Int'l Tax News

Instead of following other jurisdictions, African countries must take charge by initiating changes in the international tax agenda to influence thework on topics like digital taxation and ensure their needs are met, officials urged.

Canada's impending federal carbon tax is facing new legal challenges despite the government's effort to decrease the tax's potential impact by increasing carbon tax subsidy rates.

The government of South Korea is reportedly preparing legislation thatwould make Amazon, Apple, Google, and other digital companieswithout a permanent establishment in the country subject to tax.

The Australian government has released draft legislation thatwould restrict multinationals' flexibility in determining assets and liabilities under the country's thin capitalization regime, including by requiring consistencywith values used for financial reporting purposes.

Lengthy transition tax regs may offer practitioners some reassurance in fleshing out more details, but they don't venture much outside the original scope of previous guidance.

Congress, by the Tax Cuts and Jobs Act of 2017, amended the Internal Revenue Code so that patents and inventions created by the personal efforts of a taxpayer disposing of them are not capital assets, and therefore generate ordinary gain or loss. In and of itself, the action seems straightforward enough. It represents a policy choice aboutwhich reasonable minds can certainly differ, but it is a clear policy choice.
Congress, however, did not repeal or amend another, pre-existing, provision specifically granting capital gain treatment to specifically the same class of assets.what is the effect of Congress's action under the circumstances? It is possible to reconcile the provisions as a matter of pure textual analysis. That reconciliation, however, seems quite contrary to the desire or intent of thosewho initiated the amendment because it leaves most gain from the disposition of the assets in question taxed at capital rather than ordinary rates.

In this installment,which is Chapter 5 of a book published by Michael C. Durst, the author considers five kinds of policy instruments that might offer significant protections against base erosion for lower-income countries.

Thisarticleexamines some of the factual assumptions and economic arguments presented in the European Commission staff's ''Commission Staffworking Document ÔøΩ Impact Assessment,'' issued on March 21, 2018, to accompany two draft Directives the EC released relating to taxation of the digital economy.

PwC summarizes guidance put forward by the EU's inter-governmental Code of Conduct Group (Business Taxation) (CoCG)recentlyfor determining substancewhen consideringwhether a tax measure is harmful or 'fair'. Theguidance includes elements of behaviour that Member States must meet and requirements that nonmember States must adopt in order to avoid being included on the so-called blacklist of non-cooperative non-EU, third countries.

This paper reviews the empirical literature on international tax avoidance by multinational corporations, includingevidence on main channels of corporate tax avoidancesuch astransfer mispricing, international debt shifting, treaty shopping, tax deferral and corporate inversions.It performs a meta analysis of the extensive literature that estimates the overall size of profit shifting, andextends earlier literature reviews by Dharmapala (2014), Hines (2014) and OECD (2015). Theresults suggestthat a 1 percentage point larger tax rate differential reduces reported pre-tax profits of an affiliate by 1 percent. The authors alsoillustrate the revenue impact of tax avoidance for 81 countries.

In this article, the authors examine a new set of model rules from the OECD that seek to prevent common reporting standard avoidance arrangements and the use of opaque offshore structures by imposing reporting obligations on intermediaries. After conducting a thorough review of the rules, the authors consider how theywill function in practice and note concerns that intermediaries may have about the scope and breadth of the new requirements.

The Tax Cuts and Jobs Act caused a sharp reversal in U.S. net foreign direct investment (FDI) in early 2018 and may cause a significant long-term structural shift in U.S. multinationals' reinvestment of foreign earnings.

The German government's plan to make online platforms such as Amazon and eBay liable for VAT that is not paid by merchants selling on theirwebsites may be unworkable, according to one observer.

As China remains locked in a tariff battlewith the United States, China's executive branch on July 23 announced tax incentives and a bond program intended to boost domestic demand and support the economy.

In this foreword to International Tax Policy in a Disruptive Environment: A Special Issue, the authors provide an overview of the two-day interdisciplinary conference that took place in Munich on 14-15 December 2017, and offer a synopsis of the articles in this special edition of the Bulletin for International Taxation. The authors offer preliminary observations based on the conference and papers, including that despite its successes the BEPS Project has left unfinished business. In the face of reduced residence-based taxation of direct investment and tax competition for mobile activity and real investment, countries have yet to reach consensus on a residence-source or destination-based division of taxation rights. The international tax regime remains at away station in copingwith the disruptive forces of change.

