Int'l Tax News

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U.S. Making Progress on CbC Reporting Agreement Negotiations, Treasury Official Says

The U.S. Treasury Department has made significant progress in negotiating competent authority agreements for exchanging country-by-country reports,with two agreements signed and several others in the signatory process, according to Elena Virgadamo, attorney-adviser, Treasury Office of International Tax Counsel.
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EU Brexit Guidelines Set Taxation Safeguards

Leaders from 27 European Union member states adopted guidelines for the upcoming Brexit negotiations that include measures to safeguard the EU in the event the U.K. decides to dramatically lower the corporate tax rate or provide special tax rulings to multinational companies to attract investment.

The guidelinesÔøΩapproved at a special April 29 EU summit and due to be formalized in a May 3 European Commission proposalÔøΩstate that any future trade EU-U.K. relationship must "ensure a level playing field." According to the guidelines, this includes "safeguards against unfair competitive advantages"when it comes to tax and other sectors such as social, environmental and regulatory practices.
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U.K. Prime Minister Rules Out VAT Rise for Conservative Party Manifesto

The Conservative Party does not plan on including any increases in VAT rates in its forthcoming election manifesto, said U.K. Prime Minister Theresa May,who did not commit to renewing the "triple tax lock" pledge thatwas contained in the party's previous platform.

Speaking on ITV's Peston on Sunday program April 30, May emphasized that her partywill not propose raising the level of tax. "In relation to specific taxes,wewon't be increasing VAT, butwhat Iwant to do is ensure thatwhenwe do look morewidely at the tax system, thatwhatwe say on the tax system,we're absolutely clearwe can deliver on it for people," she told host Robert Peston,who had askedwhether the Torieswould scrap the triple tax lock.
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Inversions, Related Party Expenditures, and Source Taxation: Changing the Paradigm for the Taxation of Foreign and Foreign-Owned Businesses

The disconnect between the rules for the taxation of domestic businesses and foreign and foreign-owned businesses operating in the United States both diminishes the federal treasury and distorts taxpayer and business behavior. Yet bringing the sets of rules into closer coordination is no simple task. This Article examines many of the solutions proffered in the academic literature and details the difficulties and trade-offs that each entails.
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Developing Countries in an Age of Transparency and Disclosure

Two important topics have been the subject of continuing debate in contemporary international tax policy circles. The first is the recent trend towards increased transparency and disclosure in tax enforcement and the prevention of tax base erosion. The second is the question of how developing countries should be treated in the design and implementation of international tax policy.
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The Other Eighty Percent: Private Investment Funds, International Tax Avoidance, and Tax-Exempt Investors

The taxation of private equity managers' share of funds' profitsÔøΩthe twenty percent "carried interest"ÔøΩreceived much attention in academic literature and popular discourse. Much has been said andwritten about the fact that fund managers' profits are taxed at preferred rates. Butwhat about the other eighty percent of funds' profits? This Article theorizes that the bulk of such profits are never taxed.
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Defending Worldwide Taxation With A Shareholder-Based Definition Of Corporate Residence

This Article argues that a principled, efficient, and practical definition of corporate residence is necessary even if some form of corporate integration is adopted, and that such a definition is a key element in designing either a realworldwide or a territorial income tax system aswell as a potential restraint on the inversion phenomenon.
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Competitiveness, Tax Base Erosion, and the Essential Dilemma of Corporate Tax Reform

Label contradicts reality for the U.S. international corporate tax system. The U.S. system is typically labeled as aworldwide tax systemwith a statutory rate of 35%, both uncommon features among our trading partners. Yet these markers of the U.S. tax system do not accurately describe reality,where multinational firms routinely face far lower effective tax rates and little, if any, tax is collected on foreign income. Understanding this discrepancy between label and reality is essential to evaluate recent policy debates surrounding corporate inversions and the competitiveness of the U.S. international tax system.
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The House GOP Blueprint Can Be Drafted to Comply with WTO Rules

Would a destination-based cash flow tax, or "DBCFT," as proposed in the House Republican Blueprint, violateworld Trade Organization (WTO) rules? The EU and other US trading partners have reportedly already begun putting together a legal challenge against the DBCFT for use at thewTO.2 This development is premature, to say the least. No one can seriously opine onwTO-compatibility, let alone develop awTO challenge, until legislative language for the Blueprint is released.
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The Foreign Tax Credit War

The government has been involved in a sustainedwar against objectionable foreign tax credit transactions. Thiswar has caused the U.S. foreign tax credit regime to be riddledwith complexity that spawns incoherent outcomes. The complexity contained in section 901was created due to a legitimate concern: the threats posed by objectionable transactions that artificially generate excess foreign tax credits represent real policy problems.
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Corporate tax rate may be lowered to 25% for bigger Indian companies

The finance ministry is considering a plan to extend the benefit of a lower 25% corporate tax rate to relatively bigger companies in 2018-19, a person privy to early discussions in the government said.

