2013
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Transfer Pricing One of Three Work Areas Under OECD Project, Treasury Official Says
A U.S. Treasury official said March 27 that thework of the Organization for Economic Cooperation and Development's base erosion and profit shifting (BEPS) project has been organized into three clusters—base erosion, jurisdiction to tax, and transfer pricing.
For the article, go here. (Subscription required.)
For the article, go here. (Subscription required.)
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Survey: Majority of Multinationals Expect Worldwide Increase in Transfer Pricing Audits
Multinational corporations are gearing up for increased levels of scrutiny of their transfer pricing policies, and a large majority admit they do not have a clear grasp of how they are treating their intangible assets for tax purposes, according to a survey released March 27 by consulting firm Taxand.
For the article, go here. (Subscription required.)
For the article, go here. (Subscription required.)
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How to Unlock That Stashed Foreign Cash
Here's a novelway to drive up a company's share price: Pay billions of dollars in additional taxes.
Deliberately bloating your own tax bill isnt a common strategy, of course. To the contrary, an army of lawyers, accountants, lobbyists and executives is atwork throughout corporate America, finding legalways to minimize taxes and retain profits. One common approach for multinational corporations is to stash foreign earnings in low-tax countries, keeping the money out of the reach of the Internal Revenue Service.
For the article, go here.
Deliberately bloating your own tax bill isnt a common strategy, of course. To the contrary, an army of lawyers, accountants, lobbyists and executives is atwork throughout corporate America, finding legalways to minimize taxes and retain profits. One common approach for multinational corporations is to stash foreign earnings in low-tax countries, keeping the money out of the reach of the Internal Revenue Service.
For the article, go here.
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How Firms Tap Overseas Cash
U.S. companies say much of their cash is trapped overseas. But that doesn't mean they can't put it to use at home.
With some careful structuring, companies including Hewlett-Packard Co. HPQ+1.10% and General Electric Co. GE+0.09% have set upways to borrow money from their foreign subsidiaries. In some cases, the firms use the funds for daily operations or to buy back stock.
The loans have to be short term. Yetwhen the borrowing is carefully set up to complywith Internal Revenue Service rules and U.S. auditing standards, the funds can be used over and overwithout incurring taxes.
For the article, go here.
With some careful structuring, companies including Hewlett-Packard Co. HPQ+1.10% and General Electric Co. GE+0.09% have set upways to borrow money from their foreign subsidiaries. In some cases, the firms use the funds for daily operations or to buy back stock.
The loans have to be short term. Yetwhen the borrowing is carefully set up to complywith Internal Revenue Service rules and U.S. auditing standards, the funds can be used over and overwithout incurring taxes.
For the article, go here.
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Big Business Spars Over Rewriting Tax Code
The idea of overhauling the corporate-tax code is greetedwith applause by nearly all U.S. big businesses. That unanimity breaks down once the conversation turns to details.
One sign of that is the splintering of big companies into different groups promoting different strains of tax reform. High-tech, pharmaceutical and consumer-products companies, for instance, are eager to change theway overseas profits are taxed. Big domestic retailers, banks and telecommunications firms, in contrast, are more eager to see the corporate-tax rate come down.
For the article, go here.
One sign of that is the splintering of big companies into different groups promoting different strains of tax reform. High-tech, pharmaceutical and consumer-products companies, for instance, are eager to change theway overseas profits are taxed. Big domestic retailers, banks and telecommunications firms, in contrast, are more eager to see the corporate-tax rate come down.
For the article, go here.
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BEPS Solutions Should Target Source of Problems, Rolfes Says
The Treasury Department supports the objectives of the OECD's project on base erosion and profit shifting (BEPS), but itwants to ensure that any suggested solutions target the source of the problems and don't go beyond the scope of the BEPS project, according to Treasury International Tax Counsel Danielle Rolfes.
Speaking at a March 27 Bloomberg BNA Tax Management luncheon inwashington sponsored by Buchanan Ingersoll & Rooney PC, Rolfes said Treasury agrees that some of the international tax rules are outdated and need to be overhauled to better alignwith today's global economy.
For the article, go here. (Subscription required.)
Speaking at a March 27 Bloomberg BNA Tax Management luncheon inwashington sponsored by Buchanan Ingersoll & Rooney PC, Rolfes said Treasury agrees that some of the international tax rules are outdated and need to be overhauled to better alignwith today's global economy.
