Int'l Tax News
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Pre-takeover Cadburys aggressive tax avoidance exposed
by Sally Gainsbury, Jonathan Ford and Vanessa Houlder (Financial Times)
Cadbury, the British confectionery makerwhich became a cause célèbre for tax justice campaigners after itwas acquired by US food group Kraft in 2010, engaged in aggressive tax avoidance schemes before the takeover thatwere designed to slash its UK tax bill by more than a third.
A Financial Times investigation into the tax affairs of the company established in 1824 by Quakers and famous for its philanthropic ethos has uncovered tax avoidance schemes former senior executives admitwerehighly aggressive.
The reality of Cadbury's tax affairs contrastswith the claim of campaigners and politicians that Kraft's takeoverwould cut its UK tax payments by £60m a year.
In fact, in the decade before the takeover, Cadbury paid an average of £6.4m a year in current tax on its ongoing UK operations, despite annual British profits of £100m and turnover of more than £1bn.
For the story, go here.
Cadbury, the British confectionery makerwhich became a cause célèbre for tax justice campaigners after itwas acquired by US food group Kraft in 2010, engaged in aggressive tax avoidance schemes before the takeover thatwere designed to slash its UK tax bill by more than a third.
A Financial Times investigation into the tax affairs of the company established in 1824 by Quakers and famous for its philanthropic ethos has uncovered tax avoidance schemes former senior executives admitwerehighly aggressive.
The reality of Cadbury's tax affairs contrastswith the claim of campaigners and politicians that Kraft's takeoverwould cut its UK tax payments by £60m a year.
In fact, in the decade before the takeover, Cadbury paid an average of £6.4m a year in current tax on its ongoing UK operations, despite annual British profits of £100m and turnover of more than £1bn.
For the story, go here.
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G-8 tax call wont be answered quickly on Hill
by Kelsey Snell and Lauren French (Politico)
Lawmakers from both parties are almost universally singing the praises of a new international plan to crack down on global tax evaders but thatwont translate into legislative action any time soon.
Principles unveiled Tuesday at the Group of Eight meeting in Northern Ireland called on tax authorities in theworld's leading economies to automatically share informationwith other countries to fight tax evasion. The agreement also said countries should change rules that allow companies to legally shift profits to low-tax jurisdictions to avoid paying taxes.
The deal essentially amounts to strong suggestions aboutways to make companies more transparent and governments more accountable for their tax policies. The Obama administration already has mechanisms in place to follow through butwill need buy-in from Congress on some proposals.
For the story, go here.
Lawmakers from both parties are almost universally singing the praises of a new international plan to crack down on global tax evaders but thatwont translate into legislative action any time soon.
Principles unveiled Tuesday at the Group of Eight meeting in Northern Ireland called on tax authorities in theworld's leading economies to automatically share informationwith other countries to fight tax evasion. The agreement also said countries should change rules that allow companies to legally shift profits to low-tax jurisdictions to avoid paying taxes.
The deal essentially amounts to strong suggestions aboutways to make companies more transparent and governments more accountable for their tax policies. The Obama administration already has mechanisms in place to follow through butwill need buy-in from Congress on some proposals.
For the story, go here.
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Tax Legislation: Lawmakers Aim to Lighten Taxes On Foreign Investors in Real Estate Trusts
by Marc Heller (Bloomberg)
Federal lawmakers are rekindling an effort to ease taxes on foreignerswho invest in real estate in the United States.
Two dozen senators, led by Sens. Robert Menendez (D-N.J.) and Mike Enzi (R-Wyo.), introduced legislation June 18 to allow more foreign investors in real estate investment trusts to avoid taxation, raising from 5 percent to 10 percent the share of a publicly-held company a foreign investor may ownwithout triggering a tax through the Foreign Investment in Real Property Tax Act (FIRPTA).
For the article, go here. (Subscription required)
Federal lawmakers are rekindling an effort to ease taxes on foreignerswho invest in real estate in the United States.
Two dozen senators, led by Sens. Robert Menendez (D-N.J.) and Mike Enzi (R-Wyo.), introduced legislation June 18 to allow more foreign investors in real estate investment trusts to avoid taxation, raising from 5 percent to 10 percent the share of a publicly-held company a foreign investor may ownwithout triggering a tax through the Foreign Investment in Real Property Tax Act (FIRPTA).
For the article, go here. (Subscription required)
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3M Could Succeed in Legal Challenge of Transfer Pricing Regulation, Practitioner Says
By Kristen A. Parillo (Tax Analysts; Tax Notes Today)
If the Tax Court follows recent Supreme Court case law on regulatory deference, technology company 3M Co. could succeed in its legal challenge of a 1994 Treasury regulation that permits the IRS to make a transfer pricing reallocationwithout regard to foreign legal restrictions, a practitioner said June 14.
For the story, go here. (subscription required.)
If the Tax Court follows recent Supreme Court case law on regulatory deference, technology company 3M Co. could succeed in its legal challenge of a 1994 Treasury regulation that permits the IRS to make a transfer pricing reallocationwithout regard to foreign legal restrictions, a practitioner said June 14.
For the story, go here. (subscription required.)
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G8 seeks rewrite of global tax rules
By George Parker and Vanessa Houlder in Lough Erne (Financial Times)
G8 leaders tried to plug the holes in their public financeswith a sweeping commitment to shake-up international corporate tax rules, including a new crackdown on tax evasion and the shadowy owners of shell companies.
The leaders of eight of theworld's biggest economies signed a 10-point Lough Erne Declaration that calls for tax authorities around theworld to automatically share information. It also urges countries to change the rules that let multinational companies shift profits across borders to avoid taxes and require them to reportwhat tax they paywhere.
For the story, go here.