Tax compliance in the United States has long relied on information from centralized intermediaries ÔøΩ the financial institutions, employers, and brokers that help ensure income is reported and taxes are paid. Yetwhile the IRS remains tied to these centralized entities, consumers and businesses are not. New technologies, such as the "sharing" economy (companies such as Airbnb, Uber, and Instacart) and the blockchain (the platform onwhich Bitcoin is based) are providing new, decentralized options for exchanging goods and services.without legislative and agency intervention, these technologies pose a critical threat to the reporting system underlying domestic and international tax compliance.

An initial outline listing discussion points for House Republicans' "tax reform 2.0" legislation offers a hodgepodge of recycled retirement proposals, promises to make temporary provisions permanent, and a plan to help start-up businesses.

In holding that Congress authorized "purely internal" approaches to allocating income among related parties, the Ninth Circuit's reversal of Altera departs from prior decisions' insistence that IRS authority is confined to the comparables-based arm's-length standard.

The OECD has joined the growing contingent of stakeholders urging Canada to assess the competitiveness of its corporate tax regime following the passage of the U.S. Tax Cuts and Jobs Act.

Jurisdictionswould need to demonstratethat they are activelyworking to implement OECD tax transparency standards to avoid being labeled noncooperative under a proposal agreed on by the OECD and G-20.

The OECD is poised to identify a clear path in the global debate on taxing digitalization after a key meeting among countriesworking on solutions to the problem, the organization's chief told G-20 finance ministers.

Danny Beeton examines the OECD's discussion draft on financial transactions and concludes that the draft confirmswhat international case law has made clear, namely that longstanding treasury policies need to be reviewed in the light of the accelerating changes in the international transfer pricing conventions.

Gross domestic product rose at a seasonally and inflation-adjusted annual rate of 4.1% in the second quarter, the Commerce Department said Friday. Here'swhat's behind the number: heftiest growth rate in nearly four years partly due to the Trump administration's 2017 tax cuts, climbing capital expenditures, spend-happy consumers, and exporters are ramping up sales.

British MPs have called for a new tax on Facebook and other social media companies to pay for the costs of policing data misuse, following scandals over Cambridge Analytica and Russian electoral interference.

The pre-Brexit tax bill that British companies may face from a European Union investigation is approaching $1 billion amid escalating tension between the U.K. and the trading bloc.

Belgian lawmakers are likely to introduce changes to a recently adopted law towiden the pool of related companies that can qualify for a beneficial tax regime. If adopted, the changewould allow companieswith indirect ownership of other entities to offset their profits and losses against each other, resulting in significant tax and cash flow benefits.

Thewhite House's Office of Management and Budget has concluded its review of proposed regulations implementing the new tax law's one-time repatriation tax.The next step is for Treasury to publish the rules in the Federal Register.

Diageo Plc has taken a 190 million-pound ($250 million) hit from inquiries linked to a U.K. "Google tax" investigation, marking the end of the largest publicly disclosed dispute on the controversial measure.

Greece is scheduled to exit its marathon bailout this summer after hitting the tough fiscal targets set by its creditors. But the country has done so by raising taxes so high that they are strangling the small businesses that form the backbone of its economy.

The IRS released clarified instructions on how U.S. multinational companies should complete the paperwork for their global financial data,whichwill be exchangedwith other governments.

By:Daniel Shane (CNN Money)

Beijing has announced a range of measures including tax cuts, infrastructure spending and new loans to business as its tries to reinvigorate economic growth,which has begun to slow in recent months. The tax cuts for business are relatively small ÔøΩworth about $10 billion ÔøΩ but they come on top of much bigger injections of funds into the banking system in recentweeks aimed at boosting activity.

The Internal Revenue Servicewon a court case being closelywatched by technology companies on Tuesday, as an appeals court upheld a regulation governing how corporations divide expenses between their domestic and foreign operations.

US banks are calling on the British government to cut taxes and red tape that they say could lead to financial assets and jobs pouring out of the UK afterBrexit.

Canada's Liberal governmentwill seek to address competitiveness challenges faced by the nation's businesses in a budget update later this year amid pressure to respond to U.S. tax reform.