For the article, go here. (Subscription required.)
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"Internal Ownership Structures of Multinational Firms"
This paper is the first comprehensive analysis of the foreign ownership structures of U.S. multinational firms. Though the vast majority of foreign subsidiaries are ultimatelywholly-owned by their U.S. parents, the authors show that theway these subsidiaries are arrangedwithin ownership structures varies considerably from simple to highly complex, and that much of this variation cannot be explained by basic firm characteristics, such as size, age, industry, or diversification.
For the paper, go here.
For the paper, go here.
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For Dow 30, tax burden isn't what it used to be
Awashington Post analysis found that in the late 1960s and early 1970s, companies listed on the current Dow 30 routinely cited U.S. federal tax expenses thatwere 25 to 50 percent of theirworldwide profits. Now, most are reporting less than half that share.
The reason is not simply a few loopholes tucked deep in the tax code. It's far bigger: the slow but steady transformation of the American multinational after years of globalization. Companies now have an unprecedented ability to move their capital around theworld, and the corporate tax code has not kept upwith the changes.
For the article, go here.
The reason is not simply a few loopholes tucked deep in the tax code. It's far bigger: the slow but steady transformation of the American multinational after years of globalization. Companies now have an unprecedented ability to move their capital around theworld, and the corporate tax code has not kept upwith the changes.
For the article, go here.
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Shay Proposals Would Strengthen Source-Country and Residence-Country Taxation
Stephen Shay, former Treasury deputy assistant secretary for international tax affairs, on March 21 argued that international tax rules must be reformed to address intermediaries that have little economic substance, and he outlined his proposals for doing that by strengthening both source-country and residence-country tax rules.
For the article, go here. (Subscription required.)
For the article, go here. (Subscription required.)
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HM Treasury - Budget 2013 Statement
UK Chancellor of the Exchequer George Osborne delivered the 2013 Budget Statement on March 20.
For the statement, go here.
For the statement, go here.
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Trading Clamps Spur Lobby Effort
High-speed trading firms and exchanges are being forced into the lobbying game by taxes on trades in Europe, proposals for similar levies in the U.S. and beefed-up regulatory scrutiny.
While still far less conspicuous than big banks and their legions of arm-twisters, executives and lobbyists for trading firms and exchanges have stepped up their behind-the-scenes efforts to avert specific rules and legislation, say staff members in Congress and agencies.
For the full article, go here.
While still far less conspicuous than big banks and their legions of arm-twisters, executives and lobbyists for trading firms and exchanges have stepped up their behind-the-scenes efforts to avert specific rules and legislation, say staff members in Congress and agencies.
For the full article, go here.
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Treasure Island Trauma
A couple of years ago, the journalist Nicholas Shaxson published a
fascinating, chilling book titled "Treasure Islands,"which explained
how international tax havens --which are also, as the author pointed
out, "secrecy jurisdictions"where many rules don't apply
-- undermine economies around theworld. Not only do they bleed
revenues from cash-strapped governments and enable corruption; they
distort the flow of capital, helping to feed ever-bigger financial
crises.
For the full article, go here.
For the full article, go here.
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Pop (or Is That BEPS?) Goes the Weasel
Christopher E. Berginwrites that addressing base erosion and profit shifting may be the nextweapon in thewar on tax avoidance schemes, and that it comes not a moment too soon.
For the article, go here. (Subscription required.)
For the article, go here. (Subscription required.)
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What You Should Know about the RATE Coalition's Quest for a Lower Corporate Tax Rate
Thisweek, members of Congresswill receive a visit from the tax vice presidents of major corporations that have come together in the so-called Reforming America's Taxes Equitably (RATE) Coalition, a corporate lobbying group pressing lawmakers to reduce the corporate tax rate.
The first thing you should know about the RATE Coalition is that their rhetoric about the U.S. having a high corporate tax is nonsense. The U.S. statutory corporate income tax rate of 35 percent,which RATEwants to reduce, is not as important as the effective corporate tax rate the percentage of profits that corporations actually pay in taxes after accounting for all the loopholes and breaks that lower their tax bills.
For the Citizens for Tax Justice release, go here.
