Billionaires' Wealth Soars by $2 Trillion in 2024, Report Reveals.
The global wealth of billionaires increased by $2 trillion (£1.64 trillion) in 2024, a rate three times faster than in 2023, translating to an average of $5.7 billion per day, as reported by Oxfam.
The charity's latest inequality report indicates that the world is projected to have five trillionaires within the next decade, a significant shift from last year's prediction of only one trillionaire in the same timeframe.
Titled "Takers Not Makers," the report is released as numerous political leaders, corporate executives, and affluent individuals gather at the Swiss ski resort of Davos for the annual World Economic Forum meeting commencing on Monday.
Oxfam's analysis of billionaire wealth coincides with Donald Trump's inauguration as President of the United States. Trump is anticipated to appoint several billionaires to his close advisory team, including Elon Musk, the CEO of Tesla and SpaceX, and to propose substantial tax reductions for the wealthiest citizens in the U.S.
Simultaneously, the number of individuals living below the World Bank's poverty threshold of $6.85 per day has seen little change since 1990, remaining close to 3.6 billion, which represents 44% of the global population. The report highlights that one in ten women lives in extreme poverty (defined as below $2.15 per day), resulting in 24.3 million more women than men experiencing extreme poverty.
Oxfam has cautioned that advancements in poverty reduction have stagnated, asserting that the eradication of extreme poverty could occur three times more swiftly if inequality were addressed.
Among G7 nations, the United Kingdom exhibits the highest percentage of billionaire wealth stemming from monopolistic practices and cronyism. According to reports, wealth in the UK surged by £35 million daily, reaching £182 billion in 2024.
Last year saw the emergence of four new billionaires, bringing the total in the UK to 57. These individuals include Mark Dixon, the head of the flexible office provider IWG; Sunder Genomal, the founder of Page Industries, a garment company based in Bengaluru; Donald Mackenzie, a Scottish entrepreneur and co-founder of the private equity firm CVC; and Jim Thompson, the founder of the moving company Crown Worldwide.
The majority of the increase in billionaire wealth can be attributed to rising share prices on global stock markets, although escalating property values have also contributed. Residential real estate constitutes approximately 80% of global investments.
On a global scale, the number of billionaires increased by 204 last year, totaling 2,769. Their collective wealth surged from $13 trillion to $15 trillion within a single year, marking the second-largest annual growth since records began. The wealth of the ten richest individuals in the world grew by nearly $100 million daily, and even if they were to lose 99% of their wealth overnight, they would still retain their billionaire status.
The report highlights several prominent billionaires, including Jeff Bezos, the founder of Amazon, whose net worth stands at $219.4 billion. His Amazon enterprise is responsible for over 70% of online purchases in Germany, France, the United Kingdom, and Spain. Additionally, Aliko Dangote, with a net worth of $11 billion, is recognized as Africa's wealthiest individual, possessing a near-monopoly on cement production in Nigeria and significantly influencing the market throughout Africa.
The findings suggest that a substantial portion of wealth is acquired rather than earned, with 60% attributed to inheritance, cronyism, corruption, or monopolistic practices. The report estimates that 18% of wealth is derived specifically from monopoly power.
According to the real-time billionaires list by Forbes, the wealthiest individuals globally include Elon Musk, Jeff Bezos, Mark Zuckerberg, co-founder of Facebook and Meta, Larry Ellison, co-founder of Oracle, and Bernard Arnault, founder of LVMH. During Trump's inauguration on Monday, Musk, Bezos, and Zuckerberg are anticipated to be seated in close proximity, reflecting the increasing influence of technology companies on political matters.
Oxfam advocates for ambitious measures to significantly diminish inequality and embed fairness within our economic systems.
Anna Marriott, the Oxfam inequality policy lead, said: “Last year we predicted the first trillionaire could emerge within a decade, but this shocking acceleration of wealth means that the world is now on course for at least five. The global economic system is broken, wholly unfit for purpose as it enables and perpetuates this explosion of riches, while nearly half of humanity continues to live in poverty.”
The UK government was urged to focus on economic policies aimed at reducing inequality, which should include increased taxation on the wealthiest individuals.
“Huge sums of money could be raised, to tackle inequality here in the UK and overseas and provide crucial investment for our public services. For the first time, with the groundbreaking G20 agreement to cooperate on taxing the world’s super-rich [last July], there is genuine momentum to implement fairer taxation globally.”
The staggering $2 trillion surge in billionaire wealth in 2024, while millions remain in poverty, underscores a deeply flawed global economic system that favors the ultra-rich. Oxfam's findings reveal the urgent need for systemic reforms to address inequality, ensure fair wealth distribution, and prioritize the needs of the many over the gains of the few.