G8 leaders tried to plug the holes in their public financeswith a sweeping commitment to shake-up international corporate tax rules, including a new crackdown on tax evasion and the shadowy owners of shell companies.
The leaders of eight of theworld's biggest economies signed a 10-point Lough Erne Declaration that calls for tax authorities around theworld to automatically share information. It also urges countries to change the rules that let multinational companies shift profits across borders to avoid taxes and require them to reportwhat tax they paywhere.
For the story, go here.
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Backing for tax and secrecy crackdown
By Vanessa Houlder (Financial Times)
UK Prime Minister David Cameron did not hold back on the superlatives on Tuesday afternoonwhen he declared a historic advance had been made at the Group of Eight summitwith thepotential to rewrite the rules on tax and fight thescourge of tax evasion.
For the story, go here.
UK Prime Minister David Cameron did not hold back on the superlatives on Tuesday afternoonwhen he declared a historic advance had been made at the Group of Eight summitwith thepotential to rewrite the rules on tax and fight thescourge of tax evasion.
For the story, go here.
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G-8 to Fight Tax Evasion -- Proposals Call for Changes in Laws to Stop Companies From Shifting Profits Across Borders
By Ainsley Thomson & John McKinnon (Wall Street Journal)
The Group of Eight leading industrialized nations agreed to proposals to tackle tax avoidance and evasion that call for new laws to stop businesses from shifting profits across borders and urge greater transparency about company ownership.
Tuesday's action reflected growing momentum among the largest economies for joint action to shore up their sometimes-leaky tax systems and shine more light in an often-murky area.
But the agreementswere short on specifics andwill require lengthy and difficult negotiations to implement, both for G-8 members and other countries aswell. Some activists criticized the G-8 for not going further, particularly on multinational businesses that often pay relatively low taxes thanks to porous rules.
For the story, go here.
The Group of Eight leading industrialized nations agreed to proposals to tackle tax avoidance and evasion that call for new laws to stop businesses from shifting profits across borders and urge greater transparency about company ownership.
Tuesday's action reflected growing momentum among the largest economies for joint action to shore up their sometimes-leaky tax systems and shine more light in an often-murky area.
But the agreementswere short on specifics andwill require lengthy and difficult negotiations to implement, both for G-8 members and other countries aswell. Some activists criticized the G-8 for not going further, particularly on multinational businesses that often pay relatively low taxes thanks to porous rules.
For the story, go here.
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Osborne raises hopes of G8 tax deal
By Jim Pickard, Chief Political Correspondent (Financial Times)
George Osborne has raised the hopes of an imminent G8 deal on tax as he declared that there had been rapid progress in talks over a newregister thatwould show the ownership structures of companies.
The British government has said it isleading theway on transparency by creating a central register of company ownership, although it is still unclearwhether thiswill be opened up to the public or just to the tax authorities.
The UK is trying to persuade all the other G8 countries to sign up to the action plan onbeneficial ownership, an attempt to shine a light into the often opaque ownership structures in the businessworld.
For the story, go here.
George Osborne has raised the hopes of an imminent G8 deal on tax as he declared that there had been rapid progress in talks over a newregister thatwould show the ownership structures of companies.
The British government has said it isleading theway on transparency by creating a central register of company ownership, although it is still unclearwhether thiswill be opened up to the public or just to the tax authorities.
The UK is trying to persuade all the other G8 countries to sign up to the action plan onbeneficial ownership, an attempt to shine a light into the often opaque ownership structures in the businessworld.
For the story, go here.
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G8 leaders seek common ground on tax
By Lindsaywhipp and Jim Pickard (Financial Times)
Prime Minister David Cameronwill lead a key discussion on tax evasion and avoidance on Tuesday, as Group of Eight leaders tackle an important but complex issue onwhich progress can be slow moving.
While international leaders agree on the need to tackle evasion and increase transparency, it is more difficult for them to find a single voice over how to change tax rules to counter avoidance. This is partly due to the complicated nature of tax legislation across the globe, but also because G8 countries are essentially competing for tax dollars and inward investment in a post financial-crisisworld of high government debt and slow growth.
The aim is to form action plans to increase transparency and make headway on automatic information exchange, ahead of the Group of 20 meeting in September atwhich members are expected to agree concrete steps to tackle profit shifting by multinationals.
For the story, go here.
Prime Minister David Cameronwill lead a key discussion on tax evasion and avoidance on Tuesday, as Group of Eight leaders tackle an important but complex issue onwhich progress can be slow moving.
While international leaders agree on the need to tackle evasion and increase transparency, it is more difficult for them to find a single voice over how to change tax rules to counter avoidance. This is partly due to the complicated nature of tax legislation across the globe, but also because G8 countries are essentially competing for tax dollars and inward investment in a post financial-crisisworld of high government debt and slow growth.
The aim is to form action plans to increase transparency and make headway on automatic information exchange, ahead of the Group of 20 meeting in September atwhich members are expected to agree concrete steps to tackle profit shifting by multinationals.
For the story, go here.
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Havens crackdown: Momentum builds for tax transparency
By Vanessa Houlder (Financial Times)
The 2013 summit has the potential to go down in history asthe turning point in the battle against tax evasion and avoidance, according to David Cameron, UK prime minister.
He has called on governments tobreak down thewalls of corporate secrecy by introducing central registers for corporate ownership. Talkswill also focus on the cross-border sharing of tax information andwhether companies should be encouraged to reportwhat they pay in the countries inwhich they operate on a voluntary basis.
For the story, go here.
The 2013 summit has the potential to go down in history asthe turning point in the battle against tax evasion and avoidance, according to David Cameron, UK prime minister.
