UK Times link is here (may be gated).
The Union budget has imposed a 5 per cent tax on foreign travel packages bought from tour operators with effect from April 1, 2020.
Tour operators are liable to charge the amount as TCS (tax collected at source) when the package is bought. For those who do not have PAN or Aadhaar, the TCS rate will be 10 per cent. Although the buyer will be asked to pay the TCS upfront, his or her overall tax burden in a year will remain the same as the TCS amount will be set off against the overall annual tax outgo.
This suggests the government might not be able to collect additional revenue through this measure, and the move might only be to widen and deepen the tax net through “monitoring”.
“It appears that the provision to impose TCS on overseas tour packages is a way for the tax department to monitor foreign travel,” said Asim Choudhury, principal associate at Khaitan & Co.
In January, the IT department had proposed a detailed tax return form for those who spent more than Rs 2 lakh on foreign travel. However, the proposal was rolled back after widespread protests.
Travel industry participants said the tax department periodically sought names of people travelling abroad from tour operators. This is usually done to check if the spending on a tour is commensurate with the income shown in the annual return.
Anil Punjabi, eastern region chairman of the Travel Agents Federation of India, said the new tax could result in travellers finding ways to dodge buying tour packages. “Instead of buying tour packages from us, they will either curate a package themselves or take help from friends or family staying abroad to book flight tickets or hotels,” Punjabi said.
The budget has also tried to plug remittances sent abroad. An authorised dealer receiving an aggregate amount of Rs 7 lakh in a year shall also be liable to collect TCS at 5 per cent.
40% of multinational profits are shifted to tax havens each year
Source: Missing Profits
Globally, about $650 billion in profits are shifted to such tax havens by multinational from all countries. This fascinating research project from the University of California at Berkeley and the University of Copenhagen is an attempt to track all of those tax avoiding dollars, to see which countries attract and lose profits in this shell game.
The loss of profit is the highest for the (non-haven) European Union countries. U.S. multinationals shift comparatively more profits (about 60% of their foreign profits) than multinationals from other countries (40% for the world on average). The shareholders of U.S. multinationals thus appear to be the main winners from global profit shifting. Moreover, the governments of tax havens derive sizable benefits from this phenomenon: by taxing the large amount of paper profits they attract at low rates (less than 5%), they are able to generate more tax revenue, as a fraction of their national income, than the United States and non-haven European countries that have much higher tax rates.
Rick Ferri has a new book coming out that I can’t wait to read. In the meantime, here’s something he put together illustrating the three costs that investors must control if they’re going to be successful…
Figure 1: The Investment Cost Triangle with Components
Some costs in Figure 1 are easy to identify and quantify while others are not. Structural costs are generally available because most fund fees and expenses are required to be disclosed by law. However, tax costs are more difficult in that they have to be extracted from tax return data. Behavioral costs are the most elusive and difficult to quantify because there’s very little data available. It also doesn’t help that human beings are overconfident and don’t want to be reminded of behavioral shortcomings.
Read the rest, this is the important stuff – much more important than the latest macro opinions on Greece or Guernica.
An official statement (issued after a national fiscal work conference) from China says
Expectations are that the budget deficit will rise to 3% of GDP
Note – the official statement the China Daily is reporting on was out on Monday, and its impact may well have already flowed through to the AUD, which was up during European and US trade overnight.
Karl Marx died in March 1883, yet there has been a rebirth of the ideas he detailed on the inherent flaws of capitalism. Recently, Paul Tudor Jones gave a ‘Ted Talk’ about capitalism needing re-definition. My paper entitled ‘2014 and Beyond’ began with the sentence, “Modern day capitalism appears to need a different moniker”. It is quite possible that future developments in capitalism will have profound and on-going influence on markets and valuations.
Let me first go on record and say that in the 135 years since Marx’ death, capitalism has been the single greatest engine for human advancement. It has certainly been an outstanding way to organize the production and distribution of goods and services. Its free-market structure encouraged innovation, leading to new methods and products whose technological advancements allowed for globalization and the general shrinking of the world. Entrepreneurship aided improvements to health and education, and was the cornerstone to economic progress. No other social construct in history has done more to advance the human condition, or lift more people out of poverty, than capitalism.
A capitalist structure’s main quest is to ensure the real appreciation of capital. Corporate leaders are incentivized to maximize shareholder value at almost any cost: the best means is to increase output per hour worked (productivity). Can this be sustained forever? (more…)
Here’s something you don’t hear very often. Greece’s public finances are in very healthy shape.
Over the first four months of the year, the Greek treasury boasted a primary budget surplus of €2.4bn. This surplus, which does not include debt interest repayments, came in well above a forecast of just €566m, according to the Greek Ministry of Finance.
After more than 16 months in office, the Syriza government is managing to do exactly what its creditors demand – cut spending and raise taxes. The €2.4bn surplus was also better than the €2.1bn reached over the same period last year.
Athens’ coffers were boosted by better than expected tax revenues, which came in €325m above target at €14.11bn from January to April. Spending meanwhile came in at an impressive €2.28bn below target.
Squabbling over the state of Greece’s primary budget surplus has emerged as the latest sticking point between its international creditors. (more…)
Could you survive on just $2.50 a day? According to Compassion International, approximately half of the population of the entire planet currently lives on $2.50 a day or less. Meanwhile, those hoarding wealth at the very top of the global pyramid are rapidly becoming a lot wealthier. Don’t get me wrong – I am a very big believer in working hard and contributing something of value to society, and those that work the hardest and contribute the most should be able to reap the rewards. In this article I am in no way, shape or form criticizing true capitalism, because if true capitalism were actually being practiced all over the planet we would have far, far less poverty today. Instead, our planet is dominated by a heavily socialized debt-based central banking system that systematically transfers wealth from hard working ordinary citizens to the global elite. Those at the very top of the pyramid know that they are impoverishing everyone else, and they very much intend to keep it that way.
As Credit Suisse tantalizingly shows year after year, the number of people who control just shy of a majority of global net worth, or 45.6% of the roughly $255 trillion in household wealth, is declining progressively relative to the total population of the world, and in 2016 the number of people who are worth more than $1 million was just 33 million, roughly 0.7% of the world’s population of adults. On the other end of the pyramid, some 3.5 billion adults had a net worth of less than $10,000, accounting for just about $6 trillion in household wealth.
And since this is a yearly report, we can go back and see how things have changed over time. (more…)
