Low Taxes in US Will Help Tourist Economy Bounce Back When Travel Ban Ends, But Further Tax Cuts Could Be Considered

● Only four countries in study have cut taxes to aid tourist economies
● Extension to tax cuts “will almost certainly be needed” as COVID restrictions continue

Low taxes in the US will help its tourist economy bounce back when travel bans finally end shows a new study by UHY, the international accountancy network. The study shows a tourist in the US pays an average of 9.7% in tax on a typical daily spend compared to a global average of 13.7%.

UHY says that despite low tax levels on the tourism industry, US states could do more to support the industry by cutting tourism taxes like other countries such as the UK has recently done.

UHY’s study shows that a tourist in the US pays $24.74 in tax on a typical daily spend worth $255, compared with global average of $34.82.

The US’s low taxes on tourism ranked it 19th in UHY’s study covering 25 countries. UHY measured the tax paid on a number of everyday purchases by tourists – one night in a four-star hotel in a major tourist city ($150), a meal for two in a restaurant ($75) and a bottle of wine ($30).

The US charges significantly lower taxes on tourist spending than economies in the region, such as Canada (16.4%) and Mexico (18.9%).

Tourism taxes vary from state to state, with some states such as New York, which is the most visited state in the country, levying a combined sales tax of 8.52% on goods and services. Other states, which may not be as popular with tourists such as Oregon, has no sales taxes, in an effort to stay competitive and attract visitors.

While tourism represents a relatively small part of the overall US economy, in many states it is a significant segment of the economy and supports many jobs. However, the travel restrictions imposed as a result of the pandemic are having a significant impact on the industry, with travel bookings at third of what they were this time last year*. As a result, the US economy could lose around $155bn**.

However, UHY’s study found that while the UK, Ireland Germany and China have been quick to make significant tax cuts to aid the tourism industry, 21 of 25 countries in the study, including the US have not yet made any cuts. The firm says that governments could consider further tax cuts to help their tourism economies.

UHY says that there is significant scope for central and local governments around the world to stimulate demand for tourist businesses by cutting taxes on consumption, alcohol duties and local taxes in tourist cities.

Even in the countries that have cut taxes on tourism, extensions will almost certainly be needed until the sector begins to recover. The UK’s 5% VAT rate for the leisure and hospitality sector is set to expire and return to 20% at the end of March 2021, while China’s zero VAT rate ends on December 31 2020. Germany has already announced that its temporary 7% VAT rate will not return to its usual 19% until July 2021. Ireland has temporarily cut its VAT rate for hospitality and tourism businesses from 13.5% to 9% until December 2021.

The tourist industry has been among those worst-hit by COVID, with restrictions on travel set to continue for at least several more months. The International Civil Aviation Authority reported in May that the pandemic is likely to have reduced air passenger numbers by 1 billion by the end of September 2020. This has caused substantial knock-on effects for sectors including hotels, restaurants and visitor attractions.

Dennis Petri, Partner at UHY LLP and Managing Director at UHY Advisors says: “Overall, the low tourist taxes for the US as a whole give it more of a helping hand compared to many other countries. However, we may soon need to do more to help the industry through one of the most difficult periods it has ever faced.”

“The US is already extremely popular among travelers and is home to some of the worlds most visited destinations. Tax cuts could be a way to not only attract tourists back when international travel restrictions are lifted but also stimulate domestic travel in the interim. With a vaccine finally on the horizon, we need to start planning for the post-coronavirus recovery.”

“It’ll be up to states with significant tourism industries such as California and New York to make a concerted effort to drum up travel through more attractive tax rates in order to boost the sector for the US as a whole.”

“This is a state issue – local and regional governments could also do more to help. Some cities levy specific taxes on hotel rooms and suspending those charges for a period would lift a little more of the burden from tourists and the hospitality industry.”

UHY says that Europe (11.3%) has lower taxes than the global average on tourism. Some European countries that rely relatively heavily on their tourism industries have among the lowest tourist taxes in UHY’s study, including Spain (10%) and France (11.6%).

