Int'l Tax News

The U.S. and China's interests are alignedwhen it comes to digital taxation, potentially influencing international tax reform talks, a former OECD tax chief said Friday. Theworld's largest two economies both host internet giants, including Alibaba Group, Amazon.com, Baidu, and Facebook, meaning they "have almost exactly the same interests" in relation to digital taxation, said Jeffrey Owens,whowas previously head of tax policy at the Organization for Economic Cooperation and Development.

The introduction of a Digital Services Tax (DST) to ensure that profits are taxedwhere economic value is created has been object of tough debate over recent years. The unilateral attempts of single countries to tax multinational companies active in digital businesswas initially addressed at EU level by the European Commission,which tried to propose a harmonized set of rules to tax companies rather than leaving this to individual EU member states.

Switzerland'swealth tax offers a rare real-world example of how a levy on assets canwork, just as such ideas gain traction elsewhere in thewake of the coronavirus crisis. The measure forces residents in one of theworld's richest nations to tally the value of their investments, real estate, cars, fine art, Bitcoin, and even beehives and cows. A percentage is then skimmed off by cantonal governments, varying in size and method depending on the canton. Switzerland, among only a handful of countrieswith the levy, can make a claim that it has the most effective one.

Advisers to the Senate Finance and Houseways and Means committees believe there is broad support among congressional Democrats for legislative proposals thatwould address the Tax Cuts and Jobs Act's design flaws.

The United States Council for International Business has recommended that proposed foreign tax credit regulations (REG-101657-20) bewithdrawn to permit a thorough review of the policy objectives of the U.S. FTC regimewithin the context of the ongoing debate over the extension of the international tax system beyond traditional norms.

If the IRS applies the transfer pricing method approved by the Tax Court to the Coca-Cola Co.'s post-2009 tax years, the total liability in its U.S. transfer pricing dispute could reach $12 billion.

Jasper L. "Jack" Cummings, Jr., is of counselwith Alston & Bird LLP in Raleigh, North Carolina.

In this article, the author suggests major modifications to the OECD's pillar 1 blueprint proposal to create a new taxing right for multinational digital income and some product sales thatwould greatly simplify the proposal. The modifications rely on readily available existing financial information andwould achieve certainty in the application of pillar 1,while adhering to its fundamental structure and policies.

WASHINGTONÔøΩ Amazon.com Inc., the company frequently cited by Democrats in their calls to raise corporate taxes, saw its tax liability jump last year as it prospered during the pandemic. But the technology giant, and others like it, could face even higher tax bills under the Biden administration's plan for a minimum tax rate on profitable corporations.

A proposal to eliminate a tax benefit for multinationals to help pay for a Covid stimulus package may be a sign that Congress is ready to target other such benefits. Congresswants to revoke the tax breakÔøΩwhich came into effect this year after first being introduced in 2004ÔøΩto help pay for a $1.9 trillion stimulus package (H. R. 133) aimed at additional Covid relief.without the benefit, multinationalswould lose an election that shields them from losing foreign tax credits if they have debt in the U.S.

This is aweekend roundup of Bloomberg Tax Insights,written by practitioners and featuring expert analysis on current issues in tax practice and policy. The articles featured here represent just a handful of the many Insights published eachweek. For a full archive of articles, browse by jurisdiction at Daily Tax Report, Daily Tax Report: State, Daily Tax Report: International, Transfer Pricing Report, and Financial Accounting.

Indonesia hopes for a global digital tax deal this year so the nation can lead a multilateral implementation starting next year, the country's finance minister said. "The expectation, and the hope, is that in 2021, under the Italian G20 Presidency,we are going to achieve a historic agreement on international taxation, essentially via the two-pillar solution under discussion," Sri Mulyani Indrawatiwrote in a Feb. 8 post on the Organization for Economic Cooperation and Development'swebsite. In pandemic-stricken economies, "Finding a sustainable, equitable, and fair source of revenue is critical," she said.

Chancellor Rishi Sunak has agreed to tie his own hands at next month's Budget by stickingwith the Conservatives' "triple tax lock",which stops him raising the rates of income tax, national insurance or value added tax. Treasury officials had hoped Mr Sunakwould ditch the Tories' 2019 election manifesto commitment,which stops him using the three biggest tax levers to start curbing a deficit that is expected to top £400bn in 2020-21 because of the coronavirus crisis.

Robert Goulder examines recent proposals to simplify the OECD's pillar 1 blueprint and concludes the projectwill neverwin U.S. support.