Uber Technologies Inc. and other ride-hailing companieswould have to create local subsidiaries in Chile thatwould be liable for corporate income tax under new draft legislation. The bill, presented to Congress July 20, is the latest attempt by the Chilean government to regulate the companies amid growing tension between taxi drivers, Uber drivers, and police on Santiago's streets.

EU presidency holder Austria's goal of pushing a digital tax solution through the bloc this yearwill be a big lift. "The goalwill be to campaign for further support and to take a step forward. Obstacles are to be overcome," a spokeswoman for the Austria Ministry of Finance said July 20.

Australia's plan to expand its tax definition of a "significant global entity" is set to include members of large multinational groups headed by private companies, trusts, and partnerships, and members of groups headed by investment entities.

Australiawants feedback on plans to tighten existing rules that let offshore sellers of Australian hotel accommodation escape the country's goods and services tax net.

Poland is proposing to significantly increase its powers to challenge multinational companies' transfer pricing decisionsÔøΩso much so, in fact, that one tax practitioner likened the new powers to "an atomic bomb."

This paper presents the new OECD model for the calculation of forward-looking effective tax rates and provides first empirical results based on an OECD survey, conducted in 2016, collecting comparable cross-country information on corporate tax provisions from 36 OECD and Selected Partner Economies.

Using comprehensive data on patent filings at the European Patent Office, including information on ownership transfers pre- and post-grant, thisNBERworking Paper investigates the impact of the introduction of a patent box on international patent transfers, on the choice of ownership location, and on invention in the relevant country.

This paper shows that eliminating firms' access to tax havens has unintended consequences for economic growth. The authors analyze a policy change that limited profit shifting for US multinationals, and show that the reform raised the effective cost of investing in the US. Exposed firms respond by reducing global investment and shifting investment abroad -which lowered their domestic investment by 38% - and by reducing domestic employment by 1.0 million jobs. The authors then show that the costs of eliminating tax havens are persistent and geographically concentrated, as more exposed local labor markets experience declines in employment and income growth for over 15 years. This paper discusses the implications of these results for other efforts to limit profit shifting, including new taxes on intangible income in the Tax Cuts and Jobs Act of 2017.

This IMFworking Paper describes and tentatively quantifies likely tax spillovers from the U.S. 2017 corporate income tax reform. It calculates effective tax rates under various assumptions, and tentatively estimates that under constant policies elsewhere, the rate cutwill reduce tax revenue from multinationals in other countries by on average 1.6 to 5.2 percent. If other countries react in linewith historical reaction functions, the revenue loss from multinationals rises to an average of 4.5 to 13.5 percent. The paper also discusses profit-shifting, real location, and policy reactions from the more complex features of the reform.

Taxpayers may find it harder to mount successful challenges to old IRS regulations on procedural grounds in thewake of a Ninth Circuit opinion reversingAlteraCorp. v. Commissioner.

G-20 finance ministers and central bank governors meeting in Buenos Aires July 21-22 registered their support for implementation ofthe inclusive framework on base erosion and profit shifting, according to a communiqué issued by the G-20's Argentinian presidency.

The OECD has joined the growing contingent of stakeholders urging Canada to assess the competitiveness of its corporate tax regime following the passage of the U.S. Tax Cuts and Jobs Act.

Jurisdictionswould need to demonstratethat they are activelyworking to implement OECD tax transparency standards to avoid being labeled noncooperative under a proposal agreed on by the OECD and G-20.

Despite their theoretical appeal to some, destination-based cash flow taxes may face an insurmountable political hurdle in the global debate concerning taxation of the digital economy, according to one OECD official.

The Tax Cuts and Jobs Act contains provisions thatwill acutely affect oil and gas investments, given the industry's capital-intensive nature, high leverage, practice of reinvesting earnings, and long project lead times. Future tax planningwill take into account the industry's loss-generating downturn over the past few years, and that industry participants often owed alternative minimum tax.

With the tax community focused on how to extract revenue from the profits of tech companies, other major developments in the digital space are getting less attention. Rapid growth is being made in artificial intelligence, and in a presentation at the Oxford Academic Symposium in late June, Benjamin Alarie of the University of Toronto presented a tool he and two colleagues are developing to apply AI to tax analysis.