The first thing you should know about the RATE Coalition is that their rhetoric about the U.S. having a high corporate tax is nonsense. The U.S. statutory corporate income tax rate of 35 percent,which RATEwants to reduce, is not as important as the effective corporate tax rate the percentage of profits that corporations actually pay in taxes after accounting for all the loopholes and breaks that lower their tax bills.
For the Citizens for Tax Justice release, go here.
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Business Roundtable Releases Global Competitiveness Tax-Rate Bracket
The Campaign for Home Court Advantage,which compares countrieswith the highest combined national and sub-national corporate tax rates and the largest economies, shows that the "outdated, broken" U.S. corporate tax system causes a competitive disadvantage and should be modernized, according to a March 20 Business Roundtable release.
For the release, go here.
For the release, go here.
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Cut Corporate Tax Loopholes, Multiple Taxation of Dividends, OECD Tells France
France should reduce loopholes for its corporate tax rate, and it should reduce multiple taxation of dividends as part of a thorough simplification of its tax system, according to a report released March 19 by the Organization for Economic Cooperation and Development.
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For the article, go here. (Subscription required.)
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Lawmakers Request Meeting With Treasury to Discuss U.S. Financial Transaction Tax
Rep. Peter A. DeFazio, D-Ore., and Rep. Keith Ellison, D-Minn., have requested a meetingwith Treasury to discuss the merits of a financial transaction tax in the United States, seeking to explain their legislative proposals and demonstrate how the tax can raise substantial revenue and provide a simpleway to reduce excessive risk onwall Street.
For the letter, go here. (Subscription required.)
For the letter, go here. (Subscription required.)
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BEPS Action Plan Will Provide a Sense of Direction, OECD Tax Director Says
The OECD's coming action plan on base erosion and profit shifting (BEPS)will not include firm measures to implement reform, but itwill provide a valuable sense of direction, Pascal Saint-Amans, director of the OECD's Centre for Tax Policy and Administration, said March 19.
For the article, go here. (Subscription required.)
For the article, go here. (Subscription required.)
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OECD official discusses BEPS project at TEI meeting
Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration, discussed the OECD's project on base erosion and profit-shifting (BEPS) at the March 19 meeting of the Tax Executives Institute (TEI). Attached is his TEI presentation.
For presentation go here.
For presentation go here.
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Have U.S. Multinationals Found a New Incentive to Repatriate?
In a letter to the editor of Tax Notes, H. David Rosenbloom comments on a recent rise in U.S. tax receipts from U.S. multinationalswith substantial holdings offshore.
For the letter, go here. (Subscription required.)
For the letter, go here. (Subscription required.)
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OECD Enables Companies to Avoid $100 Billion in Taxes
Headquartered in a former Rothschild chateau in an affluent Parisian neighborhood, the Organization for Economic Cooperation and Development is best known for earnest conferences on economic and social policy.
With little outside attention, it also plays a pivotal role enabling global corporations such as Google Inc. (GOOG), Hewlett- Packard Co. and Amazon.com Inc. (AMZN) to dodge taxes by shifting profits into offshore subsidiaries, costing the U.S. and Europe more than $100 billion a year.
OECD officials have been digging themselves deeper and deeper into a hole by blindly pursuing a mistaken approach that allows multinationals to avoid taxes, said Sol Picciotto, an emeritus professor of law at Lancaster University in the U.K.
For the article, go here.
With little outside attention, it also plays a pivotal role enabling global corporations such as Google Inc. (GOOG), Hewlett- Packard Co. and Amazon.com Inc. (AMZN) to dodge taxes by shifting profits into offshore subsidiaries, costing the U.S. and Europe more than $100 billion a year.
OECD officials have been digging themselves deeper and deeper into a hole by blindly pursuing a mistaken approach that allows multinationals to avoid taxes, said Sol Picciotto, an emeritus professor of law at Lancaster University in the U.K.
For the article, go here.
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OECD and BIAC on why revisiting tax rules may help build public trust
Tax is not a struggle to the death, say Pascal Saint-Amans, director of the OECD's Centre for Tax Policy and Administration andwill Morris, chair of the OECD's business advisory branch (BIAC) tax committee and global tax policy director for GE.
For the article, go here. (Registration required.)
For the article, go here. (Registration required.)
