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Lower Taxes Without Renouncing Your American Citizenship

Being born in the United States comes with many privileges. But it also comes with many responsibilities. According to Fortunly’s insightful infographic, the United States is one of two countries in the world that implement citizenship-based taxation. The only other one is the northeast African nation of Eritrea.

Interestingly enough, America’s citizenship-based tax system doesn’t only affect its natural-born citizens. Foreigners may also be held liable for income tax if they meet the country’s residency requirements. Spending too much vacation time is a common reason why non-Americans might need to hand over some cash to Uncle Sam.

But, there are legal ways to beat America’s citizenship-based income taxation system.

The most obvious way is to renounce your US citizenship. But this is a major decision that could lead to dramatic consequences. An alternative to such a drastic measure is filing for tax exemptions. The Foreign Earned Income Exclusion (FEIE) is a viable option for American professionals who intend to make a living outside of any US territory.

With the FEIE, a portion of a citizen’s total active income can be excluded up to a certain limit, which changes every year. To increase the excludable amount, a foreign housing credit can be added into the equation.

When it comes to income from passive activities like stock trading, the United States considers them taxable as usual. However, there are ways to classify passive incomes as active in order to render them partly excludable.

In addition, using an offshore company to run a business may provide an income-tax reduction. This move can legally separate an American-citizen owner and a business entity for tax purposes.

Pursuing every allowable avenue to minimize citizenship-based income tax liabilities is more practical than unpatriotic.

Taxation Around the World

Benjamin Franklin famously said that life’s sole certainties are death and taxes. It’s curious, given their universality, that we avoid thinking about these realities. But taxes are not merely worth thinking about, they’re fascinating. And they come in countless varieties.

The all-encompassing, deceptively brief infographic we present here includes specific examples of taxes around the world and how different conceptions of taxation are evolving in the digital era. We use images to untie the conceptual knots and tease apart the strands of similarity that serve as the warp and woof of worldwide taxation. Understanding the variety of tax systems around the globe can lead to renewed appreciation of the creative capacity of the human spirit.

Yes, taxes.

The United States has federal taxes, of course, plus distinct tax laws in each of the 50 states. We use America as a benchmark to compare the lowest- and highest-taxed countries in the world. We explore relationships among political systems and tax codes. We highlight curious facts, unsuspected trends, and obscure figures of urgent relevance.

The results of our extensive research, data collection, and artistic ingenuity are arrayed in the detailed graphic you see here. It’s jam-packed with important statistics, tidbits about the states with the highest taxes, digital taxation, corporate tax rate by country, and much more. Whether you’re looking for today’s numbers or projections about the future of taxation, it’s all here.

No one enjoys paying taxes, but we hope you will enjoy learning about them here.

BDO PHOTO

BDO expands product development Advisory Services in Life Sciences

BDO USA, LLP, one of the nation’s leading professional services organisations, today announced the acquisition of BioProcess Technology Consultants, Inc. (BPTC), a provider of chemistry, manufacturing and controls (CMC) consulting services to the global biopharmaceutical industry. The acquisition of BPTC bolsters BDO’s capabilities in the life sciences industry within the biopharmaceutical product development space and is effective as of April 1, 2019.

“We are pleased to welcome BPTC’s knowledge and resources to enhance our focus in the life sciences industry and deepen our biopharmaceutical product development offerings,” said Eric Jia-Sobota, national leader of BDO’s Industry Specialty Services and Life Sciences practices. “Joining forces with BPTC strengthens our ability to assist life sciences companies in managing risk, maximising profitability and fostering continued innovation to unlock new value and deliver improved outcomes.”

Founded in 1994, BPTC was a biologics CMC consulting firm, providing a full range of technical, regulatory and strategic assistance related to the development and commercialisation of biopharmaceutical products. BPTC assisted clients in developing manufacturing processes and strategies that enhanced the overall value of their products, while de-risking product development.

Howard L. Levine, Ph.D., BPTC founder, president and CEO will become managing director and national leader of the Bioprocess Technology Group within BDO’s Life Sciences practice.

“Since our inception, we’ve worked with companies to advance and de-risk the biotherapeutic development process, address unmet medical needs and increase patient access to novel medicines,” said Levine. “We’re excited to join BDO’s Life Sciences practice to support clients across the entire product development and company lifecycles.”

The professionals of BPTC who have joined BDO’s Life Sciences practice are headquartered in BDO’s Boston office at One International Place and based in locations throughout the country.

