Int'l Tax News

Republicans on the House's tax-writing committee are clinging to the new tax-cut law in their reelection races, as the odds of a bluewave in November appear to be increasing

The view that inequality is harmful for growth is increasingly fashionable among policymakers around theworld. In the strongest form of this argument, high levels of inequality can make sustained growth impossible or even cause recessions. In aweaker form, lower levels of inequality are good for growth. Among policymakers this view has almost entirely supplanted the traditional economic view that therewas a tradeoff between inequality and growth, and that greater inequality might be the cost of higher levels of growth. This paper is not a fresh attempt to assess the empirical evidence on inequality and growth or a survey of the existing literature. Instead this paper addresses the question ofwhether policymakers should even be interested in this question in its traditional form, answeringwith a resounding no for three reasons.

Illinois Toolworks Inc. has asked Treasury and the IRS to issue guidance indicating that, for purposes of the foreign tax credit limitation under section 904(a), indirect expenses are not apportioned to any amount includable in the gross income of a U.S. shareholder as global intangible low-taxed income under section 951A.

Issuing guidance on the application of the base erosion antiabuse tax (BEAT) aggregation rule is a top priority for the IRS, according to an agency official. Speaking April 10 at an International Tax Institute luncheon in New York, Daniel McCall, IRS deputy associate chief counsel (international-technical), said the IRS has made it a top priority to issue guidance on the application of the BEAT aggregation rule to groups attempting to determinewhether they meet the rule's $500 million average annual gross receipts test or fall under the 3 percent de minimis exception (also known as the BEAT percentage).

The challenges of taxing the digital economy are "not something you can fixwith antiabuse rules," according to Valeska Gronert, head of sector in the European Commission's Directorate-General for Taxation and Customs Union. It's not about aggressive tax planning, it's about an "outdated tax system," she said.

The United Nations and the OECDwill be rolling out more international tax guidance aimed at developing countries, as non-OECD economies have joined the global project to combat base erosion and profit shifting.

As the OECD's super-tax treatyÔøΩthe multilateral instrumentÔøΩnears its entry into effect, practitioners representing multinational companies remain concerned about a provision designed to avoid treaty abuses.

The IMF iswading into a thorny debate overwhether online giants such as Facebook Inc. andAmazon.comInc. pay enough taxes. Some digital industries are prone to become monopolies, because the first company that establishes a technology often becomes dominant, the IMF said in an analysis released April 12."The resulting market distortions are best addressed through regulatory rather than tax measures. However, in their absence, the high profit generated provides an attractive tax base, especially given that some technology giants are among the largest companies in theworld," the fund said.

Trade union and tax justice groups insist an upcoming European Commission company law legislative package include an economic substance test to combat letterbox company tax abuse. Due to be released April 25, the new commission legislative package aims to modernize EU company law in the digital era.

The taxworld could see the development of international common law for transfer pricing as countries fight for their slice of multinationals' profits, such as in the case of Ireland, the European Union, the U.S., and Apple Inc, a U.K. tax barrister said.

Business leaders in the Philippines say they fully support the Duterte Administration's proposed corporate tax reforms and investment incentives package.

Describing the reforms as "a bold move" to sharpen the Philippines' regional competitiveness, the Management Association of the Philippines, an association of over 1,000 business executives from the country's largest local and multinational companies, said lowering corporate income tax rateswill put the country on parwith its ASEAN peers. It also praised proposals to modernize investment incentives, and make these perks time-bound and performance-based.

Multinationals indirectly investing into China should examine their restructuring options to take advantage of China's beneficial ownership tax treaty rules that could cutwithholding tax rates on dividends, royalties and interest.

The Senate Republicans' campaign arm is escalating its attacks on Democrats running in key races over opposition to the GOP's tax overhaul.

A liberal group on Monday launched awebsite to track how corporations are responding to the new tax law.

Thewebsite from Americans for Tax Fairness, called "Trump Tax Cut Truths," contains searchable data about the size of corporations' tax cuts aswell as information about bonuses,wage increases, job cuts, new investments and stock buybacks companies have planned following the law's enactment. The database contains information about more than 800 companies.

Paul Crispino analyzes recent court decisions inwhich taxpayers prevailed in arguing that their interpretation of the tax codewas reasonable even though those interpretations may have produced tax benefits that Congress had not contemplated.

Many foreign corporations are refraining from making long-term investments in the U.S., concerned that incentives in the new tax reform lawwon't stick orwill phase out too quickly to help them, practitioners said.