The tax rate for companieswith annual revenue of less than Rs50 crore a yearwas reduced to 25% from 30% in the Union Budget for the current fiscal.
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U.S. Signs First Two Pacts to Exchange Global Tax Reports

The IRS has signed its first competent authority agreement to exchange companies' global tax and profit reportswith the Netherlands, as the Service races to negotiate approximately 100 competent authority agreements.

Negotiating "qualified competent authority agreements"ÔøΩthe government-to-government agreements underwhich the country-by-country reporting data is exchangedÔøΩis a top priority for the Internal Revenue Service. A comprehensive network of bilateral agreementswould permit U.S. multinationals to file their reports of global taxes and profits for 2016with the IRS rather thanwith foreign jurisdictions.
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Corporate Tax Cut as Growth Elixir? Foreign Experience Suggests Caution

Lastweek President Donald Trump proposed slashing the corporate tax rate to 15% as the centerpiece of a tax plan designed to boost economic growth.

He is in good company. Between 2000 and 2016, most of the U.S.' largest trading partners cut their corporate rates. But their experience offers a reality check. There is little compelling evidence any enjoyed substantially faster growth as a result, and certainly not on the scale of Mr. Trump's ambitions; hewants to push the U.S. long-term growth rate from its current 2% to 3%.
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EU Lawmakers Label Trump Tax Plan a Race to the Bottom

U.S. President Donald Trump's plans to slash corporate taxes by more than halfwill accelerate a "race to the bottom" and undermine global efforts to combat corporate tax evasion by multinationals, according to a second political group in the European Parliament.

The Socialists and Democrats, made up of 190 European Parliament lawmakers, insisted the Trump tax reform, announced April 26, threatens the currentwork in the Organization for Economic Cooperation and Development and the Group of Twenty to establish a fair and efficient tax system that puts an end to base erosion and profit shifting by companies.
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CCCTB Deadlock May Require Fresh Political Guidance

The EU might need fresh political guidance on the proposal for a common consolidated corporate tax base (CCCTB) now that technicalwork has ended in a deadlock.

After a failed attempt in 2011, the European Commission tried to make the pill easier to swallow for member states reluctant to embrace tax harmonization. The new draft plans provide for generous tax incentives. The most controversial aspect, the consolidation of losses and profits in the EU, has been reserved for a second phase of implementation.
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Should Modi follow Trump's strategy on tax rate cuts?

Trump's radical tax plan that seeks to reduce tax rates across the board has many parallels to India. In post 1970s India fraughtwith droughts, malnutrition and grinding poverty itwas a sin to be rich. Americans meanwhile have alwaysworshipped money and idolised thosewho make money. Both nations seem to have followed similar trajectories in the manner inwhich tax rates have moved since the 1970s.
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International Reactions to Trump Tax Plan Range from Concern to Resignation

While the proposals made by President Trump to lower U.S. corporate tax rates to 15 percent are as ambitious in scope as they are vague in detail, they hae the potential to force profound changes in the tax regimes of developed countries theworld over if carried through to fruition.

Foreign economists, academics, and practitioners contacted by Tax Analysts for their reactions about the international impact of a dramatic lowering of U.S. companies' tax burden, as outlined by the Trump administration on April 26, gave responses that ranged from deep concern about the ability of their home countries to retain and attract foreign direct investment to resignation that therewould be little that could be done to offset the resulting economic impact.
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VAT Fraud Could Be Punishable by 4 Years in Prison Under European Council Directive

Cases of serious VAT fraudwhere damage exceeds ÔøΩ10 million should be considered by member states as an offense against the EU budget and punishable by four years' imprisonment, according to a directive to improve the prosecution of financial crimes thatwas adopted by the EU Council April 25.
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Trumps radical corporate tax plan could slow investment abroad

Planned cuts in US corporation tax could slow the future flow of foreign direct investment (FDI) into countries such as the Republic but are unlikely to affect existing US operations here, Irish tax experts believe.

