How often is tax law amended and what are the processes for such amendments?
Tax (2nd Edition)
As a part of the economic politics of the country, Tax regulations are modified at least once a year, in order to include the changes derived from such politics. Nevertheless, the regularity of the modifications lessens when it is about changes aiming at fulfilling political programs of governing parties, whether they are in coalition or not.
Usually, when the regulation to be modified is a Law, the procedure shall be processed by Parliament, which has two chambers: the Congress and the Senate.
Regulations of a lower rank, such as Royal Decree or a Ministerial Order are directly modified by the Government or by the Ministers.
The above mentioned are the general regulations which regulate matters of State competence. Things change when we come to regulations which are competence of the Autonomous Communities. In such case, the entitled body is the Parliament of the relevant Autonomous Community which only has one chamber (it does not have a Senate) and processes its own Laws.
The Autonomous Communities are governed by an entity receiving varied names such as Autonomic Government, formed by Counsellors. Autonomic Governments are entitled to pass tax regulations within their competence scope.
Last, there is another way of modifying a tax regulation when we are speaking of a local regulation. In these cases, it is the plenary session of the relevant Town Council the one empowered to modify the local bylaws.
Tax and tax procedural laws are often amended in Romania, in some instances even several times during the course of one year. Usually, the amendments are made by Emergency Government Ordinances, which are used by authorities in order to bypass the more lengthy procedures of the Romanian Parliament. Such normative deeds are subsequently approved by the Parliament, yet their entry into force is not conditioned by the existence of such approval. When the amendments are significant (e.g. such as the enactment of the new Fiscal Code and Fiscal Procedure Code as of January 1st, 2016), they are made under laws issued by the Parliament.
The frequency with which Australian tax law is amended varies depending on the priorities of the government. Legislative changes can be made at any time. However, the federal government releases its budget annually each May, which often includes plans to reform taxation laws.
Generally, the government decides on tax policy, taking into account advice from the Australian Treasury. The government usually consults on significant tax law amendments. Consultation can occur at either or both the policy development and legislation development stages. The Australian Treasury undertakes the consultation on potential tax law amendments on behalf of the government, and generally works with the Board of Taxation and the Australian Taxation Office (ATO) in doing so. The consultation process varies for each measure, and may include open public consultation, targeted public consultation and targeted confidential consultation.
Draft legislation is then prepared, or updated, to reflect the outcomes of the consultation process. All tax law amendments are made following Australia’s ordinary parliamentary procedure. At a federal level, this involves the bill being introduced into the lower house of parliament, the House of Representatives, where it must be approved by a majority. Before receiving approval, the bill will be subject to parliamentary debate, which may result in amendments to the bill. Once passed by the House of Representatives, the bill then requires a majority approval from the upper house of parliament, the Senate. The Senate is not permitted to make amendments to the bill, but it can refer the bill back to the House of Representatives for further amendments. Once the bill is passed by both houses of parliament, it receives Royal Assent from the Governor General and becomes an Act of Parliament.
Amendments to state taxes follow a similar process.
In theory, tax law is amended twice a year by two finance laws adopted at the end of each year: (i) the Finance Act which settles the budget of the following year and (ii) an Amendment to the Finance Act correcting the budget of the finishing year.
Tax law may also be, and in practice often is, amended by specific tax provisions contained in more general laws. For example, the Social Security Financing Act often includes tax provisions, such as the rates of French social contributions (CSG, CRDS). More recently, in 2017, the moralisation law of politics (law n°2017-1338 dated September 15, 2017 included specific tax provisions tending to strengthen the tax fraud offense. Finally, an additional amendment to the Finance Act may also be adopted during the year (often in summer).
Bills are not subject to systematic prior consultation with industry stakeholders. In France, companies or individuals do not have an official say in the lawmaking process and are not consulted either by the French government or the legislator. However, there are ongoing discussions about tax law between the French tax authorities (FTA) and taxpayers and their representative bodies, particularly the main bodies representing business (so called Medef and Afep) during the lawmaking process.
Belgian tax law can be amended at any time throughout the year. Amendments are in practice often grouped in so-called program laws, which are usually voted at the end of the tax year.
Both the Federal State and the Regions may, within their area of competence, draft and adopt own legislative measures. Provinces and municipalities also have a limited competence to issue certain tax regulations.
The legislative process is public and usually allows institutions, interest groups and academics to comment on the draft bills.
Tax law is quite often amended in Bulgaria. All basic tax laws are amended at the end of every calendar year and several times throughout the year.
Every amendment is done by the Parliament.
The last comprehensive reform of the U.S. tax code was in 1986. However, almost every year Congress adds or amends individual provisions to the tax code. Amendments to the tax code must be passed by both the House of Representatives and the Senate, and generally must be signed into law by the President.
