Int'l Tax News

The base erosion and antiabuse tax may reflect concernwithin Congress that the arm's-length standard is slipping as an effective transfer pricing method. However, the new law is flawed in its drafting, making its application to taxpayers overbroad and inconsistent across industries. Treasury's ability to fix these problems through regulatory guidance is hindered by a lack of legislative history. Other countries looking to the United States for leadership in this area should beware.

The potential effects of the U.S. Tax Cuts and Jobs Act on the Canadian economy have been hotly debated, but a new report suggests that significant percentages of Canada's GDP and employment are at risk.

A Canadian court upheld adjustments totaling C $470 million ($362 million) to taxable income of food retail giant Loblaw Companies Ltd.'s subsidiary, denying challenges under Canada's controlled foreign company and general antiavoidance rules.

A House of Lords committee's inquiry into the draft finance bill is seeking evidence of "perceived unfairness" in U.K. tax policy or enforcement.

The National Association of Manufacturers has asked Treasury to avoid imposing rules under the Tax Cuts and Jobs Act (P.L. 115-97) thatwould mandate reallocation of former general limitation foreign tax credits against the new general limitation and foreign branch baskets and to limit any new taxes on manufacturers, consistentwith congressional intent.

A manufacturers' coalition urged Treasury, in its coming guidance, to ease the corporate burden created by the combination of global intangible low-taxed income and expense allocation rules and to provide transitional foreign tax credit rules.

With the first conviction under the Foreign Account Tax Compliance Act, time may be up for financial institutions trying to avoid U.S. reporting obligations.

Taxpayers may have to assert the inapplicability of the base erosion and antiabuse tax to their circumstances by filingwith the IRS rather than staying silent, if a recent draft form is any indication.

The European Commission in January or February 2019will propose abandoning the unanimity rule on tax issues, commission President Jean-Claude Juncker announced September 12.

Israel has adopted safe harbor rules providing for a range of prices for intercompany services thatwill be accepted by the Israeli tax authority, thus reducing the transfer pricing compliance burden for multinational companies.

Multinational companieswill have to provide more details to the Chilean tax authority on how it prices sales of goods between its units located in Chile under draft tax legislation presented to the nation's Congress. The legislationwould rewrite Article 64 of Chile's code covering the power of the tax authority Servicio de Impmuestos Internos (SII) to assess the value of intercompany sales of goods and services, providing more detail ofwhen and how the power can be used.

Canada's government is planning targeted measures to boost competitiveness rather than a broad, across-the-board cut to the nation's benchmark corporate tax rate, according to Finance Minister Bill Morneauwhowill address business concerns on competitiveness in his fall economic update.

The Swedish government, in a Sept. 4 announcement from the Ministry of Finance, announced a reworking of itswhite list,which is made up of countries inwhich foreign income isn't subject to Swedish taxation. The changes are meant to alignwith the EU's Anti-Tax Avoidance Directive, and make aggressive tax planning more difficult resulting inmore foreign-owned companies exposed to Sweden's corporate anti-avoidance rules.

South Africa's controlled foreign company regimeÔøΩwhich limits tax avoidance through the use of entities set up in low-tax jurisdictionsÔøΩhas ended up creating an over-sized compliance burden for companies, practitioners say. The controlled foreign company regime is aimed at aggressive tax planning among multinational companies, but the burden of compliance is significant, often for relatively little additional tax revenue.

Malaysia is having a bumpy rollout of its sales and services taxÔøΩfrom confusion at the shipping ports to concerns about profiteering. Services are taxed at 6%, covering sectors like information technology, hotels and restaurants, insurance, and telecommunication,while the sales tax can be either 5% or 10% depending on the product. Contributing to the confusion is the fact that the government hasn't finalized the list of services that are subject to sales and service tax, and companies are still lobbying to be included in the list of exemptions.

Japan is considering giving carmakers fiscal support including tax breaks to offset the impact from trade frictionswith the United States and a sales tax hike planned for next year, government sources told Reuters onwednesday.