Republicans' pitch on tax cutswas fairly clear: Lower rates on corporationswould spur investment and create new jobs. A new survey published by the Federal Reserve Bank of Atlanta in conjunctionwith Stanford University and University of Chicago Booth School economists shows the new policy measures have done little do bolster corporate investment plans.

U.S. states could learn valuable lessons from the EU's efforts to impose VAT on electronic sales between member states if the Supreme Court overturns its decision in Quill. Richard Asquith, vice president of global indirect tax at Avalara in London, told Tax Analysts there are two reasons the states should look to the EU's efforts to improve VAT collection on e-commerce should the 1992 decision in Quill Corp. v. North Dakota be overturned.

In 1864 Generalwilliam Tecumseh Sherman's army marched from Atlanta to Savannah, carrying out a scorched-earth campaign that eviscerated much of the landscape along theway. The Tax Cuts and Jobs Act (P.L. 115-97) is having a similar effect on large areas of the U.S. international tax regime. It haswreaked havoc by layering new concepts on old, and the two don't meshwell.whether the U.S. Treasury and the IRSwill be able to use regulatory guidance to restore a system thatwas already awobbly house of cards is unclear.

Tax executives almost unanimously consider the U.S. corporate rate to be the tax reform provisionwith the greatest potential to influence business, according to a new survey.

The majority of Canadian firms anticipate "no clear impact" on business activity over the next 12 months from the Trump administration's policy changes on trade and taxes, a quarterly Bank of Canada survey said Monday.

US companies are expected to report earnings growth of 17.1 percent per share for the first three months of the year, as Donald Trump's cut to the corporate tax rate helped to deliverwhatwould be the biggest quarterly increase in seven years.

European executives are targeting U.S. companies as a brighter economic landscape at home and abroad boosts buyer confidence. Lower taxes and favorable foreign exchange rates are increasingly enticing for France's JCDecauxSA,which has looked at U.S. rivals as potential acquisition targets for more than a decade.

Vietnam's excitement for a raft of new trade deals comeswith the side effect of lower tariff revenues, so tax collectorswill help cover the shortfallwith more audits in the coming year, especially for transfer pricing.

India's dreaded long-term capital gains tax has made an "insignificant splash" in the mutual funds and equity markets, according to practitionersÔøΩindicating Indian markets are strong enough to standwithout tax incentives.

The EUwill likely ensnare Germany's massive auto industry as it targets U.S. tech companies for massive tax bills the bloc believes it is owed. Car industry representatives told Bloomberg Tax they fear automakers therewill face undue tax burdens under the European Commission's new tax treatments of digital companies like Facebook Inc. and Alphabet Inc.'s Google.

Companies in Brazil have begun to post victories as they challenge a controversial tie-breaking procedure used by the revenue service's appeals courts. In February and March, the Brazilian units of Delta Airlines and American Airlines blocked rulings they had lost because of a rule that permits the heads of the tax courts to vote twice to break ties.

Opposition lawmakers March 29 applied renewed pressure on the Dutch government to publicly release anonymous versions of individualized tax deals issued to resident companies. Lawmakers made the statements during a plenary debate on tax avoidance duringwhich lawmakers repeatedly pressed the country's finance secretary to do more to tackle tax avoidance by companies and curb profit shifting through the Netherlands.

The Australian opposition Labor Party has initiated a Senate inquiry into business support for the government's plan to reduce the corporate tax rate to 25 percent from 30 percent, even after the government stalled a vote on it. The inquirywill target a commitment given March 21 to the Senate by the Business Council of Australia and 10 of its members, including some of Australia's largest companies.

In comments to the TPMinds International Conference in late March, Deputy Commissioner Mark Konza outlined the Australia Taxation Office's priorities in the area of international tax enforcement,with an especial focus to be placed on the energy and resources sector and pharmaceutical industry.

A bipartisan group of lawmakers, conservative groups and online businesses are urging the Supreme Court to keep in place limits on states' ability to require online retailers to collect their sales taxes.

Several major labor groups are pressing corporations over how they expect to benefit from the GOP tax law and use their savings as the unions prepare to bargain new contracts forworkers.

Financial executives in the U.S., Canada and Mexico are reporting increased confidence about the economy and their companies' prospects following passage of the GOP tax law.

European Union antitrust chief Margrethe Vestager has become the de facto global regulator for U.S. companies such as Google and Apple. Under herwatch, the EU fined Google, ordered Apple to repay ÔøΩ13 billion (about $16 billion) in alleged unpaid taxes to Ireland, and this year hit Qualcomm Inc.with a nearly ÔøΩ1 billion fine for payments it made to Apple that the EU saidwere illegal.