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Rough Justice on Foreign Tax Credits
New York lawyers had a virtual trip towashington on March 14,when Senate Finance Committee International Tax Counsel Jefferson VanderWolk visited the International Tax Institute. VanderWolk, for his part, got a taste of New York lawyers' expectations that their policy advicewill be adhered to.
The question at handwas the use of foreign law in U.S. tax law, specifically, reliance on foreign legal conclusions. A brief history: foreign law has been relevant forever, on simple factual issues like did the taxpayer pay a foreign tax. But only in recent years has U.S. law explicitly relied on foreign legal conclusions for U.S. results.
For the article, go here. (Subscription required.)
The question at handwas the use of foreign law in U.S. tax law, specifically, reliance on foreign legal conclusions. A brief history: foreign law has been relevant forever, on simple factual issues like did the taxpayer pay a foreign tax. But only in recent years has U.S. law explicitly relied on foreign legal conclusions for U.S. results.
For the article, go here. (Subscription required.)
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Lawmakers unified in call to fix international tax system for business Read more: http://www.politico.com/story/2013/03/lawmakers-unified-in-call-to-fix-international-tax-system-for-business-88911.h
Corporate America doing business abroad needs more than a once-in-a-generation repatriation to bring profits home to the United States at low tax rates it needs a better international tax system, a group of bipartisan lawmakers said Friday.
For the article, go here.
For the article, go here.
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International Tax Planner Makes Tax Reform Recommendations
In March 3 comments, international tax planner Jeffery M. Kadet made several recommendations to the Houseways and Means Committee's International Tax Reformworking Group on reforming the tax treatment of accumulated deferred foreign income and on improving the proposed territorial tax system.
For the full text of the comments, go here. (Subscription required.)
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International Tax Planner Urges Against Shifting to Territorial Tax System
Instead of a territorial tax system, aworldwide full-inclusion systemwould better reduce incentives for multinational corporations to shift profits offshore by ending possible double nontaxation, Jeffery M. Kadet said in March 11 comments submitted to the Houseways and Means Committee's International Tax Reformworking Group.
For the full text of the comments, go here. (Subscription required.)
For the full text of the comments, go here. (Subscription required.)
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Worldwide Tax Reform: Reversing the Race to the Bottom
Jeffery M. Kadet recommends changes thatwould alter the behavior of multinational enterprises so that they discontinue, or at least curtail, their profit-shifting activities.
For the article, go here. (Subscription required.)
For the article, go here. (Subscription required.)
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Apple, Microsoft and Eight Other Corporations Each Increased Their Offshore Profit Holdings by $5 Billion or More in 2012
In recent years, multinational U.S.-based corporations have systematically accumulated staggering amounts of profits offshore. Much if not most of these profitswere actually earned in the United States but have been artificially shifted to foreign tax havens to avoid U.S. corporate income taxes.
For the Citizens for Tax Justice report, go here.
For the Citizens for Tax Justice report, go here.
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Overseas Tax Savings for U.S. Drugmakers Under Threat
The six biggest U.S. drugmakers avoided paying $7.05 billion in U.S. taxes last year by shifting their profits overseas. That's almost double the amount they saved using the same strategy 10 years earlier, according to data compiled by Bloomberg.
For years, multinationals such as Pfizer Inc. (PFE), Merck & Co. (MRK) and Johnson & Johnson (JNJ) have been moving ownership of patents and trademarks to subsidiaries in low- or no-tax countries. This has allowed drug companies, aswell as businesses in several other industries, to skirt paying U.S. taxes on sales of those products unless the money is returned home.
While the practice of shifting assets and profits overseas is legal, that could change. As the trend continues to grow in an erawhen the government is desperate to raise revenue, the strategy has drawn the ire of legislators eager to shut it down.
For the article, go here.
For years, multinationals such as Pfizer Inc. (PFE), Merck & Co. (MRK) and Johnson & Johnson (JNJ) have been moving ownership of patents and trademarks to subsidiaries in low- or no-tax countries. This has allowed drug companies, aswell as businesses in several other industries, to skirt paying U.S. taxes on sales of those products unless the money is returned home.
While the practice of shifting assets and profits overseas is legal, that could change. As the trend continues to grow in an erawhen the government is desperate to raise revenue, the strategy has drawn the ire of legislators eager to shut it down.