He has called on governments tobreak down thewalls of corporate secrecy by introducing central registers for corporate ownership. Talkswill also focus on the cross-border sharing of tax information andwhether companies should be encouraged to reportwhat they pay in the countries inwhich they operate on a voluntary basis.
For the story, go here.
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Foray into global tax fraught with challenges
By James Politi inwashington (Financial Times)
US business groups have been opposed to even the smallest foray into the kind of country-by-country tax reporting debated by Group of Eight leaders, highlighting the challenges in implementing such provisions even·if¬∑agreement¬∑is reached in Northern Ireland.
A key plank of the G8 agenda to boost tax transparency by multinationals has been to force them to at least disclose how much tax they pay in each country.
The EU and the US have taken steps in that directionwith regard to oil, gas and mining companies, but applying these requirements to all sectors is expected to be resisted across the corporateworld.
In the US, the provision requiring country-by-country reporting in the energy sector, buried inside the Dodd-Frankwall Street reform bill enacted three years ago, has been the subject of a legal challenge and lobbying to kill it before it takes effect next year.
For the story, go here.
US business groups have been opposed to even the smallest foray into the kind of country-by-country tax reporting debated by Group of Eight leaders, highlighting the challenges in implementing such provisions even·if¬∑agreement¬∑is reached in Northern Ireland.
A key plank of the G8 agenda to boost tax transparency by multinationals has been to force them to at least disclose how much tax they pay in each country.
The EU and the US have taken steps in that directionwith regard to oil, gas and mining companies, but applying these requirements to all sectors is expected to be resisted across the corporateworld.
In the US, the provision requiring country-by-country reporting in the energy sector, buried inside the Dodd-Frankwall Street reform bill enacted three years ago, has been the subject of a legal challenge and lobbying to kill it before it takes effect next year.
For the story, go here.
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UK under pressure from Berlin over tax competition
By Vanessa Houlder and Quentin Peel (Financial Times)
Britain is coming under pressure from Berlin to rein back on tax competition, amid fears that a break on the levy aimed at high tech companieswill undermine German revenues.
Concerns about Britain's efforts to attract investment by cutting taxes have risen as German companies moved to take advantage of an incentive for patent income.
For the story, go here.
Britain is coming under pressure from Berlin to rein back on tax competition, amid fears that a break on the levy aimed at high tech companieswill undermine German revenues.
Concerns about Britain's efforts to attract investment by cutting taxes have risen as German companies moved to take advantage of an incentive for patent income.
For the story, go here.
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UK to set up central tax register
By George Parker, Jim Pickard and Vanessa Houlder (Financial Times)
Britain is to lead by example in its push for greater tax transparency by setting up a new central register to try to ensure that the true owners of shell companies often located in tax havens pay their taxes.
David Cameron hopes to persuade other big economies to set up similar registerswhen he chairs the G8 summit in Northern Ireland nextweek, a move designed to recover the billions of pounds in lost revenue suffered by exchequers around theworld.
For the story, go here.
Britain is to lead by example in its push for greater tax transparency by setting up a new central register to try to ensure that the true owners of shell companies often located in tax havens pay their taxes.
David Cameron hopes to persuade other big economies to set up similar registerswhen he chairs the G8 summit in Northern Ireland nextweek, a move designed to recover the billions of pounds in lost revenue suffered by exchequers around theworld.
For the story, go here.
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Cameron under pressure to push for G8 tax transparency deal
By Vanessa Houlder and George Parker in London (Financial Times)
David Cameron is under pressure to build on a tax transparency dealwith British offshore territories by pushing for aglobal agreement at the summit of the Group of Eight leading economies .
Global poverty charitieswelcomed the UK prime ministers success in bringing British territories such as Bermuda into the framework on Saturday but said he needed to go further in promoting real transparency to crack down on tax evasion and aggressive avoidance.
Mr Cameron said the UKwas leading theway on transparency by creating a central register of company ownership. But he faced criticism from campaigners for only offering to consult onwhether it be opened up to the public rather than just tax authorities.
For the story, go here.
David Cameron is under pressure to build on a tax transparency dealwith British offshore territories by pushing for aglobal agreement at the summit of the Group of Eight leading economies .
Global poverty charitieswelcomed the UK prime ministers success in bringing British territories such as Bermuda into the framework on Saturday but said he needed to go further in promoting real transparency to crack down on tax evasion and aggressive avoidance.
Mr Cameron said the UKwas leading theway on transparency by creating a central register of company ownership. But he faced criticism from campaigners for only offering to consult onwhether it be opened up to the public rather than just tax authorities.
For the story, go here.
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Camp Signals Support for 15% Foreign Patent Income Rate: Taxes
by Aaron E. Lorenzo (Bloomberg)
For companieswith a lot of foreign income from intangible products like patents, Dave Camp has a carrot-and-stick approach to overhauling the tax code.
Camp, the top Republican taxwriter in the U.S. House of Representatives, says putting a rate of 15 percent on all foreign income from intellectual property rights and intangibleswould limit revenue erosionwhen Congress pursues broad tax reform, Bloomberg BNA reported.
For the story, go here.
For companieswith a lot of foreign income from intangible products like patents, Dave Camp has a carrot-and-stick approach to overhauling the tax code.
Camp, the top Republican taxwriter in the U.S. House of Representatives, says putting a rate of 15 percent on all foreign income from intellectual property rights and intangibleswould limit revenue erosionwhen Congress pursues broad tax reform, Bloomberg BNA reported.
For the story, go here.
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Editorial: The world needs global tax reform -- G8 leaders must continue their work beyond the summit
As leaders of the Group of Eight leading economies gather in Northern Ireland, David Cameron'swelcome initiative to reform global corporate tax rules may still fall short of definitive success. All the more reason for governments to push on after the summit, together and at home.
For the editorial, go here.
