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During a recent sitting, the Liechtenstein government adopted a report pertaining to changes to the Principality's tax law, and introducing measures aimed at increasing tax revenues, including notably a new marginal tax rate for the country's top earners.
Defending the planned tax measures, the Liechtenstein government alluded to the budget plan, which revealed an expected revenue shortfall in 2013 and in subsequent years, and noted that although the government has already adopted two fiscal packages to redress the state budget, the measures included have proven insufficient.
The government explained that it had therefore submitted a bill for consultation, providing for a series of new tax rises. However, as a number of the proposed measures were highly contested in the consultation process, Liechtenstein's Prime Minister Tschütscher held talks with representatives from industry to discuss the outcome of the consultation process and to unite on a way forward.
During the consultation process, plans to decouple the notional interest deduction and the own capital interest deduction were rejected, as were plans to increase the minimum income tax and therefore also the minimum capital levy to CHF1,800 (USD1,950).
According to the Liechtenstein government, the Prime Minister and industry representatives agreed that as a first step the revenue measures agreed within the framework of the consultation process should be implemented.
Therefore, the government's adopted report provides for these "undisputed" measures, and provides crucially for the introduction of a new marginal tax rate applicable to top earners in the Principality. The government has not, however, furnished further details of the new tax rate.
The report also provides for an increase in wealth and individual income tax by adjusting the lower and middle tariffs in such a way as to ensure that the tax burden is the same as under the country's old tax law. In addition, the introduction of an additional 8% tax rate has been agreed, together with plans to increase the endowment tax rate.
Finally, the report provides for the loss carry-forward allocation to be limited and provides that no loss carry-forwards are to be generated by own-capital interest.
Given that these new measures will still be insufficient in themselves, the government aims to take further measures to redress the state budget. Consequently, a joint project group, comprising representatives of the associations and the government, has been set up. The group is due to draft a report by mid-February 2013, advocating which additional fiscal initiatives should be taken to consolidate the budget by the required CHF52m.
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