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With nearly half of humanity living on less than $6.85 per day, the rise of monopolistic practices and cronyism further widens the gap. Governments must take decisive action, including fair taxation and robust social policies, to foster a more equitable future and prevent worsening disparities.
In the last Quarter of 2023, it was confirmed that the UK had fallen into recession. The picture of the UK over the last decade has been one of stagnation or decline. Productivity has grown by just 0.9% per year since 2008, and as per the Centre for Macroeconomics May 2022 Survey, it is believed that the UK will continue to suffer from low growth in the upcoming decade. This was considered to be a result of UK-specific structural issues, one of which being the UK's tax system, which has been described as “complicated, inefficient and beset with perverse incentives that do little to raise revenue” (Tetlow and Marshall 2019).
For some time now, there has been discussion about tax reform in the UK, whether they truly maximise the revenue the Government could bring in, and whether they are still fit for purpose, with some taxes not seeing true reform in decades. With an election looming, both parties looking to win will require additional revenue in order to enact their policies. With growth in the UK stagnant, it's likely that either party would currently have to rely on either borrowing money or cutting spending. Herein lies the argument for reforming the taxes we currently have in order to increase the revenues the government can earn whilst simultaneously making them less complicated.
Taxing Capital vs Taxing Labour
One of the key battlefields is where the balance of taxation falls in the UK. It can be argued that in the UK, labour is taxed far more aggressively than wealth. This can be best seen by the current Prime Minister Rishi Sunak. Mr Sunak recently published his tax returns in which we learned that he paid £508,308 in the financial year 2022-23 on overall earnings and gains of £2.23m. This is an effective rate of tax of 23%, which is far lower than the top rate of income tax, which is 45%. This is largely due to his earnings in the US being taxed at source, and capital gains tax is much lower at 20%.
Capital Gains Tax
This raises a good question, why is a millionaire able to pay less in tax than for example, a Doctor? The answer is that capital gains tax is very favourable to those with wealth. The capital gains tax is targeted at realised capital gains. Realised capital gains are the amount of profit made after selling an asset, usually real estate or stock investments. The ‘gain’ is the amount earned by the sale minus the original amount. A capital gains tax will then tax the seller on the profit made from the sale.
For some time now, capital gains tax has been lower than income tax. This has resulted in those who earn in excess of the highest tax bands to re-characterise their income. As capital gains are taxed lower than income tax, a lot of business owners now take small salaries or in some cases no salaries and instead take money out of their company in the form of capital gains.
So, how can we reform this tax to make it more suitable? In 2023 the Economy 2030 Inquiry by the Resolution Foundation released a report suggesting the following reforms:
"The report proposes aligning the tax treatment of these different income sources by increasing tax rates on self-employment and rental income, enabling the rate of employer NICs to be cut by one per cent. Moving towards equal treatment would also mean increases in the rates of Capital Gains Tax, such as from 28 per cent to a top rate of 53 per cent for second homes, and a top rate of 37 per cent for shares. Crucially though, the report argues that this would be combined with a major tax cut, with no tax paid on gains that are merely in line with inflation. The result would be a net Capital Gains Tax cut for many, with anyone seeing an annual capital gain for shares of 8 per cent or less facing a lower net tax rate than the 28 per cent rate that George Osborne oversaw between 2010 and 2016."
National Insurance & Income Taxes
Another area for reform is income taxes. Both National Insurance contributions (NIC) & Income taxes are overly complicated. Both have a series of rules and exemptions that make it difficult to calculate. For example, Resolution Foundation's 2023 report provides the following example:
"A common example of this complexity is the ‘hidden’ 60% effective marginal tax rate that people must pay if their annual income falls between £100,000 and £125,140 due to the loss of personal allowance, despite a statutory income tax of 40%. Similarly, employees face different effective marginal tax rates depending on how their income is structured. For instance, the effective marginal tax rates for employees in the top income bracket (earning more than £125,140) can vary significantly, peaking at 53.4% when employer NICs are included or 54.5% paid on income from dividends, falling to 47% paid on self-employment income, 45% on rental income, 28% on gains from property, and as little as 0% if an employee keeps their income in a company and then emigrates".
In order to uncomplicate this tax, one solution is provided by Broome et al. (2023), who suggest equalising tax rates on different kinds of income and removing very high marginal rates, through higher dividend and capital gains taxes and higher top National Insurance rates for the self-employed, offset by indexing capital gains to inflation, a cut in employer National Insurance, reinstating the personal allowance above £100,000, and abolishing the High Income Child Benefit Charge.