BDO Facts:

  • Over the past six years, BDO USA’s cumulative growth rate has far outpaced all other major U.S. accounting firms, with revenues more than doubling from $618 million in 2012 to $1.47 billion in 2018. During that time, BDO entered 24 new U.S. cities and expanded its critical mass in 13 existing markets.
  • BDO represents companies ranging from closely-held private businesses to leading non-profits to Fortune 500 multinationals.
  • BDO USA has industry practices specialised in serving businesses in the construction, energy, financial institutions, asset management, government contracting, healthcare, insurance, life sciences, manufacturing, non-profit, private equity, real estate, restaurant, retail and technology sectors.
  • BDO has been named a Best Company by Working Mother Magazine for eight consecutive years and been recognised with the When Work Works Award for Business Excellence in Workplace Flexibility for nine consecutive years.
  • BDO has more than 60 offices and over 650 independent alliance firm locations around the country.
  • BDO USA has been serving clients for more than 100 years since its founding in 1910 (as Seidman & Seidman).
  • As an independent member of BDO International Limited, the firm can leverage the resources of more than 80,000 people in 1,591 offices across 162 countries.

Firm Overview

BDO is the brand name for BDO USA, LLP, a U.S. professional services firm providing assurance, tax, and advisory services to a wide range of publicly traded and privately held companies. For more than 100 years, BDO has provided quality service through the active involvement of experienced and committed professionals. The firm serves clients through more than 60 offices and over 650 independent alliance firm locations nationwide. As an independent Member Firm of BDO International Limited, BDO serves multi-national clients through a global network of more than 80,000 people working out of 1,591 offices across 162 countries.

BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. For more information please visit https://www.bdo.com/

IT PHOTO

Italy to cut deficit from 2020, provides relief to markets

Italy will cut its budget deficit targets from 2020 and reduce its debt over the next three years, Prime Minister Giuseppe Conte said on Wednesday, easing fears about fiscal policy in the euro zone’s third-biggest economy.

The ruling coalition last week stunned investors by tripling Italy’s previous deficit target for the 2019-21 period to pay for tax cuts, welfare for the poor and a planned revision of an unpopular pension reform.

Speaking to reporters after a meeting of ministers, Conte said the government would push ahead with its expansionist fiscal programme but would keep its spending in check.

“We will show courage above all in 2019, because we believe that our country needs a budget that calls for strong growth,” said Conte, flanked by deputy prime ministers Luigi Di Maio and Matteo Salvini, and Economy Minister Giovanni Tria.

Conte confirmed a deficit target of 2.4 percent of gross domestic product (GDP) in 2019 and said this would fall to 2.1 percent in 2020 and 1.8 percent in 2021.

He predicted the debt/GDP ratio would fall beneath 130 percent next year and hit 126.5 percent by 2021. It is currently around 131 percent, the second highest in Europe after Greece.

The government did not release growth targets, but Tria said the gap between Italian growth and the rest of the eurozone would halve next year. The IMF has forecast growth of 1.0 percent in Italy in 2019 against 1.9 percent for the eurozone.

News the coalition planned to cut the deficit faster than previously indicated caused Italian government bond yields to fall sharply on Wednesday, while the Milan bourse outperformed other major stock exchanges in Europe to close up 0.9 percent.

Investments

The coalition came to power in June promising to slash taxes and boost welfare spending, and says an expansionary budget is needed to lift Italy’s underperforming economy, which is some six percent smaller than it was a decade ago before the sovereign debt-crisis exploded.

Tria said the 2019 budget would include a lift in public investment and would offer tax breaks to firms investing in equipment and staff. The jobless rate would fall from around 10 percent now to as low as 7 percent, the prime minister said.

European Commission officials and EU allies had expressed their concern over Rome’s spending plans and there was some relief over the reduced targets.

“It’s a good signal that the trajectory has been revised because it shows the Italian authorities are hearing the concerns and remarks from their partners and the European Commission,” EU Commissioner Pierre Moscovici said in Paris.

Italy’s minister for European affairs, Paolo Savona, went to Strasbourg on Wednesday to try to reassure EU lawmakers that Rome was not being irresponsible.

“I think there is no chance that Italy will default on its public debt,” said Savona, who has previously called into question Italy’s membership of the euro currency.

“I do not intend to take any action against the euro. On the contrary, I want to strengthen it,” he said on Wednesday.

Stewart PHOTO

Meet the $5bn tech boss who grew up without electricity

The BBC’s weekly The Boss series profiles a different business leader from around the world. This week we spoke to Stewart Butterfield, the founder of technology companies Flickr and Slack.

