CIP Journal

On 26 July 2018, the Agreement between the Government of the Republic of Moldova and the Government of the United Arab Emirates for the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income, entered into force.

Under Article 30 “Entry into Force” of the Nominal Agreement, its provisions shall apply:

• with reference to withholding taxes, to income earned on or after 1 January of the calendar year in which this Agreement was signed;
• with reference to other taxes, for fiscal periods beginning on or after January 1 of the calendar year in which this Agreement was signed.

At the same time, according to the provisions of the mentioned Agreement, the following rates of taxes withheld at the source of payment are set: Dividends – 5%, Interest and Royalty – 6% of the gross amount.

Source: finance.gov.md

On June 18, 2018, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Dominica.

On September 18, 2017, category 5 Hurricane Maria hit Dominica while the country was still recovering from tropical storm Erika. Maria was Dominica’s worst natural disaster with damage estimated at US$1.3 billion (226 percent of GDP). Most economic sectors sustained significant damage and losses, with public infrastructure carrying the brunt. The output collapse and costs of reconstruction resulted in large fiscal and current account deficits. Fiscal performance deteriorated sharply due to the fall in tax revenue after the hurricane, but was partially offset by a surge in grants and buoyant Citizenship-by-Investment (CBI) sales revenues.

With limited revenue, drawdown of large government deposits, grants, and an insurance payout helped meet financing needs. The hurricane also exacerbated weaknesses in the financial sector, particularly of non-bank institutions, which face undercapitalization, low profitability and high non-performing loans. Credit to the private sector has been flat and inflation remains subdued.

In 2018, output is projected to decline by 14 percent and to take about 5 years to recover to pre-hurricane levels. The fall in output and government revenue, coupled with increased expenditure for rehabilitation and reconstruction, will lead to a substantial worsening of fiscal and external deficits. However, signs of recovery, particularly in construction and the public sector, have already started to emerge. The risks to the outlook include the budget becoming financially constrained and unable to sustain adequate investment given high debt, limited buffers, weak revenue, and urgent needs for reconstruction spending. Other risks include financial instability stemming from undercapitalization of systemic financial institutions, recurrent natural disasters with low resilience, uncertainty regarding CBI and grant income, and external competitiveness challenges.

Executive Board Assessment

Directors commended the authorities’ efforts in responding to the humanitarian crisis and significant devastation wrought by Hurricane Maria. Directors stressed the need to implement cost effective fiscal policies and reforms to support recovery while containing expansion of public debt. They recommended containing current spending extraneous to recovery, and enhancing the efficiency of capital investment while protecting critical social and recovery spending. Given Dominica’s vulnerability to natural disasters, directors noted that investment in resilient infrastructure was appropriate, despite its higher cost. They encouraged the authorities to create a savings fund for natural disasters. Once output recovers, directors recommend fiscal consolidation to sustain reconstruction while generating a primary surplus sufficient to set public debt on a downward trajectory.

Directors highlighted the need for stronger financial sector regulation and supervision to address vulnerabilities exacerbated by Hurricane Maria. They stressed the importance of decisive action to reduce non-performing loans and capital shortfalls, as well as adequate preparedness for possible liquidity pressures in line with recommendations of Fund’s technical assistance. Directors recommended maintaining a proactive stance to mitigate the risk of withdrawal of correspondent banking relationships including continued strengthening of the AML/CFT framework. They supported the phasing out of the off-shore bank sector and welcomed cessation of new license issuance.

Directors agreed that enhancing growth prospects requires higher private sector participation and improving the business environment. To this end, directors recommended identification and removal of costs and barriers that affect investment and profitability. They advocated that public sector compensation decisions consider their impact on private wages and competitiveness. Directors stressed the need to improve the business environment, including efforts to reduce the costs of dealing with the government. They urged strict enforcement of construction and zoning regulations given vulnerability to natural disasters.

Ultra high-net-worth individuals (UHNWI) are defined as having a net worth of at least US$30 million in constant 2018 dollars. It is the wealth segment above very-high-net-worth individuals (>5 million) and high-net-worth-individuals (>1 million). Although they constitute only 0.003% of the world’s population, they hold 13% of the world’s total wealth.

The global UHNW population is forecasted to rise to 360,390 people by 2022, which is a increase of 40%, according to new Wealth-X report.  A Solid growth is expected in the UHNW population. The top 10 UHNW countries all experienced double-digit growth in total wealth.

• In 2017, the world’s ultra high net worth (UHNW) population – individuals with a net worth of $30m or more – rose by 12.9% to 255,810 people.
• The US remained by far the leading country for UHNW individuals in 2017, accounting for a 31% share.
•   The fastest growth was in Asia, which posted an increase in ultra wealth of 27%.
• Stronger global commodity markets and relatively stable exchange rates against the US dollar also supported UHNW wealth trends, especially in emerging markets.
• Collective wealth in China jumped by 33%, generating large gains in average net worth.
• The share of women in global UHNW population has increased. The number of ultra wealthy women totaled just under 35,000, equivalent to a record-high share of 13.7%
• The global UHNW population is forecast to rise to 360,390 people by 2022, an increase of almost 105,000 compared with 2017. The level of UHNW wealth is projected to increase to $44.3 trillion
• Hong Kong and New York are the top cities for billionaires
• Bangladesh is the fastest growing UHNW country.

Source/Credit: Wealth-X