For the editorial, go here.
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Why we need to simplify our corporate tax system
by Eric Schmidt (Financial Times)
The G8 is the forum to decide on the complex issue of company fiscal reform, says Eric Schmidt
As the leaders of theworlds largest economies descend on beautiful, blustery Lough Erne, their briefingswill doubtless be packedwith different ideas for international tax reform. Todays rules are fiendishly complicated and everyonewould benefit from a simpler, more transparent system. That iswhywe have been encouraging a broader debate at the level of the Group of Eight leading economies and the Organisation for Economic Co-operation and Development.
For the commentary, go here.
The G8 is the forum to decide on the complex issue of company fiscal reform, says Eric Schmidt
As the leaders of theworlds largest economies descend on beautiful, blustery Lough Erne, their briefingswill doubtless be packedwith different ideas for international tax reform. Todays rules are fiendishly complicated and everyonewould benefit from a simpler, more transparent system. That iswhywe have been encouraging a broader debate at the level of the Group of Eight leading economies and the Organisation for Economic Co-operation and Development.
For the commentary, go here.
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The G8 agenda: The transparency summit -- Britain's leader envisages a world of tax compliance and clear corporate ownership
At first blush, David Cameron seems an unlikely foe of tax dodgers and their accomplices. Conservatives are traditionally friendly to thewealthy and to big business,who gain most from fancy financial footwork. The City of London enjoys symbiosiswith a cluster of offshore dependenciesincluding Jersey and the British Virgin Islands (BVI)which have a reputation for, at best, inviting tax avoidance and, atworst, aiding financial crime.
But as chair of the summit of the G8 (the biggest industrialised countries) being held in Northern Ireland nextweek, the prime ministerwill push for global reform of theworld economys most shadowy corners. Hewants to improve tax compliance through the cross-border exchange of information, to improve those data by making companies, trusts and the like show their true owners, and to change outdated ruleswhich multinationals exploit to cut their tax bills. His assault is both on the offshore tax havens and on the often dodgier, if lesswell-known, practices in onshore jurisdictions such as Delawareor London.
For the story, go here.
But as chair of the summit of the G8 (the biggest industrialised countries) being held in Northern Ireland nextweek, the prime ministerwill push for global reform of theworld economys most shadowy corners. Hewants to improve tax compliance through the cross-border exchange of information, to improve those data by making companies, trusts and the like show their true owners, and to change outdated ruleswhich multinationals exploit to cut their tax bills. His assault is both on the offshore tax havens and on the often dodgier, if lesswell-known, practices in onshore jurisdictions such as Delawareor London.
For the story, go here.
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WNTS Insight: House Ways and Means Committee tax reform hearing focuses on tax havens, base erosion, and profit shifting
The Houseways and Means Committee today held a hearing on tax reform issues related to US international tax rules and tax havens, base erosion, and profit shifting. The hearing also discussed approaches for reforming US domestic tax rules through rate reduction and base broadening. In addition, the hearing examined OECD initiatives that seek to address concerns over transfer pricing, the tax treatment of intangible property, and related issues as part of an action plan addressing base erosion and profit shifting (BEPS).
For thewNTS Insight, go here.
For thewNTS Insight, go here.
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U.K. Lawmakers Slam Google Over Contrived Tax Strategy
U.K. lawmakers attacked Google Inc. (GOOG) for defending ahighly contrived strategy of booking advertising sales through Ireland to reduce its tax liability in Britain.
Parliament's Public Accounts Committee said in a report published in London today thatpublic confidence in the companywill only be restoredwhen it establishes a corporate structure that ensures Google pays taxwhere it generates profit.
For the article, go here.
Parliament's Public Accounts Committee said in a report published in London today thatpublic confidence in the companywill only be restoredwhen it establishes a corporate structure that ensures Google pays taxwhere it generates profit.
For the article, go here.
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Commentary: "How America Lost Its Way"
Not everyone is an entrepreneur. Still, everyone should try -- if only once -- to start a business. After all, it is small and medium enterprises that are the key to job creation. There is also something uniquely educational about sitting at the deskwhere the buck stops, in a dreary office you've just rented,working day and nightwith a handful of employees just to break even.
As an academic, I'm just an amateur capitalist. Still, over the past 15 years I've started small ventures in both the U.S. and the U.K. In the process I've learned something surprising: It's much easier to do in the U.K. There seemed to be much more regulation in the U.S., not least the headache of sorting out health insurance for my few employees. And therewere certainly more billable hours from lawyers.
For the article, go here.
As an academic, I'm just an amateur capitalist. Still, over the past 15 years I've started small ventures in both the U.S. and the U.K. In the process I've learned something surprising: It's much easier to do in the U.K. There seemed to be much more regulation in the U.S., not least the headache of sorting out health insurance for my few employees. And therewere certainly more billable hours from lawyers.
For the article, go here.
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ACT Statement on Todays Ways and Means Hearing on Tax Reform
The Alliance for Competitive Taxation (ACT), a coalition of 42 leading American businesses that employ millions of Americanworkers, issued the following statement regarding today's Houseways and Means Committee hearing on tax reform:
“ACTwelcomes the hearing today on an important issue to advancing tax reform. ACT supports comprehensive tax reform that lowers the corporate tax rate to 25%, gets rid of corporate tax breaks and preferences and establishes a modern hybrid international tax system. ..."
For the statement, go here.
“ACTwelcomes the hearing today on an important issue to advancing tax reform. ACT supports comprehensive tax reform that lowers the corporate tax rate to 25%, gets rid of corporate tax breaks and preferences and establishes a modern hybrid international tax system. ..."
For the statement, go here.
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Schwartz: Bipartisan Tax Reform Urgently Needed to Keep Jobs in U.S.
