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Saturday, January 2, 1999

Bhutan to introduce new personal tax system 

The tiny Himalayan kingdom of Bhutan is to put in place this year a modified system of personal taxation to widen the scope of revenue collection, reports the India Abroad News Service.

Currently, Bhutanese pay tax only on salaries. From January 1999, the new Personal Income Tax (PIT) is to cover earnings from salaries, rent, savings, company dividends, cash crops and other sources. Finance Minister Yeshey Zimba said the objective of the new system was to reduce emerging disparities in income, guide savings and investment activities as well as broaden the tax base.

Income of Bhutanese Nu 50,000 and above would qualify for progressive tax beginning with a minimum of 5 per cent. The first collection, based on the earnings in the 1999 calendar year, is to be made in February 2000.

The proposal for PIT was passed by the National Assembly in its session in June this year. Formal legislation is expected to be passed in time for the first collection.

``Personal income tax is the main source of income in manycountries and is also one of the most important tools for ensuring equity in income distribution,'' the Revenue and Customs Division explained. ``It facilitates the transfer of resources from the more affluent members of society to the poorer citizens,'' it added.

Revenue officials say the tax system in Bhutan, a country with 600,000 population sandwiched between India and China, would be less stringent than in several neighbouring countries. They point out that the tax base in India is Rs 40,000; in Nepal, Rs 35,000-40,000 and in Bangladesh, Taka 30,000. Over the next few months, revenue officials will be conducting ``tax payer education'' workshops across the country to ensure that all those affected are aware of the rules and regulations.

Officials say that under the new system, it would be more difficult for businessmen to evade tax as their suppliers and customers would need documentation of transactions for their own tax returns.

Insurers hold back on Euro preparations

Most insurers areaware of the issues concerning the Euro, but are reluctant to incur significant implementation costs until they have a clearer idea of government intentions towards the single currency, according to an industry survey reported in The Financial Times.

A report conducted by the Association of British Insurers and Ernst & Young, the consultant, attracted responses from 100 companies. More than half say they have been considering the Euro's impact on their mainstream UK insurance operations for more than a year. Bigger companies are much more likely to have been working on Euro for longer. But 70 per cent have two or fewer people dedicated to Euro issues beyond January 1, 1999.

The industry regards the Euro as having a neutral to positive effect on business, with only 15 per cent expecting it to be negative. The cost of implementation is highlighted as the most significant implication, but 65 per cent of companies say they have no precise idea of how much this will be.

Results varied among those whohave made initial estimates. About half believe it will be less than 0.5 per cent of annual net UK premium income and half think it will be more. Ernst & Young said its experience in the Euro-zone suggested early figures were likely to be underestimated. The survey says the key area of uncertainty is the question of UK entry.

Respondents said significant investment is likely following greater clarity about the timing of the UK entry, success of first-wave entrants and an increase in demand for Euro products in the UK. Peter Havelock, a consultant with Ernst & Young, said: ``Organisations are taking the Euro seriously, but are not yet spending significant money on it because of uncertainty over timing.''

Price transparency is not considered an issue. Janette Weir, ABI chief economist, said other barriers to trade--such as regulatory regimes--were more important.

Stockbroker levied largest fine of 1998

The Securities and Futures Authority (SFA) recently levied its largest fine of 1998, makingAlbert E Sharp, the regional stockbroker, pay 200,000 for ``widespread failures of stock and dividend reconciliation'' over a year-long period.

The broker, which trades as Capel Cure-Sharp after its takeover by Old Mutual, the South African financial group, must also contribute 12,500 to the SFA's costs, says The Financial Times.

The SFA reprimanded the broker for failures that occurred between August 1996 and August 1997. It said these were caused by deficiencies in the firm's operational systems structure, the introduction of the Crest trading system and integration problems after Sharp's acquisition of Brown Shipley, another broker, in 1996.

As a result, Sharp's portfolio, nominee and custody records were disrupted and could not be relied upon, impeding the administration of dividend payments.

The regulator said it took into account the fact that the broker had brought the matter to its attention, engaged accountants to resolve the problem and had made ex gratia payments to compensate forloss of interest.

The SFA separately announced the expulsion of four individuals from its register of representatives, the removal of a fifth and the suspension of a sixth.

Expelled were Andrew Peter Evenden, who concealed losses as a trader at Bank Boston; Omar John Khayat, who broke internal rules at Baii Asset Management; Frank Ntim, who misappropriated money from a dormant account at Ghana Commercial Bank; and Christopher Michael Sanders, who carried out unauthorised personal dealings at Falcon Securities.

Andrew Gibson was removed from the register for entering artificial transactions at Refco Overseas in an effort to increase the bonus pool. Philip Penner was suspended for a year for building up a short futures position at Credit Suisse First Boston significantly in excess of his position limits.

Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.


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