*LSE October 2020
**World Travel & Tourism Council

Tourism taxes in the US make up 9.7% of a tourist’s typical daily spend

ENDS

About UHY LLP
UHY LLP is a licensed independent CPA firm that performs attest services in an alternative practice structure with UHY Advisors, Inc. and its subsidiary entities. UHY Advisors, Inc. provides tax and business consulting services through wholly owned subsidiary entities that operate under the name of “UHY Advisors.” UHY Advisors, Inc. and its subsidiary entities are not licensed CPA firms. UHY LLP and UHY Advisors, Inc. are US members of Urbach Hacker Young International Limited, a UK company, and form part of the international UHY network of legally independent accounting and consulting firms. “UHY” is the brand name for the UHY international network. Any services described herein are provided by UHY LLP and/or UHY Advisors (as the case may be) and not by UHY or any other member firm of UHY. Neither UHY nor any member of UHY has any liability for services provided by other members.

About UHY, the network
Established in 1986 and based in London, UK, UHY is a leading network of independent audit, accounting, tax and consulting firms with offices in over 320 major business centres across more than 95 countries. Our staff members, over 8,100 strong, are proud to be part of the 16th largest international accounting and consultancy network. Each member of UHY is a legally separate and independent firm. For further information on UHY please go to www.uhy.com.

UHY press contact: Leigh Lyons on +44 20 7767 2624 Email: l.lyons@uhy.com – www.uhy.com

Nick Mattison or Richard Crossan
Mattison Public Relations
+44 20 7645 3631
+44 74 4637 5555
Email: richard.crossan@mattison.co.uk

UHY is a member of the Forum of Firms, an association of international networks of accounting firms. For additional information on the Forum of Firms, visit www.forumoffirms.org.

UHY is an international association of independent accounting and consultancy firms, whose organizing body is Urbach Hacker Young International Limited, a UK company. Each member of UHY is a separate and independent firm. Services to clients are provided by the UHY member firms and not by Urbach Hacker Young International Limited. Neither Urbach Hacker Young International Limited nor any member of UHY has any liability for services provided by other members.

Clayton & McKervey CPA eases preparation for year-end business reporting with a roundup of filing requirements for companies

Southfield, Mich.—October 30, 2019—Clayton & McKervey, a certified public accounting and business advisory firm helping growth-driven companies compete in the global marketplace, knows this time of year brings a host of filing requirements and forms that companies need to finalize in order to file their taxes. Shareholder Margaret Amsden, CPA, who leads the firm’s tax department and is the point person for domestic tax strategies at Clayton & McKervey, says proactive preparation is half the battle in ensuring the tax filing process will go smoothly.

“Income, Social Security, Medicare tax withholding and payments that are not considered wages have to factored in for accurate reporting,” Amsden said. “It may seem a bit overwhelming, but companies that administer a system to ready their information now will have an easier time seeking the best possible financial advantages at tax time.”

Amsden offers a rundown on the key areas to consider when preparing year-end business reporting:

Form 1099’s – Depending on the nature of the non-wage payment, there are several:

Form 1099-MISC (Miscellaneous Income) relates to services rendered which are not reportable wages on Form W-2 and includes: rents, services prizes, awards, medical and health care payments, cash paid from a national principal contract to an individual, partnership, or estate, royalties, or payment to attorney or law firm.
• For non-employee compensation, the form must be filed by January 31.
• Any other type of payment is due by February 28.
• For multiple types of payments, the IRS now requires two filing batches, one on or before January 31 and the second on or before February 28.

Form 1099-DIV (Dividends and Distributions) is required for payees who:
• Received at least $10 in dividends and other distributions on stock—not generally applicable to S Corporation distributions; had any foreign tax withheld and paid on dividends and other distributions on stock regardless of the amount of the payment; had any federal income tax withheld under the backup withholding rules regardless of the amount of the payment; or received at least $600 as part of a liquidation.
• There is also a change in exclusions on gains regarding all qualified small business stock – RICs acquired on or after January 1, 2019. If a RIC was acquired after December 31, 2018, then there will be no additional exclusions on any gain generated from that stock. If the stock was acquired on or before December 31, 2018 then the previous exclusions may apply to gains received.

Form 1099-INT (Interest Income) is required for payees who: received at least $10 in interest (or for certain payees at least $600); had any foreign tax withheld and paid on interest regardless of the amount of the payment; or had any federal income tax withheld under the backup withholding rules regardless of the amount of payment.

