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Understanding Precautionary Cash at Home and Abroad


Has the need for precautionary savings driven the dramatic increase in U.S. corporate cash?we show that the run-up in cash is concentrated in foreign subsidiaries of multinational corporations. Precautionary motives explain variation in the level of cash held domestically, but not the level or growth of foreign cash. Multinational firms' foreign cash balances are instead explained by low foreign tax rates and the ability to transfer profitswithin the firm through among related subsidiaries. The firmswith the greatest incentive and ability to transfer income to low tax jurisdictions do, causing cash to accumulate in their foreign subsidiaries.
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Questions and Answers on the Communication on a Fair and Efficient Tax System in the EU for the Digital Single Market

  • By European Commission

The taxation of the digital economy is part of the Juncker Commission's fair taxation agenda. The President's call for digital companies to pay their fair share of taxes in his State of the Union speech on 13 September reflects the Commission's commitment to tackling this issue. It is this Commission's view that the international tax framework needs to be reformed so that it effectively captures the value created from the new business models, aswas already stated in a 2014 Commission report. However, it has so far proved difficult to agree on the solutions at global level, as is evident from OECD report in October 2015.
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CJEU Addresses VAT Exemption for Services Supplied by Independent Groups


The EU VAT exemption for the supply of services by independent groups of persons (IGPs) for some activities undertaken in the public interest applies to all IGPs operating in the public interest, but not to those conducting economic activities related to insurance and financial services, the Court of Justice of the European Union held in three September 21 decisions.
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IRS: Foreign Entities Must Forget Unfair Old FAQs on FATCA


Foreign financial entities need to forget prior IRS FATCA guidance to ensure consistent compliancewith the legislation, according to an IRS official.

Deleted in the past two years, these online FAQs "are not available to everyone, so itwould be an unfair advantage over" other entities "if some did," IRS attorney Kamela Nelan said Sept. 20 at the Tax Congress for Financial Institutions in London.
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EU Equalization Tax Could Re-balance Tax Burden


A French-inspired EU "equalization tax" on digital companies' turnoverwould hit incomes that are "untaxed or insufficiently taxed," the European Commission said in a communication setting out short-term solutions for effectively taxing the digital economy.
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Commission: EU could go alone on taxing digital giants


The EU should be prepared to find away to tax digital firms on its own if the rest of theworld takes too long to get its act together.
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Multinationals Fear Japan Reports Could Spur Outside Audits


Japanese multinational companiesworry that filing their first country-by-country reports in 2018will lead to a barrage of transfer pricing audits by developing countries.
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Irelands Tax Treatment of Short-Term Vehicle Imports Violates EU Law, CJEU Says


Ireland's treatment of vehicles imported by its residents from other member states under a short-term rental or lease agreement as permanently registered in the country for purposes of applying its vehicle registration tax is a violation of EU provisions guaranteeing the freedom to provide services, the Court of Justice of the European Union has held.
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U.S. Tech Giants in EU Crosshairs as Tax Clampdown Takes Shape


The European Commissionwill outline on Thursday different options for taxing digital companies as the 28-nation bloc seeks to raise money from an industry that it says provides less than it should to public coffers.
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China to Expand Tax Incentives to Attract Outsourcing Industry Investment


Chinawill extend tax breaks for advanced technology service enterprises (ATSEs) nationwide to further attract foreign investment.

Starting in 2010, qualified ATSEs enjoyed a reduced corporate income tax of 15 percent, compared to the general tax rate of 25 percent, aswell as an increase in the maximum deduction rate allowable for employee education expenses from 2.5 percent to 8 percent of salary expenses.
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Israeli Officials at Loggerheads Over Import Taxes as E-Commerce Booms


A simmering dispute over sky-high prices on consumer goods imported into Israel boiled over thisweek,with one ministry accusing Colgate-Palmolive Co., Unilever Plc., Procter & Gamble Co. and other major manufacturers of "gluttony" and treating Israeli consumerswith "contempt."
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Trustees of U.K. Pension Fund May Seek Tax Credit Under EU Law, CJEU Finds


Pension fund trustees can rely on EU law to claim that the foreign income dividends (FIDs) received by domestic companies inwhich they invested must receive the same tax treatment as the domestic dividends those companies received, the Court of Justice of the European Union held, rejecting the U.K. government's claim that the EU's free movement of capital protections do not apply to the trustees.
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Residence-Based Taxation: Is Revenue Neutrality Possible?