In addition to the statutory tax code, the Internal Revenue Service (IRS) promulgates regulations on a regular basis that provide the Treasury Department’s official interpretation of the tax code. New or revised regulations can make significant changes in the tax law. Significant IRS regulations are published in proposed form and include a notice and comment period that provides for public consultation prior to finalization.
Both Democrats and Republicans for several years have been proposing various versions of comprehensive tax reform. With Republicans controlling both branches of Congress and the presidency, there is the possibility of comprehensive tax reform by the end of 2017. The President is extremely focused on tax reform and is working closely with Republicans in Congress to pass legislation. There is consensus among policy makers to lower corporate and individual tax rates, move to a territorial-style system, and impose significant anti-tax base protection rules. The specific details of each of these policy goals are under negotiation.
The annual federal budget is the major means of introducing new tax policy measures. Federal income tax legislation is drafted by the Tax Legislation Division of the Tax Policy Branch of the federal Department of Finance. The legislation is usually released in draft form and, accompanied by explanatory notes, made available to the public for comment and consultation before it is finalized. The government may, after the end of the consultation process, amend the legislation before finalizing, but it is not obliged to do so.
Once finalized, the legislation is ordinarily tabled in Parliament by the Minister of Finance. The legislation must be passed by both the House of Commons and the Senate and receive Royal Assent from the Governor General before it becomes law.
One of the main principles established by tax legislation of Ukraine is the principle of its stability and predictability. Accordingly, changes in any elements of taxes and charges can not be made earlier than six months before the commencement of the new budget period. Unfortunately, the Ukrainian parliament usually does not follow this requirement.
In practice, Ukrainian tax legislation can be amended at any time of the year upon the adoption of the respective bill by the Ukrainian Parliament.
During the last several years, the Verkhovna Rada of Ukraine (Ukrainian Parliament) has significantly amended the main legislative act in the tax area – the Tax Code of Ukraine.
Usually substantive changes are made in December, at the end of the fiscal year. At the same time, less significant changes can also be made throughout the year. For instance, during 2016, the Tax Code of Ukraine was amended seven times.
Apart from implementation of EU directives, amendments to the Cyprus tax laws are generally infrequent. This means that taxpayers can undertake transactions with a high degree of assurance that the tax environment they anticipated at the time will continue to apply. There is generally advance consultation with stakeholders over a period of several months before legislation is enacted.
An annual Finance Act is passed by the UK Parliament enacting substantive changes to tax law. In some years there may be more than one Finance Act. Procedural or administrative changes to tax law may be included in secondary legislation which may be passed at any time although there may be prior public consultation.
There is public consultation in relation to most substantive changes, previously often linked to the Autumn Statement to the House of Commons of the Chancellor of the Exchequer which was followed by a Budget Statement the following March or April. However, with effect from autumn 2017, there will now be a single major fiscal event each year, the annual Budget. For 2017, which will be a transitional year, there will be a spring Budget and an autumn Budget. From 2018, there will be a Budget in the autumn and a Spring Economic Statement.
Draft clauses to be included in the next Finance Act are often published several months before the Act is introduced to Parliament to allow for comments. On occasion, however, changes are implemented without prior consultation.
Over the last 10 years, Ecuador tax law has been amended 29 times (at least 2 amendments/year) to increase tax revenue, fight tax evasion and discourage aggressive planning.
The National Assembly has the power to create, amend or eliminate taxes. Notwithstanding, only the President is empowered to promote tax bills.
Bills are generally approved in 180 days minimum. However, tax amendments are usually proposed by the President under an economic urgency proceeding for approval in 30 days.
Gibraltar laws are contained in Acts of the Gibraltar Parliament. The last wholesale review of the tax legislation in Gibraltar was carried out in 2010 through the introduction of the Income Tax Act 2010 (ITA). Amendments to the ITA can take place at any time by way of the presentation of a Bill to be debated and passed at the Gibraltar Parliament. The ITA, however, provides for amendments to be introduced by way of regulation, and small-scale, operational changes to the ITA are introduced this way.
Tax laws in Israel are constantly amended in order to implement various policy decisions (e.g., granting incentives) as well as aligning the tax system to the ongoing challenges and changes in the global tax arena.
To amend an existing tax law (or to adopt a new law), the Israeli Knesset (Israel’s parliament) generally needs to enact the amending or new law by a majority vote. Certain matters are dealt with through regulations which are promulgated based on statutory grants of authority.
In the past year, the Knesset adopted some significant changes to the tax laws that are expected to influence many domestic and multinational taxpayers. Such changes include reduction of the standard corporate income tax rate, a comprehensive reform in the tax-free reorganization rules, and the introduction of a new intellectual property regime, treatment of certain withdrawals (including by way of loans) as well as inter-company loan guarantees as deemed dividends.