The OECD Global Forum on Transparency and Exchange of Information for Tax Purposes has rated Estonia, France, Monaco, and New Zealand as compliant; Bahamas, Belgium, and Hungary as largely compliant; and Ghana as partially compliant in new peer review reports on implementation of international tax transparency standards.

The South Korean tax authoritywill be more easily able to flag companies for audits once large firms begin publishing their governance structure, practitioners told Bloomberg Tax. Starting in 2019, South Korea's Financial Services Commissionwill require publicly traded companieswith assets exceeding 2 trillionwon ($1.8 billion) to publicize their ownership structure in a bid to improve corporate transparency for stakeholders, the financial authority said in a March 21statement.

The OECD began reviewing the new U.S. tax law April 4 andwill scrutinize it "diligently and expeditiously," according to a letter obtained by Bloomberg Tax.

A renewable energy company based in Florida is selling Canadian assets inwhat some consider aworrying sign of increasing capital reallocation from Canada to the United States as a result of U.S. tax reform.

Luxembourg's corporate tax base may suffer from the U.S. Tax Cuts and Jobs Act and EU anti-tax-avoidance directives because of the country's heavy reliance on foreign investment, according to an IMF report.

The Alliance for Competitive Taxation has asked Treasury to consider numerous issues the group has identifiedwhen developing guidance on the base erosion and antiabuse tax under section 59A.

Taxation is the lifeblood of a modern liberal democracy. It is the one policy areawithoutwhich nearly all of the other functions and aspects of the statewould not be possible. Yet in the face of this reality, many Americans continue to believe that they can receive the goods and services provided by a modern regulatory, administrative, social-welfare statewith low taxes and limited government. Many politicians and everyday Americans have even perpetuated the myth that they are "overtaxed" compared to the citizens of other advanced, industrialized nations.

McCormick & Co. Inc.will increase capital expenditures by 10% this year among other benefits linked to the recent U.S. tax overhaul, said Chief Financial Officer Michael Smith. "We like the tax act overall," he said. "We have a lot of business overseas and for us to be competitive it's good to have the tax rate come down."

Amazon.com Inc. faces a renewed legal challenge from the IRS,which filed a brief March 30 appealing its 2017 loss in U.S. Tax Court to the tech giant. Amazon had successfully challenged the IRS's adjustment of $2.2 billion in income related to its business in Luxembourg, resulting in a tax bill of $234 million. In its appeal, the IRS pointed to the 2017 tax act and its legislative history as evidence that Congress intended the law to match the IRS's position.

The Netherlands iswilling to publish anonymized versions of tax deals issued to resident companiesÔøΩif it has to, a finance official said. An independent committee is currently investigating the country's tax ruling practice, and may recommend the release of the deals. In that case, "we'll simply start doing this," State Secretary for Finance Menno Snel said during a March 30 parliamentary debate.

The French governmentwants to add the stick to its carrot-and-stick plan to combat tax fraud, trying to ease late-filing penalties for "honest" companies and get toughwith those that aren't.

The Australian Treasury has issued a memorandum that explains the Treasury Laws Amendment (Tax Integrity and Other Measures) Bill 2018,whichwould extend the purview of the multinational antiavoidance law to cover additional corporate structures and entities.

The European Commission is holding out hope that the newest version of its long-embattled common consolidated corporate tax base (CCCTB)will become law. But so far it seems to be following the same trajectory as its doomed 2011 predecessor: strong backing in the European Parliament before disintegrating in the EU Council.

The IRS has released (Announcement 2018-8) a report on advance pricing agreements for calendar year 2017 under the advance pricing and mutual agreement program, showing therewere more APAs executed than last year and it took slightly more time to complete them. According to the report, 116 APAswere executed in 2017 comparedwith 86 in 2016; the median completion time for an APA in 2017was 33.8 months comparedwith 32.8 months in 2016; and 101 applicationswere filed in 2017 comparedwith 98 in 2016.

In this article, the authors argue that statutory and effective tax rates are inadequate tools for conducting cross-country tax-attractiveness comparisons. Instead, they advocate for the use of the multivariate Tax Attractiveness Index,which they use to compare the changes in the tax attractiveness of 100 nations over 10 years and also to compare tax attractivenesswith major macroeconomic variables.

America's new tax law is encouraging foreign banks to raise short-term dollar fundingwith commercial paper instead of currency swaps, according to Credit Suisse strategist Zoltan Pozsar. In his view, this explains the recent narrowing in thecross-currency basis. The specific provision, according to Pozsar, is the "base erosion and anti-abuse tax" (BEAT),which is meant to limit multinationals' ability to minimize their US tax liabilities.