For the article, go here.
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Saint-Amans Urges Prompt Action To Solidify Support of Arm's-Length Principle
Wealthy countries urgently need to take coordinated action to answer questions about the effectiveness of the arm's-length principle if they are to avoid a breakdown in consensus around that mainstay of transfer pricing, the top tax official of the Organization for Economic Cooperation and Development said March 11.
Pascal Saint-Amans, head of the OECD's Center for Tax Policy and Administration, said the Group of 20 countries has asked the organization to come upwith an action plan by July to address mounting concerns over very low effective tax rates paid by some multinational companies, especially giant internet companies, and related questions about the continued effectiveness of OECD tax and transfer pricing rules.
For the article, go here. (Subscription required.)
Pascal Saint-Amans, head of the OECD's Center for Tax Policy and Administration, said the Group of 20 countries has asked the organization to come upwith an action plan by July to address mounting concerns over very low effective tax rates paid by some multinational companies, especially giant internet companies, and related questions about the continued effectiveness of OECD tax and transfer pricing rules.
For the article, go here. (Subscription required.)
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More U.S. Profits Parked Abroad, Saving on Taxes .
U.S. companies are making record profits. And more of the money is staying offshore, and untaxed.
Awall Street Journal analysis of 60 big U.S. companies found that, together, they parked a total of $166 billion offshore last year. That shielded more than 40% of their annual profits from U.S. taxes, though it left the money off-limits for paying dividends, buying back shares or making investments in the U.S. The 60 companieswere chosen for the analysis because each of them had held at least $5 billion offshore in 2011.
For the article, go here.
Awall Street Journal analysis of 60 big U.S. companies found that, together, they parked a total of $166 billion offshore last year. That shielded more than 40% of their annual profits from U.S. taxes, though it left the money off-limits for paying dividends, buying back shares or making investments in the U.S. The 60 companieswere chosen for the analysis because each of them had held at least $5 billion offshore in 2011.
For the article, go here.
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Congress: Deduction Curbs May Be Most Feasible Fix for Base Erosion
Michael C. Durst presents a method for controlling U.S. base erosion through statutory limitations on deductions for payments made to related parties in low- or zero-tax countries.
For the article, go here. (Subscription required.)
For the article, go here. (Subscription required.)
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Offshore Stockpiles of U.S. Firms Rise by $183 Billion in Past Year
The largest U.S.-based companies expanded their untaxed offshore stockpiles by $183 billion in the past year, increasing such holdings by 14.4 percent, according to data compiled by Bloomberg.
The build-up of offshore profits—totaling $1.46 trillion for the 83 companies in the analysis—is increasing because of incentives in the U.S. tax code for booking profits offshore and leaving them there. The stockpiles complicate attempts to overhaul the tax system as lawmakers look forways to bring the money home and discourage profit shifting.
For the article, go here. (Subscription required.)
The build-up of offshore profits—totaling $1.46 trillion for the 83 companies in the analysis—is increasing because of incentives in the U.S. tax code for booking profits offshore and leaving them there. The stockpiles complicate attempts to overhaul the tax system as lawmakers look forways to bring the money home and discourage profit shifting.
For the article, go here. (Subscription required.)
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New York University School of Law, Colloquium on Tax Policy and Public Finance : "Competitive Neutrality among Debt-Financed Multinational Firms"
Debt plays an important role in the financing of multinational corporations (MNCs). Interest expenses are typically tax-deductible in most corporate income tax systems, and there has been a growth of interest in recent years in the tax treatment of debt and its consequences. This paper discusses the optimal form that interest deductibility and associated restrictions should take in a multi-jurisdictional setting.
For the paper, go here.
For the paper, go here.
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Group wants to limit tax bite on overseas profits
A new lobbying coalition is in theworks to take on one of the thorniest issues associatedwith tax reform: the levies paid by massive U.S. corporations on profits generated offshore.
The group dubbed the LIFT America coalition is in the process of seeking corporate members and hasnt yet officially launched .
Partners, awashington public affairs firm, is handling the group's communications, recruitment and strategy.
Recruitment documents obtained by POLITICO indicate the group's primary focus is pressing Congress to shift the corporate tax regime to a so-called territorial system inwhich companies are shielded from paying tax on most if not all of the profits they earn in other countries.