There is no set time at which amendments to tax law are made. However, almost every year, the Swiss Parliament adds or amends individual provisions to the Swiss Federal Income Tax Act. At a cantonal level, tax law is also regularly amended by the different cantonal parliaments.
The Swiss process for legislative amendments typically includes various actors that can initiate the legislative process, such as the Swiss people, the Parliament, the Federal Council, the cantons and also associations. At a federal and cantonal level, such amendments can be initiated for example by a popular initiative or a parliamentary motion.
Significant amendments are published in draft form for consultation and include a comment period. Consultation in relation to the amendment of tax law will usually include cantons, political parties, associations, cities as well as the affected economic areas. Anybody can generally express their opinion regarding a project in consultation, even without being asked first.
According to Constitutional principles, new tax legislation can be introduced only by Law which shall be approved by both houses of the Parliament. The Parliament can approve a law setting forth the guidance and framework of new tax provisions and delegating the Government to implement them (in such a case, the Government will issue a Legislative Decree). In cases of exceptional urgency and necessity, the Government may approve, without prior consent of the Parliament, Law Decrees introducing new tax provisions. A Law Decree shall, in any case, be approved by the two chambers of the Parliament within 60 days from when it is issued.
The Ministry of Finances can issue decrees aimed at introducing implementing provisions when so required by law provisions.
Tax law is usually amended each year. Particularly the main new provisions are usually introduced by the Budget Law presented by the Government and approved by the Parliament in December every year.
Usually the tax law (such as the General Tax Lax, the Personal Income Tax Code, the Corporate Income Tax Code, the VAT Code) is amended yearly with the State Budget Law. The amendments are proposed by the Government and submitted to vote in the Parliament. Members of the Parliament proceed to a thorough analysis of the amendments and may present alternative provisions and/or other amendments to the law. Afterwards, all amendments are discussed and a vote is held. The approved amendments to the law are required to be enacted by the Portuguese President and are published in the Official Gazette (Diário da República).
Although amendments to the tax law are usually made with the State Budget Law, they may also occur during the year with a specific law.
These amendments generally correspond to technicalities. Amendments resulting in significant changes of tax law policy or taxpayers guarantees are less frequent. For instance, the Personal Income Tax Code has been significantly amended in 2000 and suffered several amendments in 2014. Usually, the amendments set forth in the State Budget Law are mere technicalities, related with tax deductions limits and compliance rules.
Amendments to tax laws in Kenya are done annually by Parliament through the Finance Act. The Finance Act introduces the substantive amendments to existing provisions in the different tax laws.
Most of the proposed amendments are contained in the budget statement presented by the Cabinet Secretary in charge of National Treasury to the Parliament. The proposed amendments are subsequently tabled in Parliament through the Finance Bill. Some clauses of the Finance Bill enter into force on the budget day pursuant to the Provisional Collection of Taxes and Duties Act (Chapter 415, Laws of Kenya).
Recently, Kenya has undertaken a Tax Rewrite programme which all tax legislation has been modernised. Pursuant to this programme, a new Value Added Tax Act was enacted in 2013, a new Tax Appeals Tribunal Act in 2013, a new Tax Procedures Act in 2015 and a new Excise Duty Act in 2015. The drafting of a new Income Tax Bill is in progress and is anticipated to be complete by mid-2018.
There are usually a number of tax changes implemented in Poland each year. They mainly relate to VAT, income taxes, and tax procedures. The changes occur for various reasons including: the implementation of EU Directives and BEPS recommendations, closing loopholes used for aggressive tax optimization, or increasing State revenues, etc.
The draft of the changes is usually proposed by a group of Parliamentary members, or by the Polish government. In the latter case the draft of the proposed changes must be put under the consultation process in which various institutions and interest groups provide their comments.
In order for draft amendments to become binding law, they must be approved by both chambers of the Polish Parliament (the Sejm and the Senat), signed by the President and officially published. In the case of income taxes which are settled on a yearly basis, any draft amendments must be published no later than by the end of November of the preceding year. Income tax changes usually come into force on 1 January of a given calendar year unless the changes are to the benefit of taxpayers in which case they can enter into force any time during the calendar year.
In Japan, tax laws are amended generally once a year, in the form of an annual tax reform. The process is generally like the following:
- By early fall of a calendar year, various industry groups provide input on their desired tax reform to the governmental authority to which such industry group is relevant (e.g., the Financial Services Agency in the case of banking and securities industry);
- By late fall, various governmental authorities (i.e., ministries and agencies) compile and publish their desired tax reform and provide them to the Ministry of Finance for its consideration;
- Along with the foregoing, the tax commission of the ruling party also considers its desirable tax reform, together with the Ministry of Finance, principally as a political matter;
- In early December, taking into consideration all of the foregoing, the ruling party as well as the Ministry of Finance publishes an outline for the next year’s annual tax reform;
- In February next year, the Ministry of Finance complies and publishes draft tax statute amending the current tax laws for the annual tax reform;
- In March, the draft tax statute is approved by the Japanese diet (to the extent that the ruling party has sufficient majority), and in late March is promulgated, together with the promulgation and publication of the enforcement cabinet orders and ministerial ordinances; and
- In general, the amended tax laws take effect as of April 1 of the year.