The Swiss parliament approved a corporate tax overhaul onwednesday that it hopeswill stave off the danger of it landing on a European Union blacklist of uncooperative tax havens.

Corporate China is bracing for a big tax increase as the government steps up collection of payroll levies that fund the country's social insurance programs, after years of allowing smaller companies to shirk their obligations.

U.K. multinationals have revealed a possible $1.1 billion tax bill resulting from an EU state aid probe into a U.K. tax relief, just months before the island nation exits the bloc. So far 21 companies have revealed, in regulatory filings, 877 million pounds ($1.1 billion) in potential tax liabilities from the investigation according to data compiled by Bloomberg Tax.

The OECD's plan to combat corporate tax avoidance has brought about a new level of "tax craziness," marked by countries taking unilateral measures, Nishana Gosai, former head of transfer pricing at the South African Revenue Service said. The result is more tax disputes and tax competition, as individual countries are less unified and opting for unilateral measures.

MTN Group Ltd., Africa's largestwireless operator, claims the Nigerian Attorney General's office exceeded its powerswhen it demanded MTN pay about $2 billion in back taxes. The South African mobile-phone company has been rocked twice in the past twoweeks in its biggest market,with the central bank and the attorney general accusing MTN of illegally repatriating funds and failing to pay the back taxes.

The Indian tax authority faces a high bar to convince an international panel of the merits of its claim against Cairn Energy Plc. The retroactive nature of India's tax claim alongwith mixed messages from the country's authorities have the potential towork in Cairn's favor.

IFA's panel on EU developmentswas critical of the EU's digital taxation package and state aid aggression.

It is common for OECD member countries to consider investments in tax havens and preferential tax regimes (PTR) as harmful practices that may enhance tax evasion. These regimes attract investment that allow taxpayers to shift/shelter profits in such jurisdictions. To counter such practices, Mexico and many other OECD countries have enforced various anti-avoidance rules under their legislations.

Former U.S.Federal Reserve chair Janet Yellen has spoken out in support of a carbon tax as the most effective and efficientway to reduce US greenhouse gas emissions. Yellen has joined the Climate Leadership Council, a bipartisan group pushing for the US to address the threat of globalwarming by introducing a carbon tax,with revenues returned to the public in dividend payments.

Greek Prime Minister Alexis Tsipras unveiled plans for tax cuts and pledged spending to heal years of painful austerity, less than a month after Greece emerged from a bailout program financed by its EU partners and the IMF. One of the proposed cuts includes a phased reduction of corporate tax to 25% from 29% next year.

Virtual currencies could become a new "virtual tax haven," posing a major risk for governments according to a European Parliament report. The reportwarns that virtual currency poses a "direct challenge" to national sovereignty and may undermine the tax base even though users enjoy the benefits provided by tax revenues.

Moving debt overseas may seem like a good idea for highly leveraged U.S multinationals looking to soften the blow from new TCJA limits on the amount of interest they can deduct from their taxable income. But the financial gymnastics involved in making those corporate deals may not beworth the effortÔøΩespecially as more countries limit the tax advantages of debt.

With President Donald Trump poised to hit Chinawith tariffs on another $200 billion goods, China has announced measures to support some of the exporters targeted. The Ministry of Finance said itwill raise export rebate rates for 397 goods ranging from lubricants to children's books, meaning that firms shipping these products abroadwill pay less value-added tax.

Bain & Co.will set aside millions of dollars in fees from South Africa's tax authority after evidence that its advice on a restructuringwas used to pursue a political vendetta by an ally of the former president, Jacob Zuma.

Under the EU's proposed tax on big Internet companies, Ireland stands to lose revenue as it is the locationwhere many digital companies route their profits. However, France iswilling to considerways to compensate Ireland for possible lost revenue.

Germany's Finance Minister Olaf Scholz has taken a cautious approach to the EU decision to raise levies on large digital firms and advocates the need for a thorough debate on the matter, even though an agreement could be made by the end of the year. A compromise has been proposed by French Finance Minister Bruno Le Maire,whichwould add "a sunset clause" to the European Union tax.