Property Taxes
When we examine property taxes, we see further examples of poorly designed taxes that need updating or reform. Council tax, stamp duty, and business rates which bring in near 9% (£90 Billion) of the UK's tax revenues are all flawed in their own ways.
Council tax is a levy on properties, but it is based on house prices in 1991. In an article in the New Statesman entitled "Britain's Great Tax Con" Harry Lambert wrote:
"If you live in Burnley, where homes are cheaper than many other parts of the UK, you will on average pay 1.1 per cent of the value of your home in council tax every year. If you live in a typical property in Kensington and Chelsea, where council tax has scarcely risen but homes have rocketed in value since QE – leaping from 24 times earnings in 2010 to 38 times earnings in 2022 – you will pay 0.1 per cent. The burden of council tax is ten times as great in Britain’s poorest areas."
A fairer way to tax property would be to replace the tax with an annual proportional property value tax based on up-to-date house valuations. Harry Lambert noted that by setting a flat 0.5% tax on house valuations you would raise the same revenue whilst cutting taxes for 3 out of 4 people and eradicating the need for Stamp Duty Tax. So, whilst it would not increase tax revenue, it would simplify the property tax as well as reduce the increasing economic equality in the UK as well.
In Summary
In Summary, we've outlined several reasons why the UK needs tax reform. Currently, the inequality in wealth is part of the reason that growth and GDP are struggling. By using these tax reforms, the government could free up finances to invest in public services as well as reduce the load on those who rely on those services the most.
Below, Dr Michael Thoene delves into his own recent research to explain why many tax breaks governments offer as incentives can amount to little or no benefit to the intended purpose.
Tax breaks are when the government give you a reduction in your taxes. It can come in a variety of forms, such as claiming deductions or excluding income from your tax return, the main examples are pension contributions, charity donations and if you’re self-employed. They are an important, broadly applicable and potentially efficient instruments for creating incentives for private activities and promoting policy objectives, for example: transport policy environmental policy and many sectoral or horizontal areas of policy, however, I was intrigued to see how effective these tax breaks are because, firstly, tax breaks are not included in government budgets and secondly, have tend to exist for a long time.
I conducted a large-scale evaluation with the University of Cologne of 33 German tax breaks that add up to 7.4 billion euros, focusing on the reductions and exemptions provided for energy and electricity duty, car tax and income tax. These benefits have diverse objectives, including climate protection, housing, worker participation and more. Of these 33 tax breaks, 10 measures got an overall rating of ‘weak’ because they fell short of their expected objectives. These 10 measures add up to a total of just under one million to well over one billion euros per year.
When examining the weak tax benefits, my study found that the objectives of these measures are no longer appropriate in view of the current subsidy policy. In fact, nearly all of the weak tax benefits had been around for a while and it seems that they were introduced and more likely developed, despite it not working, rather than being replaced with a more effective system. Furthermore, the design of the concessions were not all suitable. If the tax benefits had existed for a long time, without explicit intervention, there will have been social and economic changes meaning that from an economic perspective there is no longer evidence to justify the need for state intervention and that these measures either no longer achieve the objectives of the benefits or were not the most cost-effective method.
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The study also looked into the transparency of the tax reliefs and found that they were not accessible as they should be to the public. Transparency is needed to provide pressure to justify and control options in the systems, it is a way to provide politicians and the general public with a good basis of information so that politicians can make informed choices regarding policies. Without transparency, the benefits became ineffective as there is no way to keep them in check. In addition, the tax benefits were evaluated on sustainability. The ones that performed badly were the benefits that had no effect on the UN’s 17 Sustainable Development Goals. Climate change is a very important topic and now people are becoming more aware, they want governments to do something, which is why this new assessment weighs very heavily in the overall score of each benefit.
In sum, the study highlights that if not monitored correctly, most of the benefits miss their purpose or lead to deadweight effects. A singular recommendation on how to improve these tax benefits would be impossible, each concession has their positives or negatives but what can be said is that they need to be reformed or abolished urgently. In their current state, these tax benefits will be very detrimental, losing billions of euros that could be used elsewhere.
This week we learned that Flybe, though a tenth the size of Thomas Cook, is in a similar boat and facing the prospect of laying off over 2,000 employees to save its future. Sky News reported that UK-based Flybe is currently trying to secure financing so as to avoid the job cuts.
Administration and accountancy firm EY are currently on standby, but the BBC said chancellor Sajid Javid and the business and transport departments are due to discuss the possibility of a bailout, not by method of financing, but by potentially cutting air passenger tax duty.