Form 1099-R (Distributions from Pensions, Annuities, Retirement or Profit Sharing) is currently required for each payee receiving at least $10 from profit sharing or retirement plans, any IRAs, annuities, pensions, insurance contracts, survivor income benefit plans, permanent and total disability payments under life insurance contracts, and charitable gift annuities.
• Also reports death benefit payments made by employers which are not part of a pension, profit sharing, or retirement plan, and reportable disability payments made from a retirement plan
• Special rules apply for reporting distributions to employees affected by natural disasters (refer to Pub. 976, Disaster Relief)
• Rollovers to a Roth IRA cannot be re-characterized as having been made to a traditional IRA
• Payments made to any state unclaimed property funds on or after January 1, 2019

Form W-2:
Employers must file Form W-2 for wages paid to each employee subject to income, Social Security, or Medicare tax withholding and need to consider:
• Health Insurance Premiums paid for a 2% Shareholder in an S Corporation
• Personal Use of Employer-Provided Automobiles as an excludable working condition fringe benefit
• Group-term Life Insurance Coverage included in the employee’s gross income to the extent the cost of the policy coverage exceeds the cost of $50,000 of such insurance, less the after-tax amount (if any) paid by the employee toward the purchase of the insurance.
• Disability Insurance Coverage which is not required to be included in the employee’s gross income but if it is, then the benefit (if ever claimed by the employee) will be non-taxable
• The Affordable Care Act (ACA) required on the total cost of health care coverage on the W-2 form for all employers with more than 250 W-2 forms.
• Premium Reimbursement Plans on reimbursed payments for the purchase of individual health insurance policies in employees’ compensation.

Form 1095-C and 1095-B:
• Employers with more than 50 full-time employees need to report information regarding the health care eligibility and coverage for their employees on Form 1095-C (Employer-Provided Health Insurance Offer and Coverage).
• Employers with less than 50 full-time employees sponsoring self-insured group health plans will be required to file Form 1095-B (Health Coverage) to report information regarding the health care coverage for their employees.

Tax Cuts and Jobs Acts (TCJA) updates:
• Qualified Moving Expense Reimbursements Exclusion is no longer allowed during the tax years 2018-2025.
• Donated Leave–the allowance for employees donating their personal, sick or vacation leave days to qualified tax-exempt organizations helping victims of some specified, recent natural disasters, still applies in 2019.
• Qualified Equity Grants Reporting–The Internal Revenue Code (IRC) Section 83(i) covers “qualified equity grants” but comes with increased reporting requirements for eligible corporations with qualified plans. Generally, when stock from an exercise of a stock option or a stock grant is substantially vested, employees are required to recognize taxable income, and income tax withholding requirements apply. Note: In the case of a start-up business, this withholding burden often falls on the employee, which counteracts any incentive of the initial stock option or grant. Complex rules stipulate what companies are covered, employee notification requirements, and penalties if employees are not notified in a timely manner.

Amsden has written more in depth on reporting requirements and exceptions, and says that consulting with the appropriate accounting specialists can alleviate confusion and expedite the reporting process.

About Clayton & McKervey
Clayton & McKervey is a full-service CPA firm helping middle-market entrepreneurial companies compete in the global marketplace. The firm is headquartered in metro Detroit and services clients throughout the world. To learn more, visit claytonmckervey.com.

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GOP states discover a tax hike they have to like: for roads

April 14, 2019

Washington Post

David Eggert

[…]

“It’s going to take $2.5 billion a year,” said Detroit Regional Chamber CEO Sandy Baruah of Michigan’s road-building needs. “Anyone who thinks you can cut even half of that out of other elements of the state budget without having significant ramifications to real people, you’re smoking something that’s not legal.”

Democratic Gov. Gretchen Whitmer won election last year after running on the slogan “Fix the Damn Roads.” Her plan would gradually add 45 cents to the cost of a gallon of gas by October 2020, which would be more than double the current 26-cents-per-gallon gas tax and make it the highest in the country. GOP legislative leaders have dismissed the proposed hike as way too much, but they are leaving open the prospect of passing a more modest increase in the face of intense pressure from the business community.

In some states, Republican-leaning interests have become the biggest backers of higher taxes for this purpose, which is seen as necessary for economic development.

While consumers are acutely conscious of prices at the pump, legislators are struggling to get around the difficult realities of the fuel surcharge that funds transportation projects. They are also facing the echoes of the tax cut promises they made in winning over many heartland states in the last decade — that getting tougher on spending wouldn’t mean worse services.