U.S. Representative Allyson Y. Schwartz (PA-13) issued the following statement at today's Houseways and Means Committee hearing examining the various tax planning strategies used by multinational corporations to shift income out of the United States and into low-tax jurisdictions.
“Today's hearing highlights the necessity of reforming our tax code. Recent reports have shown that our current tax code puts American businesses, our economy, andworkers at a disadvantage in the global marketplace and robs the federal government of the revenue needed to meet our obligations. Our current tax code makes it easy to game the system and rewards shipping jobs overseas,while giving companies no incentives to create middle-class jobs here at home, said Congresswoman Schwartz.
For the statement, go here.
“Today's hearing highlights the necessity of reforming our tax code. Recent reports have shown that our current tax code puts American businesses, our economy, andworkers at a disadvantage in the global marketplace and robs the federal government of the revenue needed to meet our obligations. Our current tax code makes it easy to game the system and rewards shipping jobs overseas,while giving companies no incentives to create middle-class jobs here at home, said Congresswoman Schwartz.
For the statement, go here.
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Ways and Means Considers Base Erosion and Profit Shifting
Questioning a panel of experts on the merits of a territorial regime, offshore cash stockpiles, and the promotion of American manufacturing, the Houseways and Means Committee considered how best to combat base erosion and profit shifting (BEPS) at a hearing on June 13. Also up for deliberationwas an anti-base-erosion proposal that committee Chair Dave Camp, R-Mich., included in his 2011 discussion drafton corporate taxation.
For the story, go here. (Subscription required.)
For the story, go here. (Subscription required.)
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Transfer Pricing No Call for Formulary Apportionment In OECD Base Erosion Action Plan, Official Says
The Organization for Economic Cooperation and Developmentwill not recommend a shift from the arm's length principle to formulary apportionment in its July action plan on its project addressing base erosion and profit shifting (BEPS), OECD's top tax official told BNA June 13.
For the story, go here. (Subscription required.)
For the story, go here. (Subscription required.)
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Tax Reform: Camp Signals Support for Taxing Foreign Income From Intangibles at 15 Percent Rate
All foreign income attributable to intangible products, such as intellectual property rights, could be taxed at a 15 percent rate as part of a plan to reform the tax code and limit erosion of the U.S. tax base, Houseways and Means Committee Chairman Dave Camp (R-Mich.) said in a plan highlighted June 13.
Companies could get below a 15 percent effective rate by subtracting any credits for foreign taxes paid on the same income, Camp said during a tax reform hearing on tax havens, base erosion, and profit-shifting.
For the story, go here. (Subscription required.)
Companies could get below a 15 percent effective rate by subtracting any credits for foreign taxes paid on the same income, Camp said during a tax reform hearing on tax havens, base erosion, and profit-shifting.
For the story, go here. (Subscription required.)
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Witness Statements at 6/13 W&M Hearing on "Tax Reform: Tax Havens, Base Erosion and Profit-Shifting"
The Houseways and Means Committee has released thewritten testimony of thewitnesses at its June 13 hearing on Tax Reform: Tax Havens, Base Erosion and Profit-Shifting. Thewitnesses are:
- Pascal Saint-Amans, Director, Centre for Tax Policy and Administration, Organisation for Economic Co-operation and Development (OECD);
- Edward Kleinbard, Professor of Law, University of Southern California Gould School of Law; and
- Paul Oosterhuis, Partner, Skadden Arps Slate Meager & Flom LLP.
For the testimony, go here.
- Pascal Saint-Amans, Director, Centre for Tax Policy and Administration, Organisation for Economic Co-operation and Development (OECD);
- Edward Kleinbard, Professor of Law, University of Southern California Gould School of Law; and
- Paul Oosterhuis, Partner, Skadden Arps Slate Meager & Flom LLP.
For the testimony, go here.
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Chairman Camp Opening Statement at 6/13 W&M Hearing on "Tax Reform: Tax Havens, Base Erosion and Profit-Shifting
On October 26, 2011, as part of its overall approach to comprehensive tax reform that lowers rates and broadens the base, this Committee released a discussion draft aimed at modernizing our outdated international tax rules. The draft included a structure thatwould allow the U.S. to move from aworldwide taxation system to a participation exemption system similar to that used by almost all of our major trading partners. In the interest of transparency,we made a specific requestwe actively sought feedback from stakeholders taxpayers, practitioners, economists, and members of the general public on how to improve the draft proposal.
Since then,we have heard from awide range of practitioners andworldwide American companies. Nearly all have offered a universal observation having the highest corporate rate in the developedworld alongwith an outdated international tax system is a barrier to success that leaves our country falling further behind our foreign competitors. Academics and economists agreed, and also cautioned, that any solution to these challenges must protect against erosion of the U.S. tax base through the shifting of profits to low-tax jurisdictions.
For Chairman Camp's opening statement, go here.
Since then,we have heard from awide range of practitioners andworldwide American companies. Nearly all have offered a universal observation having the highest corporate rate in the developedworld alongwith an outdated international tax system is a barrier to success that leaves our country falling further behind our foreign competitors. Academics and economists agreed, and also cautioned, that any solution to these challenges must protect against erosion of the U.S. tax base through the shifting of profits to low-tax jurisdictions.
For Chairman Camp's opening statement, go here.
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Corporate Pirates of the Caribbean -- Pro-Austerity CEOs [Fix the Debt] Seek to Widen Tax Haven Loophole
CEOswith the dubious lobby group "Fix the Debt" are pushing for cuts to Social Security, Medicare, and the social safety net, painting themselves as the good guys in the budget debate. But as they ask for everyday Americans to accept cuts, these CEOs are brazenly seeking towiden tax haven loopholes thatwould benefit their corporations such as a "territorial" tax system -- and earn them billions.