Dutch tax law is regularly amended when bills are introduced in connection with the annual budget plan in September. Before publication the Ministry of Finance (the "MoF") sends tax bills to the State Council for review and comments. Subsequently, the MoF sends the bill to the Second and First Chambers of Parliament for their approval upon which it is signed into law by the King of the Netherlands and published in the State Gazette. During the parliamentary process stakeholders like the Dutch Order of Tax Advisors, Employers Organizations and the Labor Unions may provide input. In exceptional cases the MoF may organize internet consultations.
Tax laws in Mexico are subject to constant amendments, usually on a yearly basis. Any and all statutes concerning the essential elements of tax law (subject, object, taxable basis, tax rate or tariff and time of payment) must be set forth by tax laws issued by the Mexican Congress in order for them to be valid. What is more, the Mexican Constitution expressly states that tax laws must be initially discussed at the House of Representatives (failing to comply with said mandate could lead to the unconstitutionality of the relevant law).
In this regard, initiatives and amendment proposals must be discussed and approved both by the House of Representatives and the Senate. Once the relevant amendment has been authorised, the executive branch orders its issuance and publishing in the Federal Official Gazette.
Even though bar associations are consulted on some occasions concerning tax law amendments or proposals, it is not deemed as a formal practice, much less, a legal requirement for such proposals to be valid.
Notwithstanding the foregoing, it should be noted that the executive branch is entitled to issue provisions or regulations relating to the applicability, construction or enforcement of tax laws (but not concerning the essential elements of tax laws) without having to abide by the amendment procedure reserved for tax laws.
On a different subject, tax laws are often contested by means of the amparo figure (an extraordinary trial that can be initiated either once ordinary recourses have been used or directly, in cases where a constitutional violation is claimed). Generally speaking, the effects of judicial rulings produced as a result of an amparo trial are limited to the plaintiff seeking legal remedy, that is, not erga omnes. Nonetheless, precedents or jurisprudence crystallised under the procedure set forth in the applicable laws renders tax laws subject to the interpretation and constitutional review by the competent courts.
Possible amendments in the Norwegian tax legislation are at least considered once a year. Every autumn The Ministry of Finance sets up a fiscal budget proposal to be submitted to the Parliament. The proposition may contain proposals for legislative amendments to the Tax Act.
The legislative power is vested in the Norwegian Parliament. To amend the tax law, the Government must submit a bill. In the case of significant issues, or extensive revision of existing tax law, the Government often appoints an expert committee or commission to study the matter. The commission submits a report including a draft bill to the Ministry of Finance. The Ministry usually sends the report out for comments to relevant government agencies, organizations, institutions and associations. When comments have been received, the Ministry prepares the proposition. This is presented to the King in Council and is then submitted to the Parliament for approval.
Amendments may also be considered in spring in connection with the approval of the Revised Budget, and from time to time, at any time throughout the year.
The Norwegian tax acts passed by the Parliament is supplemented by various provisions issued by the Ministry of Finance or by the Tax Directorate.
German tax law is not amended at a specific date. However, there is usually at least a so-called Annual Tax Act (Jahressteuergesetz) each year containing a number of amendments to the German tax laws.
The process for the legislative amendments on the federal level typically comprises a draft bill which is commented on by political parties and certain interested stakeholder groups, such as tax associations or industry groups affected by such amendments.
The direct competence of the German Federal States and municipalities for amendments of German tax law is very limited. They have the competence to determine the locally applicable trade tax rate, the real estate transfer tax rate and local consumption and expenditure taxes like the accommodation tax only. The underlying material law is determined at the federal level.
In addition, the German tax authorities regularly issue statements on the interpretation of certain individual German tax provisions. Even though not binding for the courts, in practice, such statements of the German tax authorities have a great significance.
Almost every year the Austrian Parliament enacts a Federal Tax Amendment Act which renews existing Federal Tax Acts.
It has to be noted that also the provinces of Austria have a power to enact tax laws, which play however a rather subordinated role (except for special business lines like e.g., tourism levy, advertising tax, etc.).
The legislative process provides that a Federal law is enacted by the Federal Parliament either upon the proposal of the Federal Government, the initiative of a minimum of 5 delegates of the Parliament, proposal of a committee of the Parliament for topics related to its activity or upon the proposal of the Federal Council. During the legislative process several institutions and interest groups like the Chamber of Commerce, the Austrian Chamber of Public Accountants and Tax Advisers, the Bar Assiciation, the Chamber of Labour, the Federation of Austrian Industry and many others may provide input.