Air passenger duty is charged per passenger on each flight and is a government taxation, which if removed could save the firm from its financial woe.
Flybe operates around 75 planes in over 70 airports around Europe. Almost two in five UK domestic flights are operated by Flybe. 2,000 are at risk if the company goes under. This news comes just a year after it was already saved by a consortium led by Virgin Atlantic.
Those who are against it say that it is a double tax and that it's a basic human right to provide for your children, which the government should have no say in.
A survey of 3,000 Brits by William May, retailers of luxury vintage watches and fine jewellery, questioned what people think the threshold should be on inheritance tax (currently at 40% on estates above £325k). Considering how rapidly house prices have increased over the past few years, many may argue that an inheritance tax free threshold of £325,000 doesn’t seem at all high, and that it should increase. They were also asked whether they think inheritance tax should exist at all.
It was found that overall, Brits feel the tax-free threshold should be raised to £679,000 – more than double the current value. And on average, nearly 3/4 (70%) do not agree with the principle of taxing people on their inheritance...
Interestingly, the survey also found that over half (58%) of respondents did not know what the current inheritance tax rate is.*
The survey found that 74% of respondents feel that personal possessions that might be included in the inheritance tax, such as jewellery, should be excluded.
Moreover, nearly two-thirds (60%) agree that the inheritance tax threshold should be correlated to house prices.
Nearly two-fifths (39%) of Brits admit they wouldn’t declare gifted jewellery from a parent in order to avoid paying the inheritance tax on it.
Respondents were also asked what items they would like to be exempt from inheritance tax and it was found that over one-third (34%) said land. 20% felt jewellery should not be taxed; 18% said artwork; 16% believed cars should be exempt; 7% said vintage watches, and 5% said shares should also be inheritance tax-free.
“Luxury possessions like fine jewellery and vintage watches are priceless in terms of sentimental value, and often in terms of physical value too,” says Nick Withington of William May. “If you’re thinking about investing in a timeless piece, it’s worth planning ahead so it can be passed down (legally) free of inheritance tax.”
*According to UK regulations, inheritance tax is defined* as a tax on the estate – this not only included property and money, but also personal possessions such as family heirlooms and jewellery. Potentially this means that people might be forced to sell items passed down of sentimental value, just to pay the tax on it. While there are exceptions, the current standard inheritance tax is 40% and is charged on the portion of the estate that is above the tax-free threshold of £325,000.
From the characteristics of MITC fraud arrangements to the tangible damage that such schemes can cause, below Jérôme Bryssinck, Head of Government Solutions at Quantexa, talks Finance Monthly through the options for fighting VAT carousel fraud.
Europol believes that missing trader intra-community (MITC) fraud (usually known as ‘VAT Carousel’ fraud) costs authorities around €60 billion annually. MITC is a highly sophisticated form of fraud which can be carried out due to the way that pan-European legislation means cross-border trade may be carried out VAT free. Due to the complexity of the schemes, MITC is hard to fight, and entire legal businesses frequently become unwitting participants in the carousel. Innovative technologies and new policies must be used to tackle this fraud robustly.
What is MITC fraud?
By its nature, the EU trading bloc enables the converging of regulations and standards and the removal of barriers to international export, in order to make trade within the bloc simpler and less expensive. MITC fraud works by taking advantage of the EU legislation around cross-border transactions- traders receiving services or goods from an entity in the EU do not have to pay VAT, as intra-community transactions are VAT exempt.
To create a ‘carousel’, a criminal will create or buy companies to acquire goods (let’s call them Company A in this example). These companies will next buy goods from a company in the EU (Company B). Company A will then purchase goods from Company B, with no VAT being due. Company A will then peddle these goods to a different company (Company C). This company could be a legitimate one, or a company managed and set up by the criminals. Here, VAT will be added to the sale price. Since the goods have been sold domestically, Company A must legally declare the VAT it has included on the goods, and pay this to HMRC. In the case of MITC fraud, though, Company A will vanish, and the VAT will not be paid. The goods will then be passed through many other companies which function as a buffer so as to complicate any potential investigation. Next, a company (Company D) will send these goods out of the EU and reclaim the VAT that was not in fact ever paid to HMRC. This loss of tax revenue negatively affects the provision of crucial public services for the country including education, policing and healthcare, and also increases the tax obligations of honest taxpayers.
