Financial Daily from THE HINDU group of publications
Saturday, Jun 15, 2002
Columns - Detaxfication
EVEN as Spiderman weaves his web in theatres, the Italian police undertook Operation Spiderweb to bust a large international criminal network operated by Russians to launder money and traffic in drugs and arms. The cash flowed to Europe from Russia and CIS countries legally and illegally, then it was returned in the form of various equipment, furniture, timber materials, clothes, and so on.
More facts have emerged that the major laundering centre was Rimini, on the Adriatic Sea; that it was the extortion and threats against Russian businessmen that sparked off the probe in 1997-1998; that Chechen terrorists provided security guards for smuggling shipments; and that a part of the Russian mafia backed up the Chechen guerrillas that were in touch with Al Qaeda.
It seems the money originated in Russia, got laundered in the US before being returned to Europe, the crime organisers managing to clean dirty money by buying and selling companies and financial instruments.
What does it show? That even crooks want their money clean.
Old = new
BANGLADESH'S latest Budget has proposed sweeping tax rises for a range of imported food items, including sugar, fruits and fish but cut company tax, new-car import tariffs and those on televisions and refrigerators. There is a 7.5 per cent import tax on computer hardware and software.
Buckling under pressure, the Government wants to relent on the proposed ban on import of reconditioned vehicles but does not intend allowing any depreciation in the assessment of old and used motorcars. As a result, the price of reconditioned vehicles could shoot up to the level of new vehicles, it is felt.
A case of old for new.
SWISS banks have been known to provide the much-needed secrecy to their customers. However, they are under fire from the Organisation for Economic Cooperation and Development (OECD) that the country had been less than co-operative in assisting Holocaust survivors and their relatives recover stolen assets after the war.
The bankers' association has pointed out that the Swiss authorities provide full judicial assistance in the investigation of crimes that are punishable under Swiss law.
Those intending to use the Swiss services could benefit from reading their law.
PHARMA giant Glaxo is facing a multi-billion dollar tax fight with the US Internal Revenue Service, that it had improperly avoided a significant portion of US taxes between 1989 and 1999. At the core of the tax battle is transfer pricing by the parent to the US subsidiary, tilting profits in favour of the parent. The company seems to be unfazed as it had made "adequate provision for any tax liability" since the profits reported and taxed in the US "fairly reflect the activities carried out in the US".
Looks like the company has medicine for the tax virus too.
FOR long, everybody has been criticising Russia for its poor legal system and high taxes. Now, Russia has put in place a massive three-part Civil Code to enhance the effectiveness of its legal system, and create a more business-friendly tax environment. Personal taxation would be a 13 per cent flat rate.
And, for businesses, the move is to replace a variety of taxes such as a social tax on salaries of up to 35.6 per cent, a 5 per cent sales tax, 20 per cent VAT, a 5 per cent advertising tax, a 2 per cent property tax, a 24 per cent tax on net profits, and so on with an option to pay a 20 per cent profit tax or an 8 per cent tax on revenues.
JAPAN is itching to meddle with the criteria for levying tax. With profits alone being the base for computing corporate tax, and two-thirds of Japanese companies making a loss, revenue collections have taken a severe beating. So, the idea now is to have other criteria such as the number of employees a firm has, or the size of its capital, and so on. They call it pro forma taxation, something which critics say will not only negatively affect employment and research and development activities, but will also create tax increases beyond the capacity of most small and midsize businesses to shoulder.
But `pro forma' gives an impression that one could pay the tax `pro forma'.
ISRAEL is fighting a war, almost every other day, and is trying to pay for the same by introducing a 1 per cent tax on the value of stock market investments and a 15 per cent capital gains tax on investment profits. The Government plans that by 2008, the maximum amount of tax an individual will pay on his income will be 49 per cent, as opposed to the current rate of 60 per cent.
Anybody complaining here?
"That's why I keep it sheathed."
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