Int'l Tax News

A Biden presidential election victorywould make U.S. agreement more likely on a proposed overhaul of global tax rules, an EU official saidwednesday. The Democratic hopeful Joe Biden is proposing to double the federal minimum tax on U.S. corporations' foreign earnings, known as global intangible low tax income (GILTI), to 21% from 10.5%.were the plan to become law, itwould make the U.S. a "slightly less attractive" choice for company headquarters, Benjamin Angel, director for direct taxation in the European Commission, told a hearing of the European Parliament's tax subcommittee.

The U.K. tax authority is recommendingways to soften the impact of a Financial Conduct Authority proposal linked to property fund investments. Her Majesty's Revenue and Customswants to allow investments in open-ended property funds through tax-free retail investment accounts to maintain their tax-free status. The status became at risk after the FCA proposed adding a mandatory notice period of between 90 and 180 days for investorswanting to cash in their investments in the funds.

A United Nations committee has signaled support for an effort to help developing countries tax tech giants, but final approvalwill likelywait until 2021. The U.N.'s Tax Committee of Experts,which has been in discussions over twoweeks, voted 12-10 Oct. 23 to include an amendment, known as Article 12B, to its model treaty. But the committee is expected towait on final approval to give opposing countries time to draft language that outlines their objections in the finished version, two sources familiarwith the discussion told Bloomberg Tax Tuesday.

Public perception that tech companies didwell in the pandemic raises the stakes for OECD-led digital tax talks, an official said. An increase in public dissatisfactionwith how tech giants are taxed makes a "counterfactual" outcome of more unilateral measures more likely if there is no global agreement, Tibor Hanappi, an economist at the Organization for Economic Cooperation and Development's Center for Tax Policy and Administration, said Monday. Hewas speaking during a virtual event hosted by the Tax Foundation and the European Tax Policy Forum.

Will Morris of PwC observes the clouds gathering on the international tax horizon, and asks if a storm is coming to the post-Covidworld. He considerswhat governments, international organizations, and businesses should keep in mind to achieve beneficial solutions for everyonewhen this storm does strike.

TheEuropean Commissionhas postponed the release of a communication on business taxation because of delays in OECD-led negotiations to reach a global consensus on digital and corporate taxation, anEUtax official said.

A U.N.proposal to tax digital services revenue may have its shortcomings, but it could still influenceOECDnegotiations for consensus on a global tax overhaul by mid-2021, an Indian official said.

TheOECDhas published a new package of documents on the peer review process for country-by-country reporting,whichwill applyfor jurisdictions participating in new rounds of reviews that began in late 2020.

The U.S. position on pillar 1 of theOECD's international tax overhaul could remain a problem next year, raising the questionwhether pillar 2 could proceed on its own, according to a Canadian official.

Robert Goulder examines how the presidential candidateswould change the global intangible low-taxed income rules enacted as part of the Tax Cuts and Jobs Act of 2017.

Politicians and businesses must "talk the talk andwalk thewalk" if they are serious about agreement on a global corporate tax overhaul to avoid the chaos of unilateral measures, theOECD's tax chief said.

EU member states have discussed reforming the Code of Conduct for business taxation in two stages to allow international talks on digital taxation to influence their discussions.

The alternative to not getting an international deal on digital taxation is not the status quo,Pascal Saint-Amans, director of theOECD Centre for Tax Policy and Administrationsaid.

In this article, the authors review the tax plan of Democratic presidential candidateJoe Bidenand vice presidential candidateKamala Harris, focusing on proposed changes to the U.S. international tax system.

TheEuropean Commissionis considering potential changes to a 1970s-era VAT exemption for financial and insurance services, aiming to reduce complexity, legal uncertainty, and costs for sector operators and, ultimately, their customers.

TheEuropean Commissionis ready to propose a tax on digital companies in light of the lack of international agreement amongOECDcountries on a solution to tax the digital economy.

Businesses andwealthy individuals are preparing for the potential for former Vice President Joe Biden to raise taxes if hewins the presidential election.

The idea that the agenda of Joe Bidenwould be positive for the economy is taken to mean that his plan to increase taxeswould also be positive for the economy. However, it is a mistake to think the corporate or individual income taxes can be raisedwithout negative effects.

The Cayman Islandswere added to the EU's "Annex 1" list in February of this year. The list names jurisdictions deemed as non or partly compliantwith international tax standards. Allison Nolan of Athena International Management explains how Cayman has been removed from the list and affirmed by the EU as a cooperative jurisdiction for tax purposes and implements the highest of regulatory standards.

Lynn Cramer and Niamh Cross of Maples Group describe the tax and fiscal measures taken by the Irish government in response to the Covid-19 pandemic, including those in the recently announced Budget 2021.