Among all the personal income tax reforms on the table, changing the taxation of Americanswho reside overseas is one of the most obscure and least discussed. Americans abroad are ignored for two reasons. First, the amount of tax revenue collected under current law represents an insignificant rounding error in the total U.S. budget, 0.15 percent of total U.S. revenue. Second, most members of Congress focus on servicing residents of their states and consider the issues of Americans resident abroad as esoteric and unworthy of their attention.
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Business Tax Burdens and Tax Reform


Tax reforms affect economic performance by changing incentives for business formation, expansion, and operation. The United States has the highest corporate tax rate among OECD countries in 2017, and despite offering significant additional deductions, exclusions, and tax credits, imposes the heaviest tax burdens. This paper offers a new measure of corporate tax burdens based on information in tax expenditure budgets; this measure implies that the burden of U.S. corporate taxation in 2017 is equivalent to that produced by a corporate tax rate between 31.2-34.6%without additional deductions, exclusions, or tax credits.
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Options for Corporate Tax Reform, 2017


The coming year offers the opportunity to do reforms to fix problems of the corporate tax system that have accumulated over many decades. The Tax Reform Act of 1986 provided a major reform of the personal income tax, reducing the top rate from 50 percent to 28 percent and lowering other rates in a revenue neutral and distributionally neutralway. But it did not improve the corporate tax system.
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Demystifying the Destination-Based Cash-Flow Tax


This paper describes the Destination-Based Cash-Flow Tax (DBCFT), as proposed in 2016 by Republicans in the US House of Representatives, and its potential economic effects. As a new approach and a major departure from the existing business tax system, the DBCFT and its motivation have been poorly understood by many in government, the business community, and the economics profession.
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A Macro Perspective on Border Taxes


Tax policy that differentially treats domestically produced and foreign produced goods have long been a part of the arsenal of policy makers. These 'border taxes' can be explicit and take the form of import tariffs and export subsidies or more subtle in the form of value-added taxes (VAT) and payroll tax cuts.
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BRICS support digitisation to curtail tax evasion


The leaders of Brazil, Russia, India, China and South Africa (BRICS) reaffirmed their commitment to achieving a "fair and modern global tax system" that includes a deeper cooperation between the nations and on the OECD BEPS project. Digital enhancementswill play a large part in their efforts to achieve this.
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Spain Threatens Penalties if Companies Pay National Taxes to Catalonia


Not content towait for the results of a controversial referendum on independence from Spain scheduled for October 1, the government of the region of Catalonia said September 1 that public sector companies must pay national taxes to the region's recently beefed up tax agency. Spain's Ministry of Finance quickly announced that any company that doesn't meet its national tax obligationswill be penalized.
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Switzerlands new corporate tax reform proposals likely to succeed


The Swiss Federal Council has released its new corporate tax reform proposals that resolve many of the issues raised in its earlier failed attempt. However, companies and entrepreneurswill be the ones paying for the changes this time.
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CJEU: French Conditions on Withholding Exemption Violate EU Law


French legislation that conditions an exemption fromwithholding tax on profits distributed by a resident subsidiary to a nonresident parent company controlled by residents in third states on proof that the distribution's purposewasn't to benefit from the exemption violates EU law because it introduces a general presumption of fraud, the Court of Justice of the European Union has held.
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Move Americans to Jobs, Not the Other Way Around


For far too long, U.S. politicians have been promising to bring jobs to Americans. They should instead be encouraging Americans to move to jobs.

The absurdity of tax incentives to "create jobs" reached new heights last monthwithwisconsin's deal to lure iPhone assembler Foxconn Technology Group --whichwill reportedly cost taxpayers more than $100,000 per job. By promising to bring employment to depressed areas, politicians have convinced Americans that they have a right to a jobwhere they live, and not that they should livewhere the jobs are. Even though labor-market incentives to relocate have increased over the past 50 years,with growing differences inwages and unemployment around the country, people actually move forwork less and less.
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Austrian conservatives target multinationals and QE in economic draft


The front-runner in Austria's parliamentary election, the conservative People's Party,wants to fight tax avoidance by multinationals and backs a swift end to the European Central Bank's bond purchases, a draft of its economic program shows.
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News Analysis: A Post-Mortem for the Border Adjustment Tax


The border-adjusted tax, a component of the tax reform blueprint released by the U.S. Houseways and Means Committee last June, had a short life. Rumors of its impending demise had been circulating for months, and GOP lawmakers and the Trump administration dealt it a final blowwith the July 27 release of their joint statement on tax reform, saying they had decided to set the policy aside to advance tax reform.
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Large Companies Oppose Idea for Taxing Foreign Profits


Congressional Republicans are trying towrite new rules for taxing foreign profits of U.S. corporations, and a group of large, influential companies iswarning against one prominent option.

