation. Otherwise, the discussion cannot go on," the source said.

We all know what that means: endless TV ads extolling the virtues of the GST, dressed up as a public service announcement. The current ad cycle includes such edge of the seat issues as appointing even more politicians to do not very much. It makes me nostalgic for those ads on stormwater drains and old people. Meanwhile the government faces a problem: if it can't change people's minds in the next eight months (and it looks unlikely), what do they do with their GST idea? Or perhaps it is an idea the government is happy to see fail as it allows the business as usual system of selling off land to the property cartel? Henry Tang going on holidays only two weeks after launching the GST idea clearly shows what he thinks of the thing. This way he can say he tried, he headed public opinion and he moved on.

The only question is how much taxpayer money has been and will be spent on this fruitless exercise?

PS: I can heartily recommend a holiday at Sanya on Hainan Island, especially if you speak Russian.

posted by Simon on 08.14.06 at 09:14 AM in the Hong Kong category.


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Carousel Fraud Running Rampant In The UK

by Jason Gorringe,, London 15 August 2006

Official trade figures have revealed a massive increase in value-added tax fraud in the UK in the three months to the end of June 2006.

According to the UK's Office for National Statistics, almost GBP10 billion (EUR14.8 billion) of the country's exports were associated with Missing Trader Intra-Community fraud (MTIC), or carousel fraud, in the second quarter of the year, up 50% compared to the first quarter.

Carousel fraud has now reached such proportions that it is distorting the UK's trade data. Raw trade data suggested the the UK's exports rose by 39% year-on-year in the second quarter, but when the ONS factored out possible MTIC fraud, this falls to a 12% increase.

In its quarterly inflation report last week, the Bank of England also complained that carousel fraud makes it "extremely difficult" to accurately assess trade flows.

The fraud is largely perpetrated using goods such as mobile phones and computer chips, but also includes other electronic goods. It involves goods imported VAT-free from other EU Member States being sold through contrived business-to-business transaction chains in the UK, and subsequently exported. The tax loss occurs when the VAT charged on the initial sale of the goods in the UK is not paid to HM Revenue & Customs because the seller disappears. The purchaser can still reclaim the VAT, so the loss crystallises when the trader who exports the goods from the UK makes a repayment claim.

However, MTIC is a European concern, and some estimates have put the total loss of VAT within the EU at EUR50 billion annually. This has prompted some European governments, including the UK, Germany and Austria, to seek permission from Brussels to change VAT regulations to apply 'reverse charging' under which the purchaser of the goods, rather than the seller, will be liable to account for the VAT on the sale. So far only the UK has been given permission to change its rules to combat the fraud.

Momentum for action to combat the problem is also growing within the European Commission. In a paper published earlier this year, Taxation Commissioner Laszlo Kovacs presented some radical proposals to counter carousel fraud, but it is thought the EC will take a more conservative approach to the problem by enhancing administrative cooperation and improving safeguards in the current system.

posted by: gunlaw on 08.15.06 at 03:05 PM [permalink]

Exciting website.

posted by: Kaylee on 09.11.06 at 09:11 AM [permalink]

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