How EU tax crackdown will affect UAE, Bahrain and Tunisia

The UAE is among the countries targeted in an EU tax crackdown. (Shutterstock)
Updated 06 December 2017
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How EU tax crackdown will affect UAE, Bahrain and Tunisia

LONDON: Arab News has established how sanctions will affect Bahrain, the UAE and Tunisia as part of an EU crackdown on tax avoidance.
The main weapon will be funding restrictions to be imposed by the European Fund for Sustainable Development (EFSD), the European Fund for Strategic Investment (EFSI) and the External Lending Mandate (ELM).
Direct funding for projects on the ground in those countries — already subject to checks before loans are released – will not be affected.
The real targets are entities through which funds are channeled to other projects overseas, in places such as Africa and India, a Brussels source told Arab News.
These entities would include banks, private equity funds, asset managers and even government-linked bodies.
The three countries are among 17 jurisdictions to be punished following an EU probe.
A statement said: “The EU list should have a real impact on the countries concerned, thanks to new legislative measures.”
Brussels said new EU proposals would also, in time, impose stricter reporting requirements for multinationals with activities in “listed” states. Additionally, a tax scheme routed through an EU listed country would automatically be reported to the tax authorities, the statement said.
The European Commission is examining legislation in other policy areas, “to see where further consequences for listed countries can be introduced.”
Individual EU states have agreed they could also opt to trigger a number of other measures such as increased monitoring and audits, withholding taxes, special documentation requirements and anti-abuse provisions.
According to Brussels: “The Commission will support member states’ work to develop a more binding and definitive approach to sanctions for the EU list in 2018.” 
As well as the UAE, Bahrain and Tunisia, other countries on the so-called tax haven blacklist are: American Samoa, Barbados, Grenada, Guam, South Korea, Macau, the Marshall Islands, Mongolia, Namibia, Palau, Panama, St. Lucia, Samoa, and Trinidad & Tobago.
A “watchlist” of 47 countries promising to change their tax rules to meet EU standards has also been issued.
This “grey list” includes several with UK links, including Hong Kong, Jersey, Bermuda and the Cayman Islands, as well as Switzerland and Turkey.
The lists follow the leaking of the Panama Papers and the Paradise Papers, revealing how companies and individuals hid their wealth from tax authorities around the world in offshore accounts.
To determine whether a country is a “non-cooperative jurisdiction,” the EU index measures the transparency of its tax regime, tax rates and whether the tax system encourages multinationals to unfairly shift profits to low tax regimes to avoid higher duties in other states. In particular, these include tax systems that offer incentives such as percent corporate tax to foreign companies.
UK-based tax campaigners have said EU countries will be encouraged to disallow payments made to blacklisted countries for tax purposes, or to charge withholding taxes on interest payments to them.
The EU campaign is designed to force countries to take measures to reform their tax systems as it seeks to clampdown on corporate tax avoidance around the world.
Current EU plans are to reconsider the lists annually. Developed grey-list countries have one year to deliver on their reform promises, while developing nations have two years, said the EU.


China’s real estate investment slows as caution sinks in

Updated 19 October 2018
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China’s real estate investment slows as caution sinks in

  • Property increases downside risks to economy
  • September new construction starts up by a fifth

BEIJING: Growth in China’s real estate investment eased in September and home sales fell for the first time since April, as developers dialled back expansion plans amid economic uncertainties and as additional curbs on speculative investment kicked in.
A cooling market could increase the downside risks to the world’s second-largest economy, which faces broader headwinds including an intensifying trade war with the United States.
However, while analysts acknowledge increasing caution in the property market, they say investment levels are still relatively high, suggesting a hard landing remains unlikely.
Growth in real estate investment, which mainly focuses on residential but also includes commercial and office space, rose 8.9 percent in September from a year earlier, compared with a 9.2 percent rise in August, Reuters calculated from National Bureau of Statistics (NBS) data out on Friday.
“I think overall, China’s real estate market is still resilient, and the decline in sales is within our expectations,” said Virginia Huang, Managing Director of A&T Services, CBRE Greater China.
“There is no sign that the government has relaxed their control, but it still has many methods and tools to support the market if the economy deteriorates rapidly,” Huang said.
Real estate has been one of the few bright spots in China’s investment landscape, partly due to robust sales in smaller cities where a government clampdown on speculation has been not as aggressive as it is in larger cities.
The market has struggled as authorities continued to keep a tight grip over the sector, ramping up control in hundreds of cities. Transactions fell sharply over the period dubbed “Golden September and Silver October,” traditionally a high season for new home sales.
Property sales by floor area fell 3.6 percent in September from a year earlier, compared with a 2.4 percent gain in August, according to Reuters calculations, the first decline since April. In year-to-date terms, property sales rose 2.9 percent in the first three quarters.
China’s central bank governor Yi Gang said last week he still sees plenty of room for adjustment in interest rates and the reserve requirement ratio (RRR), as downside risks from trade tensions with the United States remain significant.
The government has implemented four RRR cuts this year, releasing hundreds of billions in new liquidity to the market.
China has for several years pushed a deleveraging campaign to reduce financial risks, clamping down on shadow banking and closing many “grey” financing channels for real estate firms.
For many highly leveraged developers, there are already signs of increasing caution as exemplified by a surge in failed land auctions due to tight liquidity and thinning margins.
New construction starts measured by floor area, an indicator of developers’ expansion appetite, rose 20.3 percent in September from a year earlier, compared with a 26.6 percent gain in August, Reuters calculations showed.
That’s against the backdrop of seemingly looser funding conditions for China’s real estate developers, who raised 12.2 trillion yuan ($1.76 trillion) in the first nine months, up 7.8 percent from the same period a year earlier, the NBS said.
The growth rate compared with a 6.9 percent increase in January-August period.
“Many developers will face lots of maturing debt by the end of this year, and there are perceived risks in the economy, so they will be more cautious,” Huang said.
China’s housing ministry is considering putting an end to the pre-sale system that developers use to secure capital quickly, in an effort to crack down on financial risks in the property sector.
China’s home prices held up well in August, defying property curbs. But analysts expect additional regulatory tightening and slowing economic growth will soon take the wind out of the property market’s sails.
The National Bureau of Statistics will release September official home price data on Saturday.