Under current law, companies owe the full 35% corporate-tax rate on theirworld-wide earnings and have to pay it on any profits they bring back to the U.S. That system encourages companies to book profits overseas and leave them there. The issue is often a flashpoint in debates over changing the tax code.
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France Considering Temporary Tax on Large Companies


The French government is considering instituting a temporary tax on the largest businesses in France to replace revenues from a 3 percent dividends tax recently struck down by the European Court of Justice.
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Brazils Revenue Service Issues New Rules for Debt Payment Program


Brazilian tax attorneys reactedwith surprise and concern to an unexpected policy alteration by the country's federal revenue service.

On Aug. 21, the service issued Interpretive Declarative Act No. 5,which prohibits tax debts companies have tried to offsetwith tax credits from being included in the government's new program for the payment of tax debts. The Special Program for Tax Regularizationwas created through a decree issued May 31.
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Commission Consults on Expanding EU Code of Conduct on Withholding Tax Relief


The European Commission has released a consultation document on dismantling capital market barriers,which seeks stakeholder views onwhether the focus of the code of conduct onwithholding tax relief principles being developed should be expanded beyond addressing barriers that result from currentwithholding procedures.
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Could Puerto Rico Be the Next Hot Tax Haven?


Some 65,000 Puerto Ricans left their bankrupt U.S. island commonwealth last year. A group of private bankers are moving the otherway. They're increasingly opening offshore banks known as International Financial Entities,whichwere created by a Puerto Rican law in 2012. There are 44 IFEs now,with 18 opening in the past year, according to data compiled by the U.S. territory's financial regulator. "Just in the last six months,we've probably closed seven deals for international banks," says Ryan Christiansen, president of Christiansen Commercial Real Estate, a brokerage based in Puerto Rico that leases office space.
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Chinese Government to Use Blockchain to Prevent Tax Evasion

  • By Bei Xi Xu

The Chinese government plans to use blockchain technology for taxation and the issuance of electronic invoices, inwhatwill be the first ever blockchain project to apply to financial and taxation business.
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Singapore Advocates for Tax Certainty for Business in the Digital Economy


As countries diverge on their positions on the taxation of the digital economy, Singapore has clarified its own approach,which includes ensuring tax certainty for businesses, achieving tax neutrality between traditional and digital businesses, and reaching international consensus.
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Ukraine Clarifies Application of Tax Treaty With U.K.


The Ukrainian State Fiscal Service (SFS) has released Guidance Letter 1531/6/99-99-15-02-02-15/IPK (dated August 8), inwhich it clarified the application of Ukraine's tax treatywith the United Kingdom to royalty payments that a Ukrainian legal entity makes to a U.K. resident.
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Saudi Arabia Sets December Deadline for VAT Registration


Saudi Arabia has set a Dec. 20 deadline for mandatory VAT registration, endingweeks of speculation.

The Saudi VAT law, gazetted July 28, referred to a deadline of "30 days" from its publicationwithout a specific date, sparking speculation from professional advisers and media that businesses liable to pay VAT had only until Aug. 26 or 27 to register.
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U.K. Government to Seek Customs, VAT, and Excise Powers Soon


The U.K.will publish a customs bill in the autumn thatwould give the government powers to operate stand-alone customs, VAT, and excise systems to prepare for the possibility that the U.K. and EU are unable to come to a satisfactory post-Brexit customs agreement.
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News Analysis: New Transfer Pricing Challenge in Chinas Domestic Transactions


Chinese tax law provides that transactions between domestic related partieswith the same tax burden are generally not subject to transfer pricing adjustments if the transactions do not directly or indirectly decrease China's overall tax revenue. However, Chinese companies may face a new transfer pricing challenge in this area.
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U.K. Brexit Plans Hint at New VAT, Customs Regime


Bloomberg

The U.K. Government's suggestion for a standalone VAT regime has started to unfold in a recently published policy paper on the country's future customs arrangementsÔøΩto ensure "the UK is prepared for all possible outcomes."
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EU Mulls Options for Sanctions for Tax Haven Blacklist


Bloomberg

European Union member states are considering various options for sanctions on countries that end up on the EU's tax haven blacklist, including a flexible approach that could lead to different EU countries imposing different measures against the same offending jurisdiction.
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Estonia Welcomes Chance to Steer in EU Digital Tax Storm


Bloomberg

EU presidency holder Estonia has committed to doubling down on solving the bloc's tricky digital economy tax issueswhen EU finance ministers meet Sept. 15-16, following revelations U.S.-based Airbnb paid only about 100,000 euros ($117,000) in taxes in France in 2016.
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CCCTBs Research and Development Provisions Insufficient, EU Working Paper Finds


The European Commission's most recent Common Consolidated Corporate Tax Base (CCCTB) proposal includes research and development provisions but is not ambitious enough on its own to reach the European Union's target of investing 3 percent of GDP in R&D by 2020, according to an EUworking paper.
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Brexit stokes tax fight between Ireland and EU


Ireland has loudly proclaimed its unitywith rest of the EU since Britain voted to leave the bloc, but a clash over the Irish low-tax regime could shatter the cohesion.