The coalition's mission is toworkwith policymakers and other stakeholders to enact a modernized territorial 2.0 tax system that protects America's tax base, promotes increased U.S. investment and strengthens America's competitiveness in the global marketplace, according to the document.
For the article, go here.
The group dubbed the LIFT America coalition is in the process of seeking corporate members and hasnt yet officially launched .
Partners, awashington public affairs firm, is handling the group's communications, recruitment and strategy.
Recruitment documents obtained by POLITICO indicate the group's primary focus is pressing Congress to shift the corporate tax regime to a so-called territorial system inwhich companies are shielded from paying tax on most if not all of the profits they earn in other countries.
The coalition's mission is toworkwith policymakers and other stakeholders to enact a modernized territorial 2.0 tax system that protects America's tax base, promotes increased U.S. investment and strengthens America's competitiveness in the global marketplace, according to the document.
For the article, go here.
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Indian budget leaves taxpayers disappointed
Readwhy foreign investors have every reason to be disappointedwith Finance Minister P Chidambaram's eighth annual budget,which contained fewer business-friendly measures than expected.
For the article, go here.
For the article, go here.
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News Analysis: Thinking Outside the Patent Box
Promoting U.S. manufacturing is on every politician's lips. By "promoting" they mean offering a combination of tax benefits and training programs, but tax incentives are the main focus. Could patent boxes be an incentive thatwould help U.S. manufacturers?
For the article, go here. (Subscription required.)
For the article, go here. (Subscription required.)
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A new European tax on financial transactions is set to go global
A new European tax on financial transactionswill hit investorsworldwide including in the United Stateswho buy stocks and bonds of European companies, do businesswith European banks or engage in any of a broad array of financial activities.
The levy is due to take effect next year andwill be a significant money-raiser for the 11 nations that have signed on, bringing in an estimated $45 billion annually. The 11-nation group,whose members are mostly from the economically ailing euro currency union, includes major U.S. trading partners such as Germany and France. Britain is not participating.
For the story, go here.
The levy is due to take effect next year andwill be a significant money-raiser for the 11 nations that have signed on, bringing in an estimated $45 billion annually. The 11-nation group,whose members are mostly from the economically ailing euro currency union, includes major U.S. trading partners such as Germany and France. Britain is not participating.
For the story, go here.
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Collaboration on FATCA Sets Stage For Work on BEPS, Corwin Suggests
The speed and successwithwhich the United States developed regulations under the Foreign Account Tax Compliance Act (FATCA)—working in cooperationwith multiple foreign governments—may serve as a lesson in how to tackle international concerns about base erosion and profit shifting, a former U.S. Treasury official said Feb. 28.
Manal Corwin,who stepped down Feb. 21 as deputy assistant secretary, international tax affairs,with Treasury,was keynote speaker at a meeting of the U.S. and Netherlands branches of the Internal Fiscal Association.
Corwin told IFA members that the Organization for Economic Cooperation and Development's approach to its BEPS project—on a fast track to a June report to the Group of 20—could draw lessons from the development of guidance and collaborative agreements related to implementing FATCA, a 2010 law intended to stop cross-border tax evasion.
For the article, go here. (Subscription required.)
Manal Corwin,who stepped down Feb. 21 as deputy assistant secretary, international tax affairs,with Treasury,was keynote speaker at a meeting of the U.S. and Netherlands branches of the Internal Fiscal Association.
Corwin told IFA members that the Organization for Economic Cooperation and Development's approach to its BEPS project—on a fast track to a June report to the Group of 20—could draw lessons from the development of guidance and collaborative agreements related to implementing FATCA, a 2010 law intended to stop cross-border tax evasion.
For the article, go here. (Subscription required.)
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News Analysis: The OECD Confronts Zipless Tax Planning
Have a care for the OECD Centre for Tax Policy and Administration.
Since the OECD released its base erosion report, "Addressing Base Erosion and Profit Shifting," they have angry European and South Asian governments on one side, hurt multinationals on the other, and the United States in between trying to head off drastic unilateral measures. (For the report, see http://www.oecd.org/ctp/beps.htm.)