Mindy Herzfeld considers U.S. legislative obstacles facing any multilateral digital taxation deal agreed to by the Biden administration and reviews other considerations that could affect the chances of reaching global agreement.

Avi-Yonahwrites thatwith a new administration, it might be a good time to reflect on the Tax Cuts and Jobs Act, consideringwhat it should keep andwhat should it discard. He concludes thatthe TCJA's international provisions represent the best parts of the Act and should generally be kept (albeitwith important modifications) but that the FDII regime is a misguided export subsidy that should be discarded.

Advisers to the Senate Finance and Houseways and Means committees believe there is broad support among congressional Democrats for legislative proposals thatwould address the Tax Cuts and Jobs Act's design flaws.

Senate Finance Committee Chair Ronwyden, D-Ore., reiterated Democrats' desire to raise taxes on corporations but did not disclosewhether a consensus exists among his caucus on a specific rate.

Final guidance regarding foreign tax credits and the global intangible low-taxed income regime is atop the priority list for tax executives of multinational corporations, amid concerns about the new administration's tax policies.

It's pretty striking ÔøΩ top finance officials in Europe are sounding extremely confident about getting a digital tax deal done this year, at least publicly.

The OECD's digital tax plan should set thresholds at a level to ensure African countries benefit from a reallocation of profits, a representative of the African Union saidwednesday. The OECD is trying to broker an agreement this year between 138 jurisdictions on overhauling the global tax system to address concerns about how multinationalsÔøΩespecially tech giantsÔøΩare taxed. The planwould include reallocating multinationals' profits and establishing a global minimum tax.

Indiawants to expand the scope of a tax aimed at e-commerce companies doing business in the country. Expanding the equalization levy, as proposed Monday in India's 2021-22 budget,would hit a broader array of transactionswhere a nonresident company sells a good or service to a person in India through an online platform.

As fights between multinationals and tax authorities continue to rise, companies hope making the dispute resolution process smoother and fasterwill give them more certainty.

The European Union is seeking to overturn Apple Inc.'s victory in a 13 billion-euro ($15.8 billion) tax dispute, saying judges used "contradictory reasoning"when they found that the company's Irish unitsweren't liable for huge payments.

How the rules that limit the ability to use tax attributes following a loss corporation's ownership change apply to controlled foreign corporations is fraughtwith unanswered questions and in need of quick guidance.

Oneway to simplify the OECD's overly complex global minimum tax plan and lighten administrative burdens is for tax administrations to identify low-risk jurisdictionswith appropriate tax bases and rates, businesses and tax advisers said.

Amazon has advised businesses using its platform to sell products in Spain that itwill pass along the cost of the country's recently implemented 3 percent digital services tax.

The European Commission has opened a public consultation seeking input on a proposed EU digital tax thatwouldwork in tandemwith the OECD initiative to reform international corporate taxation.

Finance ministers and otherswelcomed Janet Yellen's confirmation as Treasury secretary,with some expressing renewed hope for an agreement on global tax reform proposals through the OECD framework by the summer.

Joe Biden's inauguration as president marks a crucial moment in international diplomacy: his predecessor's aggressive stance towards multilateral organisations and "America first" policies left many global debates in limbo. Expectations among economists and policymakers around theworld are running high that a reset in US attitudes towards international co-operation on trade, taxation, aid and the environmentwill soon emerge.

In this article, authors discusswhat may be expected of a theory of international tax justice. After looking at the most important distributive aswell as procedural theories of tax justice, authors conclude that none of the existing theories can provide a coherent account of international tax justice. They therefore propose an alternative, more pragmatic approach drawing on Amartya Sen. Even if they do not agree on any particular notion of tax justice, it is still obvious that developing countries' interestswill be served by much simpler rules of international tax law.

The subject of taxing the internet ÔøΩ and everything that goes on over the internet ÔøΩ has been a hot issue virtually since the "network of networks" morphed from the NSF Net to the internet in the 1990's.

In thewake of the global financial crisis of 2007-2008, tax havens became a controversial topic as political leaders zeroed in on low-tax jurisdictions as a source of fiscal instability that aggravated the crisis.

The OECD is trying to get nearly 140 countries to agree to an overhaul of global tax by mid-2021. If that effort fails, a growing number of countries are preparing to launch unilateral measures aimed at tech giants like Facebook Inc. and Amazon.com Inc.

Austria, Spain, and the U.K.will not shelve their digital tax rollouts in response to U.S. assertions that they are discriminatory. The U.S. said Thursday itwill add the trio to a list of countries it says are discriminating against American companies by taxing the local revenue of internet giants like Google and Amazon. Spain's digital tax begins on Saturday,while the U.K. and Austrian taxes are already in effect.