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How MITC fraud is being fought
Because millions of euros worth of goods are traded daily, it is hard to identify illegal activity amongst so much legal activity. Combatting VAT carousels is made more difficult by the way that member states need to coordinate across separate national borders. The data needed to investigate MITC fraud criminals will commonly be stored in different forms and will be owned by disparate regulatory or government bodies across the EU. In many cases, ‘carousels’ will already have dissipated by the time authorities realise criminal activity has occurred, allowing the criminals to remain unidentified and the money to have already been lost. Those seeking to fight MITC fraud are therefore unlikely to be able to act to prevent such crimes from being carried out.
Bettering our defences
Technology must be leveraged more effectively to empower tax departments to proactively tackle MITC fraud. A priority is to speed up the sharing and analysing of data at a European level. Data analytics technology should be used to better comprehension of the broader context of each individual company, so that tax departments build a bigger picture of the trades that are being carried out.
Technology must be leveraged more effectively to empower tax departments to proactively tackle MITC fraud.
Such technology would be able to identify anomalies and red flags, such as if a company with an annual turnover of €200K was able to order €2 million’s worth of goods. Under an improved system of data gathering and sharing, VAT information would be collated and interpreted by machines, and AI would be utilised to create risk models that would help improve the accuracy of identifying anomalous results. This information could be shared with a case handler, who would be able to act more swiftly to investigate criminal activity.
As well as this, each EU Member State needs to improve their operational and analysis capabilities. The pace at which each state reacts to the flagging of anomalous results needs to improve if action will be taken effectively. At present, many member states do not have the technical means required to enable them to bring together external data. Some member states must also grow the amount of information they are gathering from traders. VAT receipts, for example, could be collated in a machine-readable format which would improve data collection.
Next steps
VAT Carousel fraud has so far proved difficult for EU Member States to combat. If we are to prevent criminals benefiting at the expense of the taxpayer, we will need a pan-European, multi-pronged approach. The amount of information gathered and collated about company and trade accounts must increase, and we also need to make use of innovative technologies which will facilitate the garnering of actionable insights from the vast amounts of data collected. Only by enacting such a systematic approach will be truly be able to tackle this crime.
Making Tax Digital (MTD) is the Government's ambitious plan to transform the way taxpayers interact with HMRC. With only a few exemptions, VAT-registered businesses trading over the VAT threshold of £85,000 are required to keep records in a digital format, ensure that the transfer or exchange of VAT information is digitally linked and submit their VAT return information to HMRC using MTD compatible software.
HMRC estimates that 1.2 million businesses are subject to the MTD rules, which became law for VAT periods starting on or after 1 April 2019 (or 1 October 2019 for organisations which are deemed to be more complex). Depending on their VAT return stagger, a significant number of these will be required to submit their first quarterly VAT return to HMRC using software by the 7 August this year.
Yet figures just released by HMRC show that the financial sector has been one of the slowest to sign up, with 75% of firms yet to register.
Commenting on the new figures, John Forth, the head of RSM's financial services indirect tax practice said: “While it's not clear why financial firms have been so slow to sign up, these figures are pretty shocking.
“It is possible that HMRC have overestimated the size of the problem due to the complexity of the VAT regime. Alternatively, they may have failed to recognise that many financial services organisations will be regarded as complex and will therefore be subject to the 1 October deadline. As a result, we may see this figure come down rapidly over the next few months.
“While HMRC have stated that they won't issue filing or record keeping penalties during the first year, financial firms should not see this as a reason not to register. MTD represents a major change to the way businesses report and pay their VAT, and businesses need to make sure they are ready.
“Currently, HMRC are dealing with 10,000 registrations every day. Clearly there are tens of thousands of VAT-registered financial businesses that need to get their skates on and register at the earliest opportunity.”
(Source: RSM)
If you run operations across multiple jurisdictions you may need to invest in the support of an experienced tech companies that can help you connect the dots.
Steven Smith, Europe Proposition Lead, Corporates, at Thomson Reuters, looks at the challenges that businesses face in being tax compliant across indirect tax, corporate tax returns and year-end accounts across multiple jurisdictions.
Governments around the world are rapidly moving away from the established ‘old’ standard of gathering taxpayers’ information. These changes are not uniform and vary from country to country, with, for example, Spain requesting invoice details every four days, Hungary demanding them at the point of invoicing, and Italy adopting a clearance model (with Greece following suit in 2020).
Fraud and tax avoidance are the driving forces behind governments refining tax processes. By adding transparency to the invoicing process, tax authorities can quickly identify where one party or another may be cheating the system. In countries, such as India, goods and services taxes (GST) have been introduced, which enable authorities to see both sides of a transaction. China has also introduced a very similar process. It really boils down to compliance and data. If a multinational organisation is striving to comply across different jurisdictions, it must be sure that its data is correct, even before an invoice is raised. Are the buyer details correct? Does the invoice meet the criteria to calculate the correct VAT liability? All of this data needs to be present before the finance department starts raising invoices.