The OECD's Inclusive Framework on BEPSwill pursue itswork plan on the tax challenges of digitalization until at least the middle of 2021. The cost of simply determining how the proposed ruleswould apply to a multinational group's business could be substantial,writes Jeff VanderWolk of Squire Patton Boggs. Dec. 14 is the deadline forwritten comment. The author says itwould be prudent for businesses to take advantage of the opportunity forwritten comments now and speak at the scheduled January meeting.

A Mexican government proposal to shut downwebsites not complyingwith a new digital taxwould breach the United States-Mexico-Canada Agreement and other laws, a group of U.S. and Canadian business associationswarned in a letter Friday to Mexican lawmakers.

Companies should engage in the OECD's digital tax overhaul, or they'll face chaos and trade sanctions, the organization's tax chiefwarned Monday. "I think awake-up call is necessary" for businesses, said Pascal Saint-Amans, director of the Organization for Economic Cooperation and Development's Center for Tax Policy and Administration.

Countries may have fallen short in reaching a global tax reform agreement in 2020, but theG-20still supports those efforts, even ifit means getting a deal over the finish line by mid-2021.

TheHungarian parliamentis considering a bill thatwould provide tax incentives and assistance to businesses and sectors struggling during the coronavirus-induced economic crisis.

The Czech government has extended tax breaks introduced earlier in the year for individuals and businesses affected by the COVID-19 pandemic.

TheTax Justice Networksaid reports thatAmazonisn't liable for the U.K.digital services tax on goods it sells directly isn't surprising, and that the larger issue isAmazon'sability to shift profits abroad.

Mindy Herzfeld questions the reasoning behind the recently proposed regulations to overhaul the foreign tax credit.

Europe should levy tariffs on American imports in retaliation for U.S. tariffs imposed in response to the dispute over the EU'sAirbussubsidies, French Finance MinisterBruno Le Mairesaid.

China, Mexico, and South Africa have submitted updated descriptions of their national enforcement practices for inclusion in the next edition of theU.N.transfer pricing manual,whichwill also feature a new section on Kenya.

WASHINGTONÔøΩThere is an enormous gulf between the presidential candidates on tax policyÔøΩwith trillions of dollars at stake over the next decade. President Trump is campaigning to continue his administration's biggest legislative achievement, the 2017 tax law,which lowered taxes on businesses and individualswhile increasing budget deficits. He credits the lawwith helping spur economic growth in 2018 and 2019, a periodwhen the unemployment rate fell to 3.5% from 4.1%, and is pushing for even more tax cuts in a second term.

Taxes aren't quite the certainty they once seemed to Benjamin Franklin. On Monday, the Organization for Economic Cooperation and Development said the new global rules it is developing could add $100 billion a year to multinational companies' tax bills. That might sound like an unappealing prospect for investors, but the OECD painted a bleaker alternative: a chaos of digital taxes and tariffs that could cut global output by 1%. This outcomewould itself hit corporate earnings, even if the new levies didn't.

WASHINGTONÔøΩOn paper, the 21% U.S. corporate tax ratewas a permanent cornerstone of the 2017 tax law, a boon to businesswithout the expiration date attached to other provisions. In reality, that low rate is only as solid as Republicans' ability towield power inwashington.

The use of tax havens by multinational corporations (MNCs) has attracted increasing attention and scrutiny in recent years. This paper provides an exposition of the academic literature on this topic. It beginswith an overview of the basic facts regarding MNCs' use of havens,which are consistentwith the location of holding companies, intellectual property, and financial activities in havens. However, there is also evidence of significant frictions that limit MNCs' use of havens. These limits can be attributed to non-tax frictions (such as the legal and business environment in different jurisdictions), to tax law provisions limiting profit shifting, and to the costs of tax planning.

New lines are being drawn in the OECD digital tax talks overwhich business activitieswill be covered by a measure meant to make multinationals' tax calculations simpler and reduce disputes.Some countrieswant to broaden the scope of business activities covered by part of the Organization for Economic Cooperation and Development's planned global tax overhaul, known as Amount B. For companies, Amount B holds the promise of greater tax certainty but broadening the range of activities could mean some may end up paying more than they do now.

Developing countries could get a new avenue for taxing digital activities in their jurisdictions under a United Nations treaty amendment set for a vote nextweek.The proposal is meant to be an alternative to an OECD digital tax plan also under negotiation, said Rajat Bansal, a member of the U.N. Tax Committee and co-chair of the drafting subcommittee.

Transparency continues to be at the forefront of international tax discussions. It's the topic of articles, the focus of speeches, and the goal of legislation. But those discussions are tense and very divided, even among tax administrators. Advocates for more transparency are looking to identify and minimize a perceived tax gap, including profit shifting, paying nil taxes in low tax jurisdictions, and operating inwhat some call tax havens.