The European Union is seeking stakeholder input on how a digital tax might be introduced in the bloc. The European Commission, the EU's executive, announced Tuesday that itwould accept comments through April 12 to a questionnaire on issues including the minimum revenue thresholds abovewhich a digital levywould apply, specific digital activities that might be taxedÔøΩsuch as platforms' sale of user dataÔøΩand how taxable revenue can be delimited geographically. For example, should the proposal use the IP addresses of digital service users.

U.S. President-elect Joe Biden should drop threatened countermeasures against European Union taxes on mainly American digital platforms, one of the bloc's top finance officials said Tuesday.

To the Editor:

In a recent article, Martin A. Sullivan criticizes the complexity of the Biden campaign's tax agenda and makes a persuasive case for pursuing the same goals by simpler means (Sullivan, "Biden's Incoherent Corporate Tax Policy," Tax Notes Federal, Jan. 4, 2021, p. 9).while President-elect Biden's campaign proposals have been heavily dissected since he secured the Democratic party nomination, and even more so since hewon the presidency, Sullivan's focus on simplicity is awelcome addition to the discourse.what Sullivan did not discuss, however, is the fact that the Biden campaign's proposals for global intangible low-taxed incomewould meaningfully simplify current law. Moreover, under one of Sullivan's own recommendations, an even greater simplification of our international tax system is easilywithin reach.

The European Commission has released information about the potential scope and impact of a digital levy thatwill be pursued if OECD countries fail to reach an agreement on new international tax rules by June.

A little-publicized German proposal floated in 2020 may be the key for the Biden administration to open the door to a global tax reform deal in 2021, Treasury's former top international tax policy negotiator said.

The Office of the U.S. Trade Representative (USTR) has found that the digital taxes of Austria, Spain, and the United Kingdom discriminate against U.S. businesses, but has again held off on announcing retaliatory trade actions.

The Council On State Taxation has filed the nation's first lawsuit challenging a state's treatment of a Tax Cuts and Jobs Act provision.
At issue in Council On State Taxation v. Nebraska Department of Revenue, pending in the District Court of Lancaster County, Nebraska, is the Department of Revenue's disallowance of any state deduction claimed for section 965 deemed repatriations.

Oneway to simplify the OECD's overly complex global minimum tax plan and lighten administrative burdens is for tax administrations to identify low-risk jurisdictionswith appropriate tax bases and rates, businesses and tax advisers said.

German finance minister Olaf Scholz has said hewill seek a dealwith the incoming Biden administration on global rules for corporate taxation, as hopes rise in Berlin that the end of the Trump presidencywill usher in a new era of multilateral co-operation.

The US has said that digital taxes in Spain, Austria and the UK are discriminating against American tech companies, paving theway for tariffs and setting the scene for transatlantic trade conflict as the Biden administration takes power.

Conventionalwisdom suggests that the promise of tax legislation played an important and positive role in the 25% increase in the stock market that began on November 9, 2016 and continued through December 22, 2017 (the day TCJAwas signed into law). Our comprehensive and exhaustive forensic analysis confirms its positive effect.with that said,we find that its net impact is relatively modest. To come to this conclusion,we first construct a novel daily human-based attribution by carefully reading the news on each of the 283 days. This exercise shows the 52 days inwhich tax-related newswas important make up less than 1% of the total observed return.we attribute large gains to tax-related news immediately after the election aswell as the build-up to passage in late 2017.

Democratic control of the Senate gives President-elect Joe Biden a much stronger chance of raising taxes on corporations and high-income households. Until thisweek's Georgia runoff elections, Mr. Biden's plans for tax increaseswere running into solid opposition from the Republican-controlled Senate. But now, Democratswill hold thewhite House, Senate and House simultaneously for the first time in more than a decade, and they are poised to use that power.

France is open to all signs of "de-escalation" from incoming Biden administration in U.S. on trade disputes over aircraft makers and a digital tax, French Trade Minister Franck Riester says in interview on BFM Business television.

The digital economy is equivalent to 15.5% of global GDP and is growing two and a half times faster than global GDP over the past 15 years, according to theworld Bank. This rapid expansion has sparked global debates in many legal and regulatory realms. In the field of international taxation, the debate focuses onwhether the current rules are appropriate in the modern global economy, especially regarding the allocation of income and profits among countries for tax purposes or purposes of being potentially subject to tax.