Tax avoidance in the UK is not on the same scale when compared to countries like Brazil and Poland. Indeed, HMRC believes that UK corporate taxpayers are far more compliant and as a result it is very unlikely to introduce intrusive reporting such as Security Industry Association (SIA), however, there is still a gap that needs to be filled so initiatives such as Making Tax Digital (MTD) are only the start of more detailed information requests.
But meeting MTD in the UK is just one thing. It’s a very different story for multinationals. Many are firefighting and taking a ‘sticking plaster’ approach to help meet the myriad of tax requirements across different territories. They tend to focus on one particular country at a time, and that focus is driven by audits. And then once that requirement has been met, they simply switch their ‘firefighting’ mode to the next country and wherever the greater risk for non-compliance rests. However, they’re missing a huge opportunity by taking this case-by-case approach rather than looking at the entire organisation’s global footprint.
Meeting MTD in the UK is just one thing. It’s a very different story for multinationals. Many are firefighting and taking a ‘sticking plaster’ approach to help meet the myriad of tax requirements across different territories.
The sticking plaster approach of hopping from one country audit to the next has left a huge mess and many organisations are now in the position where they could be much smarter in the way they store and utilise their tax data. Organisations need to review how much business they’re doing country by country and prioritise by compliance risks. Now is the time to clean up and identify and rectify problem areas before the authorities come calling.
No company is the same and so it is difficult for businesses to know which country to concentrate their efforts on at a particular time. What they can do though is connect the tax dots. By working with a technology partner that operates across multiple jurisdictions and by prioritising countries, organisations can work to meet immediate requirements and add other countries as they come onboard. Working with one partner to meet these requirements means there’s no need to repeatedly hire new people, partners or add different processes as all the tools are available in one place.
Connecting the dots isn’t just about working more effectively across multiple countries though. It’s also about how invoices and indirect tax relates to the company’s corporate tax position, about corporate pricing arrangements and corporate income tax. And it’s about connecting all that internal information and driving greater collaboration across the tax and finance departments so that all parties have a clearer view of the organisation’s financial position.
MTD is just a tiny piece of the indirect tax puzzle, yet keeping records digitally will not only help to ensure a business is compliant but will also provide far greater insight into operations. Global businesses will always have more important, more urgent things to focus on, but they’d be mistaken to ignore the opportunity digital tax has to offer the business, as well as the tax authorities.
For an update on tax in India, Finance Monthly speaks with Shipra Walia, Managing Partner & Lead Consultant at W S & Co. – a Chartered Accountancy firm, rendering comprehensive professional services. Based in Noida, Uttar Pradesh, the company offers statutory audits, GST audit and compliances, tax consultancy (direct & indirect including international and domestic law), valuation, advisory on issues covered under Double Taxation Avoidance Agreements, expat taxation, audit, management consultancy, accounting services, secretarial services, representations before various authorities including Set Com and DRP etc.
How is the corporate tax system structured in India?
India has a dual taxation structure. One is direct tax paid by the taxpayer directly to the government like stamp duty, income tax, etc. and the other one is the indirect tax that reaches to the government through supply chain which is GST/VAT/Excise Duty/Customs duty. While a resident is taxed on their worldwide income, a non-resident is taxed only on income that is received in India, or that arises or is deemed to accrue in India.
How complex is the tax system in India? Are tax disputes commonplace and how are disputes resolved?
Every tax system has some inherent complexities as per the economy of the country. However, the equivalent measures are also there to curb or meet any tax litigations. Further, there are various laws which help with resolving litigations or reaching an agreement at an acceptable level for both parties. Similar, provisions exist for solving conflicts in cross-border transactions. For example, the Double Taxation Avoidance Agreements between India and foreign companies provide for MAP i.e. Mutual Agreement Procedure.
As per the amended provisions, any company whose location and effective management is in India will be treated as an Indian company and will be subject to all domestic laws
Have there been any amendments to India’s tax legislation since we last spoke in 2017?
Recently, India has included the concept of Place of Effective Management (POEM) in our tax legislation. Previously, if the control and management of a company was not located wholly in India, this was considered as a foreign company.
As per the amended provisions, any company whose location and effective management is in India will be treated as an Indian company and will be subject to all domestic laws. The rules also clarify the computation of active and passive business activity, the adherence to global group policies on accounting, HR, IT, supply chain. Additionally, routine banking operations shall not lead to POEM in India and strategic and policy decisions should be relevant in determining POEM, as opposed to routine operational decisions for oversight of day-to-day business operations.
