Taxes on earnings, investment income, sales and a few other things have gone up already in many countries, and further increases are possible, including a huge one in the United States.
Another source of unease and doubt for taxpayers is a trend toward increases of other sorts: in scrutiny by revenue authorities, reporting requirements for individuals and businesses, and legislation to close tax code loopholes.
International taxpayers — expatriates and others whose personal or professional lives extend across borders — may find conditions particularly challenging. Dealing with a changing tax regime is tough; dealing with more than one even more so. Not only that, but some authorities are focusing more keenly on foreigners or on their own citizens living elsewhere. On the bright side, certain countries still treat foreigners better than their own citizens.
Navigating a landscape that may have been familiar but is suddenly a treacherous terra incognita is not easy, tax advisers warn, but it can be done as long as taxpayers are well prepared, take care to avoid mistakes and resign themselves not to go too far.
“There is no magic solution, no one structure that will work,” said Gavin Leckie, a wealth adviser and specialist in expatriate financial issues for J.P. Morgan Private Bank. “A lot of this is a defensive exercise. Make sure to organize yourself so that you’ve anticipated problems and taken steps to protect yourself.”
There is much, existing and potential, to protect yourself from. The biggest tax-related question mark — several hundred billion dollars big — concerns the fiscal cliff. That is the term coined by another famous Ben — Bernanke, the U.S. Federal Reserve chairman — to describe the anticipated destination of the American economy if an extensive mix of tax increases and government spending cuts goes ahead as scheduled next month.
Numerous increases are on the books or heading there in Europe, including on income and/or value-added taxes in Spain, Finland, Italy, the Netherlands and France, where a 75 percent income tax rate on income exceeding €1 million, or $1.28 million, is coming in 2013. Bucking the trend, Britain is about to lower its top income tax rate to 45 percent from 50 percent — after having raised it from 40 percent.
The European Commission has proposed, and 11 euro zone members support, a tax on financial transactions. Ireland introduced a tax on insurance premiums this year, the Dutch plan to raise their tax on premiums in 2013, and France hopes to raise taxes on rental income and capital gains from vacation homes of domestic or foreign owners.
If the expanding tax bite around the region makes you want to cry in your beer, being in France could cost you more on that score, too. The beer tax is due to rise 160 percent.
Conditions in Asia are comparatively placid, but that region has not been immune from the trend. Attempts to raise the value-added tax in Japan have failed in the past, along with governments that made them, but a doubling of the V.A.T., called the Japan Consumption Tax, was approved in August.
“Quite a few countries are trying to increase tax revenue,” said Kevin Cornelius, a partner in Geneva for the Human Capital Practice at Ernst Young. “The question is who’s raising taxes the slowest. I can’t remember as much tax legislation going through as we’ve seen in the last 24 months.”
Americans would welcome at least one more piece of legislation. At press time, negotiations were continuing in Congress on a compromise to avoid going over the fiscal cliff. The consensus among pundits in Washington and on Wall Street is that one will be reached that preserves present rates on middle-class taxpayers and perhaps raises them on high earners.
If no deal emerges, tax rates will increase on income, capital gains and dividends. Employee payroll taxes are also scheduled to rise, and surcharges are due to be introduced on earned income and investment income of well-off individuals to defray the costs of the health care overhaul.
Article source: http://www.nytimes.com/2012/12/03/business/global/03iht-srtaxlede03.html?partner=rss&emc=rss