In most states, the excise tax rate per gallon is fixed and doesn’t rise with inflation. And the federal gas tax has remained unchanged since 1993. Meanwhile, consumers are driving more fuel-efficient vehicles or are driving less, depressing revenue. The real purchasing power of the federal gas tax has fallen by 40% over the past quarter-century, and repair costs rise significantly when roads decline to a rating of poor or worse.

This winter, Michigan’s Department of Transportation had to close 10 miles of Interstate 75 in suburban Detroit — one of the state’s most heavily trafficked stretches — because of vehicle damage from cracks and potholes.

View the full article here.

Analysis: Whitmer won on ‘damn roads;’ now she owns them

November 7, 2018

Crain’s Detroit 

By: Chad Livengood

Should she stand for re-election in four years, the Michigan governor’s race in 2022 could come down to one overarching question: Did Gretchen Whitmer actually fix the damn roads?

Whitmer’s campaign slogan of “fix the damn roads” found the pulse of voters as she sailed to a 9-percentage point victory Tuesday over Attorney General Bill Schuette and became Michigan’s 49th chief executive.

The newly minted Democratic governor-elect’s first major political challenge may be selling a Legislature with a smaller Republican majority on raising taxes for infrastructure that a larger GOP majority refused to do for Republican Gov. Rick Snyder three years ago.

Her Republican opponent struck out with a tax-cutting “paycheck agenda” as Michigan experiences an economic boom and the lowest unemployment rate in 18 years.

Schuette’s vow to reduce the state income tax from 4.25 percent to 3.9 percent — a tax cut that amounts to an annual savings of $175 for an individual with $50,000 of taxable income — didn’t come close to resonating with voters as much as Whitmer’s salty message about the Michigan’s long-neglected roads and infrastructure.

“The result of yesterday’s election is that people really sent us a very clear message: They want us to fix the damn roads,” Whitmer said Wednesday.

Now she has the daunting task of delivering before the roads deteriorate further and become more of an economic albatross for Michigan.

“Let me tell you, she’s going to be held accountable for fixing the damn roads,” said pollster Richard Czuba, president of Glengariff Group Inc. in Lansing, who called Whitmer’s campaign slogan politically “brilliant.”

There’s only a small window for Whitmer to get a Republican-controlled Legislature to swallow the size of tax increase that they rejected in the fall of 2015 when lawmakers passed a $600 million tax hike. That amounted to a 7-cents-per gallon increase in state fuel tax on unleaded gasoline and a 20 percent hike in vehicle registration fees.

That tax hike didn’t kick in until January 2017 — two months after the November 2016 election, of course — and the overall $1.2 billion road-funding plan won’t be fully funded until 2021.

Republican lawmakers assumed the gradual increase in funding would satisfy the state’s needs. The rapid deterioration of roads in Southeast Michigan last winter calls into question those assumptions.

And Whitmer exploited the GOP’s miscues and brushed off Schuette’s warnings that a Gov. Whitmer would deliver a 20- to 40-cents-per-gallon gas tax increase.

She never would commit to an actual dollar amount.

But unlike past elections in Michigan when taxes mattered a lot, voters apparently weren’t spooked by Whitmer’s clear lurch toward their wallets. That may be a sign that voters understand these tire-rim-bending roads won’t fix themselves.

Whitmer has said she wants to boost the $1.2 billion to $2 billion and use the additional state-generated taxes to draw down another $1 billion in matching federal funds.

The reality is, the $1.2 billion road-funding plan Gov. Rick Snyder signed in September 2015 was never going to fix all of the roads. In fact, they’re just getting worse with each passing winter, according to MDOT.

For state highways and trunk lines alone, MDOT projects pavement conditions will fall from 75 percent rated as “good” or “fair” today to 66 percent in 2021 and 48 percent in 10 years.

During the campaign, Schuette called Whitmer’s willingness to raise taxes “an economic collapse plan.” Based on MDOT’s projections, the current road-funding model is arguably a bridge collapse plan. It only partially paves over the problem.

“While transportation agencies are certainly very grateful for the legislative action that will provide some new state funding for transportation beginning in 2017, the reality is that the need for investment, particularly in roads and bridges, will not be fully addressed by that action,” Snyder’s 21st Century Infrastructure Commission wrote in its 189-page report that’s been gathering dust in Lansing for two years.