In Irish business circles, Brexit has triggered a brainstorm on how best to use it as an opportunity to push back on the EU's crackdown on Irish tax policy.

Their nuclear option: "Irexit."
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German Authorities Discuss Controversial VAT Measures for Foreign Websites


When the finance ministers of Germany's 16 states concluded a conference in May on how to combat VAT fraud related to online sales, they issued a release saying that solutions under review include a requirement for online platforms to remit tax directly.what they didn't announce publiclywas that they are also considering requirements thatwould makewebsite operators post confidential information about their companies online in machine-readable format and provide details about credit card and other payment flows from customers.
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Brazil Simplifies Regulations to Ease World's Worst Tax Reporting Burden


Brazil's Finance Ministry on August 7 announced a series of measures intended to simplify tax reporting requirements for the nation's business sector. Practitioners say the measures could help soften Brazil's reputation for making businesses jump through often redundant hoops to complywith tax reporting obligations.
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France and Germany Plan Tax Crackdown on U.S. Tech Giants


France isworkingwith Germany and other partners to plug loopholes that have allowed U.S. tech giants like Alphabet Inc.'s Google, Apple Inc., Facebook Inc. and Amazon.com Inc. to minimize taxes and grab market share in Europe at the expense of the continent's own companies.

Francewill propose the "simpler rules" for a "real taxation" of tech firms at a meeting of European Union officials due mid-September in Tallinn, Estonia, French Finance Minister Bruno Le Maire said in an interview in his Paris office on Friday, complaining that Europe-wide initiatives are proving too slow.
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Tax-driven wealth chains: A multiple case study of tax avoidance in the Finnish mining sector


This paper contributes to recent discussions of corporate tax avoidance and globalwealth chains. Drawing on multiple case studies,we outline the key strategies adopted by Finnish mining companies as they seek to lower their tax burden. After screening the accounts of the companies mining metallic ores in Finland,we provide an in-depth analysis of the tax avoidance arrangements at three of these mines. The mineswere operated by two Canadian enterprises that utilized seven different tax avoidance arrangements.
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The Platform for Collaboration on Tax Invites Comments on a Draft Toolkit on the Taxation of Offshore Indirect Transfers of Assets

  • By The Platform for Collaboration on Tax

The Platform for Collaboration on Tax – a joint initiative of the International Monetary Fund (IMF), OECD, United Nations andworld Bank Group – is seeking public feedback on a draft toolkit designed to help developing countries tackle the complexities of taxing offshore indirect transfers of assets, a practice bywhich some multinational corporations try to minimize their tax liability.
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U.S. Multinationals and Cash Holdings


U.S. multinational firms hold significantly more cash than domestic firms. I study this cash differential using a dynamic model featuring corporate physical and intangible investment, cross-border decisions, and financial policies. I find that the cash differential diminishes by 42% if repatriation costs are set to zero. Hence, costly repatriation induces cash accumulation offshore.
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Uncovering Offshore Financial Centers: Conduits and Sinks in the Global Corporate Ownership Network


Multinational corporations use highly complex structures of parents and subsidiaries to organize their operations and ownership. Offshore Financial Centers (OFCs) facilitate these structures through low taxation and lenient regulation, but are increasingly under scrutiny, for instance for enabling tax avoidance. Therefore, the identification of OFC jurisdictions has become a politicized and contested issue.we introduce a novel data-driven approach for identifying OFCs based on the global corporate ownership network, inwhich over 98 million firms (nodes) are connected through 71 million ownership relations.
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Netherlands, U.K. Are Largest Financial Conduits to Tax Havens, Report Says


The Netherlands and the U.K. are the two largest conduit financial centers, channeling 37 percent of all corporate offshore investment to and from tax havens, according to a new report.
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Lessons From India's Ambitious Tax Reform Adventure


Will tax reform necessarily contribute to economic growth? It's tempting to answerwith a resounding yes, but the better response is more cautious. The outcome depends on the details, suggesting that stakeholderswould dowell to manage their expectations.

The relative success of any tax reform effort is partly a function of one's starting point. The greater your preexisting inefficiencies, the stronger the potential for reform to be transformative. A useful illustration is provided by India's recent experience.
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Post-Brexit Luxembourg May Be More Attractive with Tax Reform, OECD Says


Luxembourg's financial center could become more attractive after Brexit as it implements anti-tax-avoidance legislation, including the outcomes of the base erosion and profit-shifting project, to help level the playing field in corporate taxation, a new OECD report says.
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