It is not the sort of upbringing you’d associate with one of Silicon Valley’s heavyweights.

But Stewart Butterfield spent the first five years of his life living on a commune in remote Canada after his father fled the US to avoid serving in the Vietnam War.

The young Mr Butterfield and his parents lived in a log cabin in a forest in British Columbia, and for three years they had no running water or electricity.

“My parents were definitely hippies,” says Mr Butterfield, whose mother and father had named him Dharma. “They wanted to live off the land, but it turns out there was a lot of work involved, so we moved back to the city.”

After the family relocated to Victoria, the capital of British Colombia, Mr Butterfield saw his first computer when he was seven, and taught himself to programme from that very young age.

Fast-forward to today and 46-year-old Stewart Butterfield – who founded both photo-sharing website Flickr, and business messaging service Slack – has an estimated personal fortune of $650m (£500m).

But perhaps in part due to his unusual upbringing he says he tries to live frugally.

“In truth I feel guilty spending too much money,” he says. “As a Canadian that world seems very strange and alien to me.”

Mr Butterfield also puts much of his success down to luck.

Mr Butterfield says that his seven-year-old self was fascinated by the first wave of personal computers.

“I was around seven in 1980, it must have been an Apple II or IIE that my parents bought,” he says. “I taught myself to code using computer magazines.”

Mr Butterfield – who changed his first name to Stewart when he was 12 – learned to make basic computer games.

However, he lost interest in computers while at high school, and ended up going on to study philosophy at the University of Victoria. From there he did a masters in the subject at Cambridge University in the UK.

In 1997 he was about to try to become a professor of philosophy when the internet “really started to take off”.

“People who knew how to make websites were moving to San Francisco, and I had a bunch of friends who were making twice as much, or three times as much, as what professors were making,” he says. “It was new and exciting.”

So Mr Stewart decided to give up academia and move to Silicon Valley.

After working as a web designer for several years he launched an online game in 2002 with future Flickr co-founder Caterina Fake, Mr Butterfield’s then-wife.

The game – called Game Neverending – failed to take off, and the pair were running out of cash. Frantically looking for a plan B they hit upon the idea of Flickr, going on to build the photo-sharing platform in just three months.

“The first camera phones were also coming out, and more and more households were getting internet connectivity, and then stuff happened so fast,” says Mr Butterfield.

Launched in 2004, Flickr was the one of the first websites to allow people to upload, share, tag and comment on photos.

Just a year later the founders sold the firm to internet giant Yahoo for $25m – although Mr Butterfield has since said this was the “wrong decision” as waiting longer could have meant a much bigger deal.

Nevertheless he moved on to bigger things with Slack.

It was 2009 and he and some partners had set up another online game, and again it failed. It did, however, spark a brainwave.

“As we were working on the game we developed a system for internal communication that we really loved,” says Mr Butterfield. “We didn’t think about it, it was very much in the background. But after a few years we thought maybe other people would like it too.”

It formed the basis for Slack, a service that today boasts eight million daily users, three million of whom pay for the more advanced features, and more than 70,000 corporate clients.

Slack enables employees to communicate and collaborate with each other in groups at work, and it has grown rapidly. IBM, Samsung, 21st Century Fox and Marks & Spencer are just a few big names to have signed up. Following a number of investment rounds Slack is now valued at $5.1bn.

Chris Green, a technology analyst at consultancy Bright Bee, says it is rare for an entrepreneur to create something successful out of the ashes of a failed project, and “almost unheard of to do it twice”.

“But if you look at Stewart’s career, it’s not just luck, he’s always been innovating in the background and looking for ways to bring order to chaos,” says Mr Green.

“That’s what Flickr and Slack have both done in their own ways.”

Slack does have competitors, though. Microsoft now offers a rival service for free with its Office 365 package, and start-up Zoom boasts a more expansive offering for about the same price.

“There is immense competition from some big well-funded companies so Slack will need to keep evolving,” Mr Green says.

Big tech firms have found themselves in the firing line for not paying enough tax – but Mr Butterfield says he would be happy for Slack to pay more taxes.

“I’d also like to see a more equitable tax policy. I have no problem paying tax. I don’t think companies are taxed enough, or critically, in the right way.”

Regarding the future, Mr Butterfield says that, unlike Flickr, he has no intention of leaving Slack.