Therewas also considerable relief on Thursday that Donald Trump's proposals to institute a special tax on imports into the US has been placed on the backburner, since thesewere seen as particularly threatening to the Irish economy.
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Global Tax Reporting Conundrum Looms for U.S. Companies

A complexweb of government relationships allowing the Internal Revenue Service to exchange confidential taxpayer informationwill likely have a few holes,with significant reporting consequences for U.S. multinational companies as they approach an Oct. 16 deadline.

The IRS's recently released draft agreements for exchanging U.S. companies' global tax and profit reportswith foreign tax authorities generally follow the OECD template. However, there are a few differences that may make negotiationswith some countries challenging, practitioners told Bloomberg BNA.
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Ireland could lose $4bn in revenue if EU tax plans go ahead, says Ibec

Irelandwould lose up to 50 per cent of its corporation tax base, equivalent to ÔøΩ4 billion in revenue, if EU plans for a consolidated tax base across the bloc come to fruition, Ibec haswarned.

In a submission to a review of Ireland's corporation tax regime, the employers' group calculated that Irelandwould beworst hit of all 28 EU states from the proposed Common Consolidated Corporate Tax Base (CCCTB).
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Germany not worried by U.S. corporate tax reform plans: Schaeuble

German Finance Ministerwolfgang Schaeuble is notworried by the prospect of cuts to corporate tax rates in the United States he told German magazinewirtschaftswoche on the sidelines of the IMF andworld Bank spring meetings inwashington.

U.S. President Donald Trump on Friday promised a big announcement about tax reform shortly and ordered a review of Obama-era tax ruleswritten to discourage U.S. companies from relocating overseas to cut their tax bills.
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Mike Pence assures Trumps tax reform will benefit Australia

US Vice-President Mike Pence assured that the proposed "massive" tax reduction by US President Donald Trumpwould benefit the economy of Australia. The POTUS tweeted on Sunday that "big tax reform" is on theway,with further details to be announced on April 26,whichwill be Thursday in the Down Under.
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Presidential Executive Order on Identifying and Reducing Tax Regulatory Burdens

By the authority vested in me as President by the Constitution and the laws of the United States of America, it is hereby ordered as follows:

Section 1. Policy. The Federal tax system should be simple, fair, efficient, and pro-growth. The purposes of tax regulations should be to bring clarity to the already complex Internal Revenue Code (title 26, United States Code) and to provide useful guidance to taxpayers.
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Tax Competition Among Developing Countries Worsens Inequality, IMF and NGOs Say

Developing countries' overreliance on regressive and poorly targeted tax incentives to attract foreign investment has undermined the fairness of their tax systems and exacerbated socioeconomic inequality, according to officials from the IMF and nongovernmental organizations.
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Competitiveness Impact of Tax Reform for the United States

The United States is looking at major business tax reform packages that could boost growth and make it more attractive to keep profits in the United States. In this paper,we specifically model the impact of a variation of two business tax reforms: the House GOP Blueprint Plan promoted by Speaker Paul Ryan, and Plan B,which has a simpler approach.
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Treasury's Mnuchin: We're 'pretty close' to bringing forward 'major tax reform'

The Trump administration is close to bringing forward "major tax reform," Treasury Secretary Steven Mnuchin said Thursday, days after he tempered expectations for how quickly itwill pass.

Mnuchin,who thisweek backed off of his earlier goal of passing tax reform by August, said thewhite Housewill unveil a plan "very soon." However, the Trump administration previously missed several of its deadlines for releasing its tax plan.
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China Rolls Out Fresh Tax Cuts in Bid to Support Economic Growth

  • By Bloomberg News
Chinawill further ease the tax burden on businesses and individuals, as part of a broader push to boost consumption and support economic growth.

The structure of value-added taxwill be simplified, from four brackets to three, and the rate for products including natural gas and agricultural itemswill be cut to 11 percent from 13 percent starting July 1, officials at a State Council meeting led by Premier Li Keqiang decidedwednesday, according to a statement.
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OECD Global Forum Shifting Focus to Application of VAT Guidelines to E-Commerce

With the publication of the VAT/goods and services tax guidelines addressing the allocation of taxing rights for cross-border e-commerce transactions, the OECD Global Forum on VAT used its recent conference to change its focus from developing the guidelines to assisting governments and businesseswith their implementation, according to an OECD official.
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Practitioners Support New Hong Kong Chief Executive's Tax Reform Plan

Market participants havewelcomed Hong Kong Chief Executive-elect Carrie Lam's tax reform proposal to boost the local economy and enhance Hong Kong's tax regimewhen other jurisdictions are pushing for lower tax and more incentives to attract foreign investment.