A new report by the Institute for Policy Studies shows that Fix the Debt member corporations stand to gain as much as $173 billion inwindfalls if Congress adopts their proposal for a territorial tax system.
For the report, go here.
A new report by the Institute for Policy Studies shows that Fix the Debt member corporations stand to gain as much as $173 billion inwindfalls if Congress adopts their proposal for a territorial tax system.
For the report, go here.
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Commentary: Time for Business Tax Reform
The U.S. last reformed its business tax code in 1986,when Forbes reported that 218 of theworld's largest 500 companieswere based in the U.S. Since then, theworld economy has become larger and more competitive, and production and employment have become more globalized. Today, the U.S. is home to only 137 of theworld's largest 500 companies by sales and is competingwith many countries for the production, research and jobs of global businesses. The current corporate tax code is a major impediment in this competition; it makes the U.S. less attractive as a place to do business and disadvantages American multinational companies.
After the 1986 tax overhaul, the U.S. had one of the lowest corporate tax rates among major economies in theworld. Today, it has the highest. The U.S. is also one of the few industrialized countries that still have aworldwide system that taxes the foreign earnings of its multinational companies. In contrast, more than 90 percent of theworld's largest companies from advanced economies are based in countrieswithterritorial systems that exempt most of the foreign earnings from domestic taxation. U.S. multinational companies, on the other hand, currently have about $2 trillion in foreign earnings that they cannot invest in the U.S.without incurring a substantial U.S. tax penalty.
For the editorial, go here.
After the 1986 tax overhaul, the U.S. had one of the lowest corporate tax rates among major economies in theworld. Today, it has the highest. The U.S. is also one of the few industrialized countries that still have aworldwide system that taxes the foreign earnings of its multinational companies. In contrast, more than 90 percent of theworld's largest companies from advanced economies are based in countrieswithterritorial systems that exempt most of the foreign earnings from domestic taxation. U.S. multinational companies, on the other hand, currently have about $2 trillion in foreign earnings that they cannot invest in the U.S.without incurring a substantial U.S. tax penalty.
For the editorial, go here.
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Taxman presence at multinationals adds to avoidance fears
The presence of hundreds of federal tax agents inside some of the US's biggest multinationals has added to the growing debate about tax avoidance ahead of a Group of Eight summit expected to discuss the issue this month.
The expected focus of this month's G8 has been on the elaborate, if legal, schemes set up by multinationals to minimise their tax bills, and how to overhaul laws to prevent the erosion of the corporate tax base around theworld.
But in the US,where hundreds of federal tax agents are often stationed inside the largest multinationals, there are increased questions aboutwhether these embedded Internal Revenue Service agents are too tough, tooweak or even too cosy in dealingwith the companies they cover.
For the story, go here.
The expected focus of this month's G8 has been on the elaborate, if legal, schemes set up by multinationals to minimise their tax bills, and how to overhaul laws to prevent the erosion of the corporate tax base around theworld.
But in the US,where hundreds of federal tax agents are often stationed inside the largest multinationals, there are increased questions aboutwhether these embedded Internal Revenue Service agents are too tough, tooweak or even too cosy in dealingwith the companies they cover.
For the story, go here.
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Occupy Wall Street Stylists Pursue U.K. Tax Dodgers
UK Uncut has no offices and no formal leader, and key members often plot strategy over midnight pints of ale in London pubs.
Yet,with more than 60,000 Twitter followers and a sprawling network of college-educated volunteers, the Occupywall Street-style group has helped galvanize public opposition to corporate tax avoidance. It has demonstrated inside Starbucks Corp. (SBUX) coffee shops, sued Britain's tax collection agency over a dealwith Goldman Sachs Group Inc. and shut down London'swestminster Bridge. It plans to target this month's summit of the Group of Eight, theworld's eightwealthiest countries.
For the story, go here.
Yet,with more than 60,000 Twitter followers and a sprawling network of college-educated volunteers, the Occupywall Street-style group has helped galvanize public opposition to corporate tax avoidance. It has demonstrated inside Starbucks Corp. (SBUX) coffee shops, sued Britain's tax collection agency over a dealwith Goldman Sachs Group Inc. and shut down London'swestminster Bridge. It plans to target this month's summit of the Group of Eight, theworld's eightwealthiest countries.
For the story, go here.
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DEALBOOK: Despite Tax Rules, Companies Stick With U.S.
The tactics that multinational companies like Apple, Microsoft and Hewlett-Packard use to avoid paying corporate income taxes might make onewonderwhy they incorporate in the United States in the first place.why not Ireland?
Advocates of a territorial-based tax system often point out that taxing United States companies on theirworldwide income creates an incentive for new companies to incorporate abroad instead. Many countries tax income earned onlywithin their borders. The United States, by contrast, purports to tax companies on theirworldwide income,with credits for any foreign taxes paid.
For the story, go here.
Advocates of a territorial-based tax system often point out that taxing United States companies on theirworldwide income creates an incentive for new companies to incorporate abroad instead. Many countries tax income earned onlywithin their borders. The United States, by contrast, purports to tax companies on theirworldwide income,with credits for any foreign taxes paid.
For the story, go here.
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Economic Analysis: "Intangible Profits: Oh, the Places You'll Go!"
If you readwhat law professors havewritten aboutwhere intangible income should be sourced, you'll soon realize that there are no easy answers to that critical question.
For the article, go here. (Subscription required.)
For the article, go here. (Subscription required.)