The IRS is launching five new compliance campaigns, including one thatwill focus on large deductions claimed on income tax returns of a foreign corporation, as part of a movement toward issue-based tax examinations.

In a Sep. 4 letter to the IRS, United Airlines Inc. requested the IRS to tell taxpayers how to determinewhether the service of transporting someone between the U.S. and some other country counts as foreign-derived deduction-eligible income,which is used in the calculation of foreign-derived intangible incomeÔøΩofwhich multinationals can take a 37.5% deduction until 2025.

Beijing has back-tracked on a tax hike for high-networth investors after backlash from the fund industry. The reversal is likely a relief towealthy Chinese venture capitalistswho faced as much as a 15% retrospective income tax hike. This action could also signal the government's increasingwillingness to listen to industry opinionswhen setting tax policy.

The EUwill try in the coming month to settle the technical and legal issues threatening the bloc's proposed 3% tax aimed at large Internet companies,with the goal of having a final accord by the end of the year.

In its opinion released on August 16, 2018, the Eighth Circuit remanded the decision of the U.S. Tax Court in Medtronic v. Commissioner,with instructions to the court to make several specific factual findings, including the review of several comparability factors that the appeals court deemed to have been not analyzed sufficiently. This article makes an argument for the appointment of a master in order to perform a proper transfer pricing analysis.

Malta's prime minister is doubling down on the booming blockchain industry in a bid to diversify the European Union's smallest economy.with tax rates as low as 5%, Malta recently passed laws that seek to ease the trading and issuance of cryptocurrencies in order to attract digital companies to set up shop on the island.

South Africa is struggling to meet this year's 1.345 trillion ($89 billion) rand tax collection target as it copeswith the challenge of adopting the OECD's global anti-avoidance reforms, South African Revenue Service Acting Commissioner Mark Kingon said.

Global tax authorities are scrutinizing an estimated $75bn of capital held by the largest US companies, highlighting international regulators' increasingly aggressive approach towards tackling corporate tax avoidance and evasion. Baker McKenzie polled 150 members of the Fortune 500 index of the largest US companies and found that between them, $23bn of revenue is subject to tax disputeswith international authorities.

In this article, the author examines the latest amendments to the EU directive on administrative cooperation, focusing on the new mandatory disclosure rules for tax planning schemes.

Fortune 500 companies are contendingwith billions in tax under dispute, a growth-threatening trend linked to complexity surrounding how corporate value is defined in an increasingly digital economy, according to a new survey.

An interim digital taxwould be difficult to implement in the European Union before the arrival of the OECD's report on taxation of the digital economy in 2020, an OECD adviser told EU lawmakers.

Nikolai Astrup, Norway's minister for international development, and Pascal Saint-Amans, director of the OECD's Centre for Tax Policy and Administration, announced September 10 that Norway and the OECD have agreed to provide approximately ÔøΩ4.6 million in financial support over four year so that developing countries can establish effective tax systems.

German Finance Minister Olaf Scholz surprised his European counterparts during their informal meeting by asking for progress on base erosion and profit shifting.

The OECD is aiming for a multilateral consensus on international tax, but there is still disparity in how tax authorities approach the tax treatment of intra-group financial transactions. Some countries are bound to disagreewith the attempts to forge such a consensus. Glenn Price, Vodafone's head of international tax, speaks to ITR about the risks of double taxation in aworldwithout a consensus on how to tax intra-group transactions.

The Bulgarian Ministry of Finance has released for public consultation a draft bill introducing several tax amendmentswhose aim is to bring the domestic regulation in linewith the EU anti-tax-avoidance directive.

This Articlewas prepared for a symposium on 'What's Law Got Do Towith It? Examining the Role of Law in a Changingworld.' The OECD and G20 Base Erosion and Profits (BEPS) project represents the most comprehensive global cooperative effort to date to inhibit aggressive international tax planning and offshore tax evasion ÔøΩ alongwith related revenue losses.

During the annual OECD seminar at the IFA congress, the chairman said "We are at nothing less than in a state of crisis in international tax," referring to the prospect of difficult negotiations over the allocation of taxing rights.