Call for Europe to widen tax haven net to include EU culprits

Oxfam activists stage a satirical street-play mimicking wealthy people hidding their money in tax haven, in this December 5, 2017 photo, near the European institutions in Brussels, within a meeting of European Union ministers over a credible blacklist of non-EU tax havens. (AFP)
Updated 13 December 2017
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Call for Europe to widen tax haven net to include EU culprits

LONDON: The EU is coming under mounting pressure to include countries within the bloc in its global crackdown on tax havens.
In the European Parliament, the Socialists and Democrats group has tabled an amendment demanding that Luxembourg, the Netherlands, Ireland and Malta — all EU members — should be written into the EU tax haven list.
Richard Murphy of Tax Research told Arab News: “There is plenty of evidence to suggest there are companies in those countries that have no economic substance and are established for tax purposes only.”
He added: “If we want to fight tax avoidance credibly on a global stage, we must also put our own house in order. Why should we care less about states inside of our union that have turned stealing our taxes into their business model?” The UAE, Bahrain and Tunisia were among 17 countries named as facing sanctions following the EU probe. But critics have said the list is undermined by being too selective and turning a blind eye to a number of other countries that should also have been penalized.
The UAE issued a strongly-worded statement saying it was surprised to be included in the list and had “worked transparently with European Union counterparts to ensure that we meet the criteria laid down by European Union Member States.”
Peter Simon, on behalf of the Socialists and Democrats group in the European Parliament, said according to the most recent OECD data on foreign direct investment, Luxembourg and the Netherlands together have more inward investment than the US, “and that the vast majority of these investments are in special-purpose entities with no substantial economic activity.”
He pointed out that of all the corporate investments ending up in tax havens, a total of 23 percent passed through the Netherlands, according to research by the University of Amsterdam.
Simon said the data provided clear indication that EU member states were “facilitating excessive profit-shifting activities, which comes at the expense of other European member states.”
“We therefore call on the European Commission to regard Luxembourg, the Netherlands, Ireland and Malta as EU tax havens.”
Murphy said: “I support the call. These places all deserve that status in their own right and it is good to see there are some politicians who are willing to stand up and say so.”
The EU’s original blacklist of tax havens —  which included South Korea, St. Lucia and Barbados — was published on Dec. 5, 2017.
It also put 47 countries on a so-called “grey list” as they had promised to change their tax rules to meet EU standards; these included Hong Kong, Jersey, Bermuda and the Cayman Islands, as well as Switzerland and Turkey.


Record budget spurs Saudi economy

The budget sets out to lift spending and cut the deficit. (Shutterstock)
Updated 19 December 2018
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Record budget spurs Saudi economy

  • “It is a growth-supportive budget with both capital and current expenditure set to rise.”
  • Government spending is projected to rise to SR 1.106 trillion

RIYADH: Saudi Arabia on Tuesday announced its biggest-ever budget — with spending set to increase by around 7 percent — in a move aimed at boosting the economy, while also reducing the deficit. 

However, analysts cautioned that the 2019 budget is based on oil prices far higher than today — which could prove an obstacle in hitting targets. 

Government spending is projected to rise to SR 1.106 trillion ($295 billion) next year, up from an actual SR 1.030 trillion this year, Minister of Finance Mohammed Al-Jadaan said at a briefing in Riyadh. 

The budget estimates a 9 percent annual increase in revenues to SR 975 billion. The budget deficit is forecast at SR 131 billion for next year, a 4.2 percent decline on 2018.

“We believe that the 2019 fiscal budget will focus on supporting economic activity — investment and wider,” Monica Malik, chief economist at Abu Dhabi Commercial Bank (ADCB), told Arab News.

“It is a growth-supportive budget with both capital and current expenditure set to rise.”

A royal decree by Saudi Arabia’s King Salman, also announced on Tuesday, ordered the continuation of allowances covering the cost of living for civil sector employees for the new fiscal year.

“The continuation of the handout package will be positive for household consumption by nationals,” said Malik. “We expect to see some overall fiscal loosening in 2019, which should support a further gradual pickup in real non-oil GDP growth.”

World oil prices on Tuesday tumbled to their lowest levels in more than a year amid concerns over demand. Brent crude contracts fell to as low as $57.20 during morning trading.

Malik cautioned that the oil-price assumptions in the Saudi budget looked “optimistic.”

“We see the fiscal deficit widening in 2019, with the higher spending and forecast fall in oil revenue,” she told Arab News.

Jason Tuvey, an economist at London-based Capital Economics, agreed that the oil forecast was optimistic, but said this should not pose problems for government finances.

“The government seems to be expecting oil prices to average $80 (per barrel) next year,” he said. 

“In contrast, we think that oil prices will stay low and possibly fall a little further to $55 … On that basis, the budget deficit is likely to be closer to 10 percent of GDP. That won’t cause too many problems given the government’s strong balance sheet. 

“Overall, then, we think that there will be some fiscal loosening in the first half of next year, but if oil prices stay low as we expect, the authorities will probably shift tack and return to austerity from the mid-2019, which will weigh on growth in the non-oil sector,” Tuvey said.

John Sfakianakis, chief economist at the Gulf Research Center, based in Saudi Arabia, said that the targets of the budget were “achievable” and the forecast oil price reasonable. 

“It is an expansionary budget that should spurt private sector activity and growth,” he said. 

“With Brent crude averaging around $68 per barrel for 2018 and $66 per barrel for 2019, the authorities have applied a conservative revenue scenario.”