International Updates

  1. I.M.F. expects members of Gulf Cooperation Council to introduce taxation to combat low oil prices

In its latest report, the International Monetary Fund suggests that introduction of VAT across the countries of the Gulf Cooperation Council could raise GDP by a staggering 2%. It seems Gulf Monarchies are already taking steps to implement the suggestion with UAE reportedly studying draft VAT laws and effecting subsidies on gasoline in 2015. Saudi Arabia has approved plans for a 2,5% tax on undeveloped land to propel property development. Questions remain whether the zero tax trade zones will continue to be sustainable in countries that used to be heavily dependent on oil production to fund their expansion.

  1. US courts getting ready to pursue “copyright infringement” against Kim Dotcom for Megaupload

Megaupload founder German-national Kim Schmitz aka Kim Dotcom  can now be extradited to the US to face multiple charges including copyright infringement, racketeering and money laundering for file-sharing site, according to the latest ruling of New Zealand court delivered December 23. Kim Dotcom disappointed with the ruling, has reportedly vowed to fight it on appeal and to instigate legal action against the Hong Kong Department of Justice seeking over USD 2 billion in damages for having his site brought down. Megaupload, founded in 2005 in Hong Kong, was used by millions to share movies, TV shows, songs and pictures.

  1. Publicly listed law firm known for its class actions, now potentially on the receiving end of a class action

An inquiry probed by the Australian regulators over rumoured failure to keep up proper systems and questions over its accounting practices, has landed Slater & Gordon, one of the first ever publicly listed law firms, in serious trouble. The Australian law firm’s share value has dropped over 87% since an April deal to purchase a unit of Quindell, a UK insurance claims management firm recently renamed to Watchstone in an attempt to refresh its plummeting public image. The root of the problem lies with S&G’s u-turn walking away from a 2016 earnings guidance showcasing lower than estimated UK trading results, the firm had affirmed only weeks earlier. Holders of Slater & Gordon shares purchased between April and December 15 of this year, are called upon by S&G rival law firms including ACA Lawyers and Maurice Blackburn Lawyers to come forth with their complaints in an historic class action preparation.

  1. Volkswagen emissions cheating update: triggering largest consumer legal actions both sides of the Atlantic

It is reported that over 500 civil lawsuits have been filed to date in the US by VW consumers, investors and dealers post wake of confirmations that the German automaker cheated on emissions tests. In a class lawsuit unlike any other, over 47 US state attorneys-general offices have joined forces to tackle the results of the admitted VW wrongdoing, focusing their attention on the alleged misleading practices and potential breaches of environmental law. Meanwhile, a UK-based product liability law firm Leigh Day has reportedly received over 8,000 potential VW-related claims, in what appears to be the largest consumer legal action in the UK.

  1. Andorra takes leaps forward on automatic exchange of financial information

As reported by the OECD, Andorra recently signed the Multilateral Competent Authority Agreement, taking a significant step forward in its commitment to implement automatic exchange of financial account information in time to exchange in 2018. The Multilateral Competent Authority Agreement lays the groundwork for the international operational framework on automatic exchange, seen as the primary step for ensuring its fast implementation. It is worth noting that Andorra is the 75th jurisdiction to sign the Agreement.

The agreement on automatic exchange of information was signed by Andorra during a meeting of experts that took place in New Delhi, India which hosted the Global Forum on Transparency and Exchange of Information for Tax Purposes.

During the Global Forum meeting, participants discussed progress toward implementation of the new global standard on automatic exchange of information, and the ways in which it can be effectively implemented. It is worth noting that many jurisdictions are now updating domestic legislation to ensure that financial institutions report information on financial assets held by non-residents. In accordance with the terms of the Agreement, financial information will be collected from 1 January 2016 in around 50 jurisdictions, for automatic exchange between authorities in 2017.

It is important to note that the Global Forum has established a real-time monitoring process to record delivery of commitments made and to identify areas where support is still required.  It has also begun assessing confidentiality standards and data safeguards in all committed jurisdictions.

  1. BEPS Update: Israel signs convention on administrative assistance in tax matters

In late November, Israel signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, rendering itself the 91st nation to accede the world’s leading instrument for boosting transparency and combating offshore tax evasion.

The Convention provides for all forms of administrative assistance in tax matters: exchange of information on request, spontaneous exchange, automatic exchange, tax examinations abroad, simultaneous tax examinations and assistance in tax collection. It guarantees extensive safeguards for the protection of taxpayers’ rights.

OECD Secretary-General Angel Gurria noted that “Israel has recognised the importance of improving tax transparency and has implemented the necessary reforms in recent years to ensure that its legal and regulatory framework is up to the task,” during a ceremony at the OECD Headquarters, attending His Excellency the Israeli Ambassador to the OECD H.E. Carmel Shama-Hacohen.

The Convention has since become truly global, and is now seen as the instrument for swift implementation of the new Standard for Automatic Exchange of Financial Account Information in Tax Matters developed by the OECD and G20 countries. It will also be critical for implementation of automatic exchange of country by country reports under the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project, and is a powerful tool in the fight against illicit financial flows.

  1. Trade update: Russia severs commercial ties with Turkey

Russian retaliation towards Turkey over the shooting down of the Russian fighter jet after it veered into Turkish airspace, continues with implemented measures taken to embargo Turkish food products and tourism, reportedly reaching a hit of over USD 10 billion for Turkey. As reported in the Financial Times, Oleg Safonov, head of the federal tourism agency, stated that co-operation with Turkey in the tourist sector would be discontinued.

According to Mr. Safonov, Turkey had received revenues of about USD 10bn a year from Russian inbound tourism. “It’s absolutely clear that Turkey won’t be earning this money any more,” he said.

It is worth noting that this significant shift in Russian foreign policy comes just a year following the announcement of the re-direction of the South stream gas pipeline through Turkey. The change in Russian foreign policy is expected to benefit EU on multiple levels, including the joined forces in the fight against ISIS.

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