Similarly, a new Goods and Service Tax (GST) was implemented in India in July 2017. GST’s mission is to exclude the multiple individuals and authorities involved in the process and is seen as one of the most influential transformations in the field of tax.
What tax considerations must be taken into account for foreign businesses who wish to expand their business operations in India?
India is a prominent upcoming market. With the government’s focus on “Made in India”, there are various tax benefits available in the country - either based on the product or the activity of the specific business. Under the changes, the initiatives are also driven towards improving exports with various countries.
With the government’s focus on “Made in India”, there are various tax benefits available in the country.
Tax benefits for angel investors, flexible valuation norms, no tax on remittance of profits by a branch of a non-resident company to its Head Office, no dividend distribution tax on Limited Liability Partnerships are amongst the few inbuilt attractions for expanding your business operations in India.
What tax incentives are in place for investors operating in India?
Tax incentives provided in the Indian tax structure can be broadly classified into location-based incentive, industry-specific incentives and activity based incentives. There are various SEZs set up for special benefits to 100% export-oriented units, as well as special international financial services centres (IFSC) which also serve as a catalyst for foreign investors that handle cross-border financial products and services.
Contact details:
Website: www.wsco.in
Email: shipra@wsco.in
Tel: 9811738764
This initiative is called Making Tax Digital (MTD) and is part of the UK’s plan for a more digital future, but not all businesses are ready. If you’re one of them, here Damon Anderson, Director of Partner at Xero explains what you can do to avoid huge fines.
1. Check your eligibility
If your business makes more than £85k each year in taxable turnover, Making Tax Digital for VAT will apply to you from April 1. After this date you won’t be able to complete a paper-based VAT return, or complete your VAT return online at the HMRC VAT portal.
If you suspect your business will soon fall within the VAT threshold, keep records digitally using HMRC-compatible software to stay within the rules.
2. Act now
If you’re eligible, first you need to find an HMRC-approved software vendor. Xero has bridging software to make it even easier to make the switch and it’s MTD tools are now live, are free for Xero users and allow you to:
- Know when VAT returns are due
- Keep a history of the VAT returns that have been filed
- Calculate how much VAT is due
- Identify the method of payment
- Post VAT returns in real time
MTD for VAT will change to the way businesses file their tax, so there’s no escape. If you’re not sure where to turn, speak to an accountant who can advise you. To help small businesses and their advisers to comply, we’ve also created Dexter the digital tax adviser who is putting a friendly face to the legislation.
Keep in mind that some VAT-registered businesses have a deferred start date of October 2019. You can find more information on eligibility here.
3. Know your penalties
HMRC can charge a maximum penalty of £500 for failure to keep the required VAT records. But don’t panic: HMRC understands Making Tax Digital is a big step, and while penalties will apply to record keeping requirements, it is expected to be sympathetic where the trader has made reasonable efforts to comply.
There’s no doubt that businesses are dealing with a lot at the moment and HMRC has said they will not pursue record-keeping penalties when businesses are doing their best to comply with the law. However, eligible businesses should still make the effort to comply by 1st April.
4. Embrace it
Millions of businesses already do so much of their business online, from banking, paying bills to interacting with their customers or suppliers, and many already using accounting software and are seeing the huge benefits. By moving to digital tax, many of the existing paper-based processes will be put to bed, allowing businesses and their agents to devote more time and attention to growing and nurturing their business.
Making Tax Digital will make tax filing simpler and more accurate. The sooner you get used to digital tax filing the more time you’ll have to grow your business.
Below, Finance Monthly hears from Kim Hau, Senior Proposition Manager for ONESOURCE Indirect Tax, Thomson Reuters, on preparing your business for MTD.
HMRC’s move is in-line with the global trend towards a more digital relationship between tax authorities and businesses, as well as increased regulatory guidance from the Organisation for Economic Co-operation and Development (OECD) for greater transparency in tax data.
Digital Records and Submission
The first stage of MTD for VAT mandates digital record keeping and filing for all VAT registered businesses with a turnover of £85,000 or more, providing a “soft landing” period for businesses before mandating the requirement to have digital links between their data. The ultimate aim is to improve the quality of record keeping, while reducing the mistakes often caused by manual processes and reducing the perceived tax gap – of which £12.6 billion relates to VAT.
A recent Thomson Reuters survey on MTD found that 79% of respondents keyed in submissions directly into the government gateway, something that will not be acceptable come April 2019, or, October 2019 for more complex businesses.