“So many things had to go right get to this position – amazing luck was involved – and I am not so smart that I can just make it happen again,” he says.

“So if I ever wanted to see how far I could take it, this would definitely be the time to do that.”

Tax PHOTO

The 10 countries that make the most money from taxes

Paying taxes is something no one enjoys doing, but the amount individuals and companies pay varies enormously throughout the world. The Organisation for Economic Co-operation and Development (OECD) has calculated how much tax was paid in 2016 by 10 countries. Here’s what it discovered. How does your country measure up?

Australia: $348 Billion

The latest figures available show Australia raised $348 billion from its 24.13 million-strong population. Individuals pay income tax on a progressive basis from 19% to 45%. A Medicare Levy is payable on top to pay for public healthcare; this was increased from 1.5% to 2% in 2014, while since 2015 higher earners who don’t have private hospital cover must also pay the Medicare Levy Surcharge of between 1% and 1.5% on top. Corporate taxes stand at 30%, however the government is pushing for this to be cut to 25% by 2025.

Japan: $351.6 Billion

Japan received $351.6 billion from its population of 127 million, according to the most recent figures. In 2017 the country’s ruling bloc approved a plan to cut the corporate tax rate from 30% to 20%, although only for companies that raise wages and increase capital spending. Japan has a progressive income tax system, with rates from 20% to 40%.

South Korea: $371.1 Billion

South Korea, which received $371.1 billion from its 51 million population, is undergoing huge changes this year as the country enacts a 2018 tax reform bill. Some of the changes include adding a new 25% corporate income tax bracket for taxable income in excess of $270 million, instead of the previous flat rate of 22%. Meanwhile the top income tax bracket has been increased from 40% to 42% for higher earners.

Spain: $412.4 Billion

With a population of 46.6 million, Spain generated tax receipts of $412.4 billion in 2016 according to the report. The country operates a sliding scale of income tax from 19% to 45%, while the general corporation tax rate is 25%. Meanwhile, residents of the Andalucia region had some good news this year, as it was announced changes to inheritance tax rules mean that the vast majority of children or spouses will not have to pay it anymore.

Canada: $491.1 Billion

The system of paying federal tax is simple in Canada: there is a sliding scale of 15% to 33% depending on how much you earn, however it gets a bit trickier when you need to add on provincial and territorial tax as the rate you pay depends on your income – and where you live. The rates vary dramatically from 4%, the lowest bracket in Nunavut, up to the highest bracket in Nova Scotia of 21%. The country’s population of 36.3 million brought in a total of $491.1 billion in 2016.

Italy: $792.8 Billion

Italy’s 60.6 million-strong population helped contribute to vast tax revenues of $792.8 billion. Italians pay personal income tax of between 23% to 43%, plus regional tax which is typically between 1.23% and 3.33%

United Kingdom: $869.4 Billion

The UK generated $869.4 billion in tax from its population of 65.6 million people, according to the OECD report. The UK uses a progressive income tax system, where those living in England, Wales and Northern Ireland pay between 20% and 45% tax, while those in Scotland pay 19% to 46% tax depending in their earnings. Residents must also pay National Insurance contributions too, which are 12%, although workers who earn more than $62,380 pay only 2% on earnings over that threshold. The Corporation Tax main rate is 19% but is set to be reduced to 17% in 2020.

France: $1,115.9 Billion

With a population of 66.9 million, France generated $1,115.9 billion in tax. However it will be interesting to see the results of dramatic tax cuts President Emmanuel Macron made in 2017, including slashing the contentious wealth tax effectively by 70% and introducing a 30% flat rate on capital gains.

Germany: $1,305.7 Billion

A combination of being the biggest economy in Europe, a population of 82 million and a relatively high taxation system means Germany has the second-largest tax revenue in the report at $1,305.7 billion. In addition to income tax, which varies from 14% to 45% for very high incomes, everyone has to pay solidarity tax, which is capped at 5.5% of an individual’s income tax. Also, if you’re a member of a church registered in Germany, you will also be required to pay a church tax of 8% or 9% of your income, depending on which federal state you live in.

United States: $4,846.3 Billion

The US tops the list in the report for having the highest level of tax revenues, with $4,846.3 billion tax generated from its population of 325.7 million. However with the US going through huge tax reforms this year under President Trump, it will be interesting to see the impact that has on those figures in future. Most analyses suggests that while the changes aren’t the biggest tax cuts the country has ever seen, the reduction of the corporate tax rate from 35% to 21% is the biggest corporate tax cut in US history.