The commission estimated Michigan needs to spend $4 billion more annually on transportation, underground water infrastructure and broadband internet.

Whitmer, who spent 14 years in Legislature, has suggested she would abandon the GOP’s plan to earmark $600 million of the $1.2 billion from the state’s $10 billion general fund, which is under financial stress after growing less than 3 percent since 2000.

Whitmer may very well get the support of business groups like the Detroit Regional Chamber and Business Leaders for Michigan, which have opposed the Legislature’s move away from Michigan’s traditional method of funding roads with taxes on the cars and trucks that use and abuse the pavement.

“If the Republicans don’t deliver and are seen as overly obstructionist on fixing the roads, I think they’re going to be in for a tougher road in 2020 — and I think they realize that,” said Sandy Baruah, president and CEO of the Detroit Regional Chamber.

Baruah, a longtime Republican who served in both Bush administrations, said the GOP’s anti-tax message is “just not resonating with voters anymore.”

“If that’s the message they’re going to use to not fix the roads, I think that means political problems for the Michgian Republican Party in 2020,” Baruah said.

By ending the general fund raid for road dollars, Whitmer would free up money to help pay for two of her other campaign pledges — a $100 million scholarship program to pay for the first two years of college and stopping the so-called “raid” of $900 million in School Aid funds that helps subsidize the state’s universities and community colleges.

Both are going to be heavy legislative lifts, especially since Whitmer has vowed to eliminate the income tax on pension income for Baby Boomers — another $300 million hit to the general fund.

Her campaign wish list for the general fund easily tops $1.3 billion.

“She’s gonna have to put those much-vaunted legislative skills to work,” Baruah said.

There are Republican legislators eager to get rid of the tax on pensions — and they would have done it by now if it weren’t for Snyder’s ability to veto such a tax cut.

“I think no matter who controls the Legislature, that’s coming to the desk,” Whitmer told Crain’s on the campaign trail in late September.

During the campaign, Whitmer said she’ll present lawmakers with a budget plan by February that funds her $3 billion plan to fix the roads.

That will inevitably include a proposed tax and fee increase for road users.

If the new Republican leaders refuse to go along with a tax hike, Whitmer has said she’ll mount a ballot campaign for a $20 billion, 10-year bond for roads and infrastructure — a get-out-the-damn-credit-card approach.

“If they’re not strong enough to do it, I’ve always said I’ll go to the voters and go for a bond,” the governor-elect said Wednesday.

All of this political wrangling will put the years-long road funding debate back in the spotlight in February, March and April — just in time for another pothole season.

View the original article here

Amid calendar shift, increased filing extensions, is April 15 losing its dreaded “Tax Day” deadline significance?

When is April 15 not really Tax Day? In 2017—when taxpayer procrastinators can take advantage of a few extra days to submit their tax returns. According to Clayton & McKervey, an international certified public accounting and business advisory firm located in metro Detroit, the actual deadline to file 2016 federal tax returns with the IRS is Tuesday, April 18, instead of the traditional April 15 deadline.

“April 15 has been ingrained in the minds of many Americans as Tax Day, but a combination of calendar dates this year and the ease at which taxpayers can and do file for automatic extensions seems to have somewhat diminished the anxiety – and taxpayer urgency – that has previously been a mainstay of tax season,” Margaret Amsden, CPA and head of Clayton & McKervey’s tax practice, said.

The IRS has reported that the number of returns it has received and processed this year is down compared to last year’s pace. Part of the reason may be that April 15 falls on a Saturday this year, which would normally move the filing deadline to the following Monday, April 17. But because Emancipation Day—a legal holiday in the nation’s capital—is being observed on Monday, the deadline to file taxes has been bumped to Tuesday, April 18. Emancipation Day created a similar situation in 2016, making it two consecutive years that April 15 has not been the official tax deadline date.

If this year’s three-day reprieve still isn’t long enough for some, Amsden says taxpayers can use form 4868—an Application for Automatic Extension of Time to File U.S. Individual Income Tax Return—to stretch their filing deadline by six months to Oct. 16 2017.

About Clayton & McKervey
Clayton & McKervey is a full-service CPA firm helping middle-market entrepreneurial companies compete in the global marketplace. The firm is headquartered in metro Detroit and services clients throughout the world. To learn more, visit claytonmckervey.com.