Instead, businesses will have to store and maintain all Accounts Payable and Accounts Receivable data in electronic form using functional compatible software. In other words, using technology that can store and maintain records, perform the required calculations, and submit the information to HMRC directly via their Application Program Interface (API). Those wedded to the use of spreadsheets will find that whilst they can continue to be used, they will require additional software to handle the digital submission piece and certain conditions must be met to ensure a digital trail.
Digital Links
The second stage mandates digital links, the requirement that any transfer or exchange of information in the VAT return process is made electronically between software programs, products or applications. This is a move to limit mistakes from manually inputting figures and comes into effect for all VAT registered businesses in April 2020.
The second stage mandates digital links, the requirement that any transfer or exchange of information in the VAT return process is made electronically between software programs, products or applications.
By far, this is anticipated to be the most complex and difficult requirement of MTD for VAT, forcing businesses to assess every single step of the UK VAT return process for each of their entities.
While there will be some flexibility in the first year of MTD going live there will be no bending of the rules. Connecting all digital records will not only help to ensure the business is compliant but will also future proof organisational systems and processes before penalties are enforced.
The Road to Digital Transformation
An obvious first step is for businesses to understand to what extent they are already compliant, focusing on where relevant data is collated, what kind of data is available via digital means and understanding the processes used for producing VAT returns.
At this stage, companies will be able to decide on what level of change is required. However, with further reforms expected after 2020 it is highly recommended that companies do not settle for a “sticking plaster” solution.
With further reforms expected after 2020 it is highly recommended that companies do not settle for a “sticking plaster” solution.
There are many solutions available to meet each gap of MTD for VAT compliance, however piecemeal solutions should be put in context of the general trend towards a digital tax agenda, and their long-term suitability.
Reviewing the options with internal and external stakeholders such as IT, software providers and external consultants will ensure that the most appropriate solution to meet operational needs is selected. This could include considering data security policies, compatibility with existing systems (e.g. ERP) and developing a tax technology strategy. After all, while MTD for VAT is a UK initiative, it is also worth considering the growing impact on tax teams of similar reporting requirements in other jurisdictions.
With the enforcement of IFRS 16 ahead of us, as of January 2019, Nick Turner, Country Manager UK & Ireland at Anaplan, discusses with Finance Monthly the potential opportunities therein.
There’s nothing quite like ringing in the new year. Along with the promises of fresh starts and renewed perspectives, it’s that time of the year that we can set—and dare not forget—lofty goals to achieve in the 365-days ahead.
Effective 1st January 2019, IFRS 16 marks one of the first significant changes to lease accounting standards in 40 years.
The new year represents more than an annual reset button and it ushers in more than new beginnings. It also brings deadlines. This rings especially true for corporate finance teams this year, as the IFRS 16 deadline looms.
Effective 1st January 2019, IFRS 16 marks one of the first significant changes to lease accounting standards in 40 years. If they haven’t already made the adjustments, businesses now have a very limited time to ensure that future accounting processes will meet compliance.
Unfortunately, for companies addressing these changes through spreadsheets and aging technology, time might be ticking even faster because these manual tools can turn such operations into a lengthy, burdensome, and complex undertaking.
What IFRS 16 means for businesses
Beginning on the first day of the year, new standard IFRS 16 will be implemented by the Financial Accounting Standards Board (FASB) and the International Accounting Standard Board (IASB). This standard will impact company balance sheets and how many businesses that rent or lease will operate in the future.
The changes are designed to make it easier for outsiders to compare the performance of different companies.
The new IFRS 16 requirements will eliminate nearly all off-balance-sheet accounting for lessees. Further, it will impact commonly used metrics such as EBITDA and gearing ratios. Why? The changes are designed to make it easier for outsiders to compare the performance of different companies.
Although the changes in performance metrics will make it easier to compare and contrast, they may also affect credit ratings, borrowing costs, and even stakeholders’ perception of a company. This makes it vital that companies understand and prepare for the effects of this new leasing standard.
Technology that turns arduous into effortless
Even though time is winding down on the IFRS 16 deadline, businesses still have an opportunity to implement a solution that can quickly fulfill its requirements—and many are turning to cloud-based, Connected Planning solutions.
Adhering to the new standard with spreadsheets and legacy tools quickly turns burdensome; in contrast, Connected Planning technology supports rapid implementation, easily interfaces with existing enterprise resource planning (ERP) databases, and calculates large volumes of data in real time. Connected Planning gives decision makers instant insight into how to optimise their company’s lease management strategy in context of the new regulations.
The deadline for IFRS 16 approaches and businesses have to determine the best way to comply with the new leasing standard soon. Connected Planning technology offers a way to tackle the complexity of the standard with ease.