Lam,whowon the election on March 26, put tax reform at the top of her agenda. She proposed two main changes: a two-tier profit tax system and super tax deductions of 200 percent for research and development. Lamwill take office July 1.
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EU to Propose VAT Overhaul to Combat $63 Billion Fraud

The European Commissionwill propose a major overhaul of the European Union's value-added tax rules in September in an effort to fight fraud associatedwith the tax, costing governments as much 60 billion euros ($63 billion) a year.

"The European Commission has today proposed that the fight against cross-border VAT fraud be taken up as an EU priority to combat serious and organized crime," said European Taxation Commissioner Pierre Moscovici in an April 12 statement. "It is no longer acceptable to put our heads in the sand, pretending that this problem does not exist."
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Strong Tax Administration Roots Out Evaders and Boosts Productivity, IMF Says

Strong tax administration can reduce the prevalence of tax-cheating by underperforming firms, leading those firms to go out of business and make room for tax-compliant firms to gain more market share and increase productivity, according to a new report from the IMF.

The IMF's April 2017 Fiscal Monitor, released on April 13, focuses on how policymakers can upgrade the tax system to boost productivity, primarily through removing barriers that give rise to "resource misallocation," or the poor use of existing domestic resources in a country,which can reduce the total output from existing capital and labor. Those barriers can block productive firms from growing and allow unproductive companies to survive.
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OECD Challenges Include BEPS Implementation, Beneficial Ownership, Saint-Amans Says

After successfully organizing the OECD's base erosion and profit-shifting project and common reporting standard (CRS), Pascal Saint-Amans said recently that two of the most important challenges facing the international tax community are fully implementing BEPS and bringing more transparency to the issue of beneficial ownership.
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A Tax Systems Perspective on Recent Global Tax Initiatives

Two major global tax initiatives by the G-20 and the OECD use tax systems instruments to reduce personal tax evasion and corporate tax avoidance. Those initiatives, the automatic exchange of information (AEOI) and the base erosion and profit-shifting project, have substantial implications for the efficiency, revenue capacity, and distributional consequences of national tax systems.
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BEPS and the New International Tax Order

Nations across theworld are currently engaged in a coordinated international effort, ostensibly to curb excessive tax avoidance by theworld's biggest multinational companies. This Article contends, however, that the most likely impactwill be to entrench a monopoly held by a small number of rich countries over the policymaking processes that created the tax avoidance problem to beginwith.
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News Analysis: Britain as the World's Tax Policeman?

The British government is just not getting the joke. Herewe are, nearly 100 years after the end ofworldwar I and the end of sterling as the reserve currency, and the British still don't appreciate that they no longer have a naval empire.

In the brief guidelines that the European Union recently sent the United Kingdom for Brexit negotiations, Spain managed to get a clause about Gibraltar, a three-square-mile Iberian peninsula that has been a British overseas territory since 1713. The guidelines state that Spainwould have to consent to Gibraltar's status upon Brexit. The British read this statement as a suggestion that Spain should have joint sovereignty over Gibraltar. The Spanish government rubbed it in by stating that itwould not veto a separate application by Scotland to join the EU.
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Rio Tinto backs Australian governments corporate tax cut plans

Rio Tinto, one of Australia's biggest companies, has urged the government to face down its political opponents and cut company taxes or risk being left behind by low-tax rivals and the US.
The intervention by one of Australia's biggest companies follows an explicit call by the government of Prime Minister Malcolm Turnbull for businesses to help sell its flagship economic reform policy to a sceptical public ahead of next month's budget.
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News Analysis: 'Design Your Own' Cross-Border Corporate Tax System

Imagine a country that has an opportunity to design its tax system from scratch. It could consider all options and then implement a system uniquely tailored to its particular economy. Itwould face none of the political obstacles that comewith changing a system already in place. Norwould it be constrained by the rules of a membership organization like the EU orwTO. The Seasteading Institute's "Floating Island Project" may present that opportunity by the end of the decade.
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Activists Urge EU to Engage With Developing Countries on Transparency

Developing countries should be allowed a greater voice in tax transparency measures through U.N. involvement and should be given more support for capacity building so they can be included in automatic exchange of information, Alvin Mosioma, founding executive director of Tax Justice Network-Africa, told a European Parliament committee.
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The search for second passports and offshore havens

For the past year or so, members of the political class around theworld have been sticking nationalist badges on to the lapels of their dark suits. The international rich and their money, though, are ever more actively looking for an additional country they can call home, or at least residence.
The search for second passports and offshore havens is beginning to take on a last-helicopter-out-of-Saigon urgency as capital controls, tax reporting and visa procedures tighten up around theworld.
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Ending Tax Haven Abuse

The focus of today's forum, Offshore Multinational Corporate Tax,was the subject of perhaps a dozen hearings of the Senate Permanent Subcommittee on Investigations (PSI),when I alongwith Tom Coburn (and later John McCain)were Chairman and Ranking members of that Subcommittee.