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Taxes help shape multinational companies
We instinctively assign national identities to large global corporations. Toyota is Japanese; IBM is American; Siemens is German; Samsung is Korean.we assume these big firms reflect their national origins and act as informal instruments of government policy. Up to a point, this is probably true. Companies' personalities do embody the culture and values of their place of birth. No doubt many executives feel patriotic toward their homeland. But as these multinational firms spread their sales, production and marketing activities around theworld, their interests and loyalties seem more murky, conflicted and stateless.
This may explain, I think, the muddled reaction to the recent appearance of Apple chief executive Timothy Cook before the Senate Permanent Subcommittee on Investigations. You may recall that the subjectwas Apple's ability to shelter a huge slice of its global profits from taxation. A subcommittee staff study found that from 2009 to 2012 Apple had paid almost no taxes on about $74 billion in profits earned outside the United States. These global profitswere diverted to Ireland,which levied almost no tax. The legal mechanics of how this occurredwere less impressive than the sheer magnitude of avoidance.
For the op-ed, go here.
This may explain, I think, the muddled reaction to the recent appearance of Apple chief executive Timothy Cook before the Senate Permanent Subcommittee on Investigations. You may recall that the subjectwas Apple's ability to shelter a huge slice of its global profits from taxation. A subcommittee staff study found that from 2009 to 2012 Apple had paid almost no taxes on about $74 billion in profits earned outside the United States. These global profitswere diverted to Ireland,which levied almost no tax. The legal mechanics of how this occurredwere less impressive than the sheer magnitude of avoidance.
For the op-ed, go here.
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Intangibles Next Release of OECD Intangibles: Draft To Address Location Savings, Official Says
The next release of the Organization for Economic Cooperation and Development's discussion draft on intangibleswill cover comparability factors including corporate synergies, local market conditions, and location savings, an OECD official said June 6.
For the story, go here. (Subscription required.)
For the story, go here. (Subscription required.)
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Ways & Means Committee Sets 6/13 Hearing on "Tax Reform: Tax Havens, Base Erosion and Profit-Shifting"
Congressman Dave Camp (R-MI), Chairman of the Committee onways and Means, today announced that the Committeewill hold a hearing on U.S. and foreign multinational corporations use of tax havens (low- and no-tax jurisdictions) to avoid tax and shift profits outside the United States and erode the U.S. tax base as part of the Committee's continuedwork on comprehensive tax reform. The hearingwill take place on Thursday, June 13, 2013, in Room 1100 of the Longworth House Office Building, beginning at 10:00 A.M.
For the release, go here.
For the release, go here.
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How Supreme Court's PPL ruling will reduce transaction costs for US multinationals
US multinationals should see their transaction costs reducedwhen investing in foreign jurisdictions following the Supreme Court's judgment in favour of energy company PPL.
For the article, go here.
For the article, go here.
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German Min Fin could introduce patent box to compete with others in Europe
German officials are concerned about the country's potential loss of competitive advantage because of new intellectual property tax incentives being offered by other European countries such as the UK.
For the story, go here.
For the story, go here.
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International Tax News: June 2013 edition available
International Tax News is designed to help multinational organisations keep upwith the constant flow of international tax developmentsworldwide. Among thearticles featured in this month's edition are:
* Recent legislative changes reaffirm Cyprus' attractive tax regime
* Netherlands renews decree on limitation of interest deduction
* Azerbaijan expands tax treaty network
* Billwould liberalise Hong Kong's exchange of information regime
For the June edition of International Tax News, go here.
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Potential Vodafone conciliation could open door for alternative dispute resolution in India
If Vodafone accepts the Indian cabinet's offer to enter a conciliation process under the Indian Arbitration and Conciliation Act to try and resolve its longstanding tax dispute, the Indian government may have to open up such resolution mechanisms to other multinationals.
For the story, go here.
For the story, go here.
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When multinationals should use ADR to resolve UK tax disputes
HM Revenue & Customs officials discusswhen taxpayers should consider using alternative dispute resolution (ADR) to resolve large and complex tax cases.
For the story, go here.
For the story, go here.
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OECD and U.N. Officials Discuss Transfer Pricing Challenges
Aworldwide consensus on transfer pricing issues is becoming increasingly challenging to reach, and the process for achieving it is important, Joseph Andrus, head of transfer pricing at the OECD, said June 5.
At the Transfer Pricing Minds Americas conference in Coral Gables, Fla., Andrus previewed the OECD'swork on intangibles and base erosion and profit shifting (BEPS), and Michael Lennard, chief of international tax cooperation in the Financing for Development Office at the United Nations, discussed the U.N. approach.
"We think at the OECD that agreement among countries in the transfer pricing area is extremely important," Andrus said. One area of general agreement is that the arm's-length standard should be retained. However, the arm's-length standard is notworking theway some countrieswould like, he said.
For the story, go here. (Subscription required.)
At the Transfer Pricing Minds Americas conference in Coral Gables, Fla., Andrus previewed the OECD'swork on intangibles and base erosion and profit shifting (BEPS), and Michael Lennard, chief of international tax cooperation in the Financing for Development Office at the United Nations, discussed the U.N. approach.
"We think at the OECD that agreement among countries in the transfer pricing area is extremely important," Andrus said. One area of general agreement is that the arm's-length standard should be retained. However, the arm's-length standard is notworking theway some countrieswould like, he said.
For the story, go here. (Subscription required.)
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Reputational Risk Is Here to Stay, Transfer Pricing Panel Says
The popular sentiment that corporations are poor citizens for legally minimizing their tax liabilities is incorrect, but that perception is a lasting problem for multinationals, according to a panel of practitioners and commentators at the Bloomberg BNA and Baker & McKenzie North American Transfer Pricing Conference inwashington on June 5.
The theme for the panelwas set earlywith the recital of the famous quote from Judge Learned Hand that taxpayers may arrange their affairs so they pay no more tax than they are legally obligated to pay. Therewas also broad endorsement of Apple CEO Tim Cook's recent recommendations to the Senate Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations that the United States simplify its corporate tax code and adopt a lower rate.