Multinationals are hoping that an OECD-led effort to set a global minimum tax ratewill spare them from complicated calculations to figure outwhat they'll owe. Companies have two months to tell the Organization for Economic Cooperation and Development how to ease compliance burdens they'll face under part of the plan known as Pillar Two.

Francewill go aheadwith plans to collect its contentious digital services tax mid-December, Finance Minister Bruno Le Maire said, keeping Europe on course for a trade battlewith the U.S. over the taxation of tech giants like Facebook Inc. and Alphabet Inc.'s Google.

A United Nations committee thisweek is voting on a new approach to taxing the digital economy that could create another division in the fractured global digital tax debate. The proposed tax treaty changewould give countries a framework for deciding how to tax cross-border digital revenues. The plan's proponents say itwill help developing countries that are disadvantaged in larger global discussions about a digital tax overhaul.

As awhole, the U.S. tax system (federal, state and local) since 1980 has served more and more to increase racializedwealth inequality. The tax system is today operating to entrench the system of advantage based on race that centuries of racial exploitation and unequal access towealth created. As the future face of the nation becomes lesswhite, the U.S. tax system as awhole and the anti-tax rhetoric that has fueled its shift from progressive to regressive are driving economic inequality and racial inequity. More deeply, the tax system is inhibiting broad-scale public investment in the primary resource of the future: human capital.

In this article, the authors analyse the notion of 'economic reality' in EU VAT and how it is applied by the CJEU in its case law. The purpose is to clarify the concept of economic reality, to establish how it affects the taxation of transactions, and towhat extent it should affect that taxationwhen taking into account the principle of legal certainty.

Theworld's tax policy leaders are currently engaged in debate overwho should tax the income streams producedwith the help of cross-border regulatory coordinationÔøΩthe cooperative surplus over the gains that, in a counterfactualworld,would be available if investmentswere confined to the domestic economy. To the extent there everwas a coherent relationship between consensus tax policy norms and the distribution of cooperative surplus, that relationship is now hopelessly skewed by real life factors, chief among them the rapid advancement of innovative technology that transcends physical boundaries of all kinds. The growing dissatisfaction of those on thewrong side of the skew had already initiated a rise in innovativeways to tax cooperative surpluswhen COVID-19 struck, significantly increasing the stakes for taxation and prompting yet more reform proposals. There are now at least fourteen strategies in play, each drawing varying levels of scrutiny, buy-in, and pushback. This Article examines the fourteen and argues that among them, those seeking to tax revenue flows at source have the best chance to alter the distribution of cooperative surplus in the immediate term, provided some formalistic tropes can be overcome.

International corporate tax planning and corporate social responsibility are topics that might not seem to have common ground at first sight. The aim of this researchwas to prove the contrary. This research addressed international corporate tax planning from various perspectives, such as regulation, ethics, business, and society. Not all forms of legal tax planning are considered (socially) legitimate anymore. Corporate tax planning is a complex issue: on the one hand, it is common corporate practice to keep costs low. On the other hand, corporations have to contribute to society and common goods by paying (corporate income) taxes as any other member of society. Not all kinds of corporate tax practices are (socially) illegitimate per se. Tax planning can be carried out in various forms. This research focused on tax planning activities that remainwithin the boundaries of the law (thus tax evasion is not part of this research).

Between 1985 and 2019, the global average statutory corporate tax rate has fallen from 49 percent to 23 percent, largely due to the rise of international tax competition. The biggestwinners from globalization have received the largest tax cuts. In this paperwe propose a solution to replace this race-to-the-bottomwith a race-to-the-top. Multinational companies that have low effective tax rates in some foreign countries (whatwe call a "tax deficit")would pay an extra tax in their home country.we explain how such a tax should be designed and how it could be collected. The ideal solutionwould be for all countries to jointly start collecting the tax deficit of their multinationals.we describe how defensive measures could be applied against countries refusing to take part in such an agreement, measures that could ultimately pave theway to global corporate tax coordination.

The U.K. government may need tax rises of over £40 billion a year by 2024-2025 "just to stop debt spiraling upwards," but now is not the time for increases, theInstitute for Fiscal Studies(IFS) said.

Members ofthe United Nations' subcommittee on taxing the digital economy have proposed a new treaty article allowing source-country taxation of digital services revenue, partingwayswith the proposal currently under consideration at theOECD.

TheEUwill hold off on unilateral plans to tax digital activity even though theOECDmissed its 2020 deadline to reach agreement on a multilateral approach to modernize global tax rules.

By: Stephanie Soong Johnston

Countries could not agree on a renovation of the international tax system in 2020 as planned, but they now have the blueprints that theOECDhopeswill provide the foundation for an accord in 2021.

Despite legal concerns from the state advisory body, Dutch lawmakers are moving forwardwith a proposal for a "dividend exit tax" thatwould affectcorporations likeUnileverthat are moving their Dutch operations to low-tax jurisdictions.