Intensive bipartisan investigationswhich preceded those hearings disclosed tax loopholeswith no economic justification,which allowed for tax avoidance by highly profitable corporations of hundreds of billions of dollars of taxes.
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Americans abroad lobby for tax changes

Advocates for U.S. citizens living abroad see a big opportunity in the GOP's push for tax reform.

A number of fiscally conservative groups are pushing for the repeal of an Obama-era offshore tax law that they say has ensnared Americans residing overseas. Some groups alsowant tax reform to include a move to residency-based taxation.
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U.N. Committee on Tax Cooperation Proposes Changes to Model PE Article

Proposed changes to article 5 of the U.N. model tax convention relating to permanent establishments adopt significant portions of the OECD's model treaty and commentary to help address base erosion and profit shifting, according to a report released by the U.N.'s Committee of Experts on International Cooperation in Tax Matters.
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The Destination-Based Cash Flow Tax: International Considerations

The GOP blueprint released in June 2016, A Betterway: Our Vision for a Confident America, presents the most significant tax reform in the United States since the Tax Reform Act of 1986. The blueprintwould lower the corporate tax rate (from 35% to 20%), shift to a territorial tax system, and introduce a destination-based cash flow taxwith border adjustments (the "DBCFT").
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CCCTB Should Promote Competitiveness, European Commission Official Says

Although business-friendly measures are often unpopular, the common consolidated corporate tax base (CCCTB) proposals balance antiavoidance ruleswith measures that promote competitiveness in the EU, according to Uwe Ihli, the European Commission's head of section for corporate tax directives and CCCTB.
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PANA Committee Extends Investigation 6 Months

The European Parliament's Committee of Inquiry Into Money Laundering, Tax Avoidance and Tax Evasion (PANA)will have another six months to investigate the ramifications of information released a year ago by the International Consortium of Investigative Journalists on secret bank accounts in Panama.
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German related-party royalty proposal conflicts with BEPS agreement, OECD tax official says

Tax experts at a German parliamentary hearing heldwednesday expressed support for the aim of draft law thatwould deny tax deductions for some royalty payments made by multinationals to related companies. Many, including an OECD tax official, noted difficulties applying the draft law in practice, though, and suggested that the proposal be revised.
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Likely U.S., U.K. Opt-Out on BEPS Change Hints at Complications

The OECD's multilateral tax treatywas supposed to provide a smoothway for countries to rapidly implement the international BEPS project's most important changes, but speakers at a recent conference suggested some bumps may lie ahead.

The Organization for Economic Cooperation and Development is due to hold a signing ceremony in June for jurisdictions that last November adopted the text of the multilateral instrument,which it saidwill cover countries' adherence to the four minimum standards for the OECD project to combat global tax base erosion and profit shifting. Beyond that, a "flexible approach"will allow countries to select options for some individual treaty provisions.
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Focus BEPS Work on Practical Results, Not Participation: Stack

The OECD effort to rebuild the global tax system should focus on practicalwork that benefits the international tax community rather than trying to get as many countries as possible around the table, a former Treasury official said.

The OECD's so-called inclusive framework for implementing the four minimum standards of the international project to fight base erosion and profit shifting has brought in many countries that aren't members of the OECD,which launched the BEPS project, or even of the Group of 20 nations,which endorsed BEPS outcomes, Robert Stack, a former U.S. deputy assistant Treasury secretary for international tax policy, noted March 27. The G-20's members account for about 85 percent of the global economy, he said.
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OECD: More Transfer Pricing Drafts, Final VAT/GST Guidelines Coming

Additional drafts of revised and new transfer pricing guidancewill come out in mid-2017, and final value added tax and goods and services tax guidelineswill be published in April, according to OECD tax officials. The officials gave updates on otherwork related to the base erosion and profit-shifting project, the G-20 mandatedwork on tax certainty, and automatic information exchange.
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