For the story, go here. (Subscription required.)
The theme for the panelwas set earlywith the recital of the famous quote from Judge Learned Hand that taxpayers may arrange their affairs so they pay no more tax than they are legally obligated to pay. Therewas also broad endorsement of Apple CEO Tim Cook's recent recommendations to the Senate Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations that the United States simplify its corporate tax code and adopt a lower rate.
For the story, go here. (Subscription required.)
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Spotlight on Transfer Pricing Shows Need for Global Cooperation, Maruca Says
With public attention recently drawn to the income-shifting practices of multinational corporations, transfer pricing is becoming increasingly challenging for taxpayers and administrators and the need for global cooperation is more apparent than ever, according to Samuel Maruca, transfer pricing director, IRS Large Business and International Division.
"Transfer pricing has gone mainstream," Maruca said June 5 at the Bloomberg BNA and Baker & McKenzie North American Transfer Pricing Conference inwashington. Previously, transfer pricing issueswere mostly out of the public's sight, but the pressures of an economic downturn and fiscal austerity measures have created a "geopolitical firestorm," he said. Recent events like the Senate hearing on Apple's international tax practices illustrate the growing public attention to profit shifting, he said.
For the story, go here. (Subscription required.)
"Transfer pricing has gone mainstream," Maruca said June 5 at the Bloomberg BNA and Baker & McKenzie North American Transfer Pricing Conference inwashington. Previously, transfer pricing issueswere mostly out of the public's sight, but the pressures of an economic downturn and fiscal austerity measures have created a "geopolitical firestorm," he said. Recent events like the Senate hearing on Apple's international tax practices illustrate the growing public attention to profit shifting, he said.
For the story, go here. (Subscription required.)
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IRS Could Update Regs on Transfers of Intangibles to Foreign Corporations
The IRS believes it has the authority to modify section 367(d) regulations dealingwith transfers of intangibles to foreign corporations to close most perceived loopholeswithout a change to the tax code, according to Chris Bello, branch 6 chief, IRS Office of Associate Chief Counsel (International).
Speaking June 5 at the Bloomberg BNA and Baker & McKenzie North American Transfer Pricing Conference inwashington, Bello said the IRS is considering updating the section 367(d) regulations, a project that it hasworked on "in fits and starts" over the years.
For the story, go here. (subscription required)
Speaking June 5 at the Bloomberg BNA and Baker & McKenzie North American Transfer Pricing Conference inwashington, Bello said the IRS is considering updating the section 367(d) regulations, a project that it hasworked on "in fits and starts" over the years.
For the story, go here. (subscription required)
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Economic Policy Institute Produces Dual Axis Chart That Proves Nothing Affects Economic Growth
The progressive Economic Policy Institute likes the corporate income tax because EPI likes tax revenue in general and feels that the corporate income tax raises it in a distributionally progressiveway. They also offer the chart above to prove that corporate income tax rates don't drive economic growth.
And indeed they don't. But though this is an unusually egregious example, it highlights a big flaw in the entire chart-blogging genre.
For the article, go here.
And indeed they don't. But though this is an unusually egregious example, it highlights a big flaw in the entire chart-blogging genre.
For the article, go here.
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Corporate taxes dont cause recessions. But do they hurt growth?
Congressional Research Service reports arent generally the cause of political dust-ups. The agency is known for its rigorous yet completely dispassionate analysis of everything from national security threats to budget policy to Congressional procedure. At one hearing I attended three years ago, a CRS analyst recalled a time her bosswas askedwhat he thought about a particular piece of legislation and replied,Im not allowed to think.
So itwas surprisingwhen Thomas Hungerford, a veteran tax analyst at the agency, issued a report last year that Senate Republicans immediately tried to revoke. The report found no correlation between the top personal income tax rate and economic growth.
A revised version of the reportwas eventually released, softening some language and citing reports suggesting negative growth effects from high taxes. But soon after, Hungerford departed CRS for the left-leaning Economic Policy Institute.
Now, he's conductingsimilar researchat EPI, this time focusing on the corporate tax rate. His latestreportfindsno evidence that eitherthe statutory top corporate tax rate or the effective marginal tax rate on capital income is correlatedwith real GDP growth.
For the story, go here.
So itwas surprisingwhen Thomas Hungerford, a veteran tax analyst at the agency, issued a report last year that Senate Republicans immediately tried to revoke. The report found no correlation between the top personal income tax rate and economic growth.
A revised version of the reportwas eventually released, softening some language and citing reports suggesting negative growth effects from high taxes. But soon after, Hungerford departed CRS for the left-leaning Economic Policy Institute.
Now, he's conductingsimilar researchat EPI, this time focusing on the corporate tax rate. His latestreportfindsno evidence that eitherthe statutory top corporate tax rate or the effective marginal tax rate on capital income is correlatedwith real GDP growth.
For the story, go here.
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G8 tax avoidance drive alarms US business
Corporate America's biggest lobby groups havewarned Barack Obama against embracing Group of Eight proposals to crack down on international tax avoidance, days ahead of expected Senate questioning of one of the president's advisers about his investments in a Cayman Islands fund.
For the story, go here.
For the story, go here.
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Calculating Apples True U.S. Tax Rate
Some have suggested that Timothy D. Cook's calculation of Apple's tax rate is based on a badly distorted measure of United States income.One lesson from the Senate hearing about Apple's offshore tax planning is that figuring outwhat a multinational company actually pays in taxes is harder than it should be. At the risk of sounding Clintonesque, it depends onwhat the meaning ofpays is.
For the story, go here.
For the story, go here.
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