Representatives of multinationalswhinged that their careful tax planningwas derided as "schemes." Critics like your correspondent said the report didn't go far enough. And the complaining members and non-members are not going to be satisfied if four months from now, the OECD tells them to go back and amend their domestic laws if they don't like cross-border arbitrage.
For the article, go here. (Subscription required.)
Since the OECD released its base erosion report, "Addressing Base Erosion and Profit Shifting," they have angry European and South Asian governments on one side, hurt multinationals on the other, and the United States in between trying to head off drastic unilateral measures. (For the report, see http://www.oecd.org/ctp/beps.htm.)
Representatives of multinationalswhinged that their careful tax planningwas derided as "schemes." Critics like your correspondent said the report didn't go far enough. And the complaining members and non-members are not going to be satisfied if four months from now, the OECD tells them to go back and amend their domestic laws if they don't like cross-border arbitrage.
For the article, go here. (Subscription required.)
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India to Foreign Firms: Pay More Taxes
India's tax authorities are seeking billions of dollars from some of theworld's biggest multinational companies, saying that they haven't properly valued transactionswith their Indian subsidiaries.
The move threatens to sour foreign companies on Indiawhen it badly needs investment and is creating friction between tax authorities in India and the U.S.
The tensions reflect growing debate over how multinational companies should report their income through subsidiaries around theworld. Emerging economies such as Indiawant to grab a larger slice of such income,while the U.S. and other countrieswhere the multinationals are basedwant to keep profitsand taxesat home.
For the story, go here.
The move threatens to sour foreign companies on Indiawhen it badly needs investment and is creating friction between tax authorities in India and the U.S.
The tensions reflect growing debate over how multinational companies should report their income through subsidiaries around theworld. Emerging economies such as Indiawant to grab a larger slice of such income,while the U.S. and other countrieswhere the multinationals are basedwant to keep profitsand taxesat home.
For the story, go here.
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EU Commissioner Advocates Global Financial Transaction Tax
The new EU financial transaction tax (FTT) to be adopted by 11 EU member stateswill serve as an example that proves the viability of the tax in meeting policy and fiscal needs, EU Tax Commissioner Algirdas Šemeta said on February 25.
"We are ready to lead theway to show that the FTT can and should be appliedwidely," said Šemeta. "I believe that the group of 11 member stateswill grow. Several others have already expressed an interest in joining the FTT zone in the future and I also retain hope that through the EU's example a global FTTwill also be a reality sometime."
For the article, go here. (Subscription required.)
"We are ready to lead theway to show that the FTT can and should be appliedwidely," said Šemeta. "I believe that the group of 11 member stateswill grow. Several others have already expressed an interest in joining the FTT zone in the future and I also retain hope that through the EU's example a global FTTwill also be a reality sometime."
For the article, go here. (Subscription required.)
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Who's Afraid of Inversion?
Many large U.S. companies avoid U.S. taxes by using accounting gimmicks to shift profits legitimately made in the U.S. to offshore tax havens that levy little to no tax. The most recent academic estimates put the revenue lost due to corporate tax haven abuse at $90 billion annually.According to a 2008 study by the Government Accountability Office, at least 83 of the top 100 publicly traded companies in the United States maintain subsidiaries in offshore tax havens.
As Congress considers closing the loopholes that allow aggressive offshore profit shifting, lobbyists for some companies are resorting to blackmail:If you prevent us from using offshore tax havens to avoid paying taxes,we may re-register our company outside the country or rearrange our corporate structurewith a foreign headquarters to avoid U.S. taxes altogether. Dont messwith our loopholes orwell become a company based in a tax haven like the Cayman Islands!
For the report, go here.
As Congress considers closing the loopholes that allow aggressive offshore profit shifting, lobbyists for some companies are resorting to blackmail:If you prevent us from using offshore tax havens to avoid paying taxes,we may re-register our company outside the country or rearrange our corporate structurewith a foreign headquarters to avoid U.S. taxes altogether. Dont messwith our loopholes orwell become a company based in a tax haven like the Cayman Islands!
For the report, go here.
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A Tax That May Change the Trading Game
To the dismay of the United States government not to mentionwall Street much of Europe seems poised to begin taxing financial trading as soon as next year.
For the article, go here.
For the article, go here.
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Insight: In Europe's tax race, it's the base, not the rate, that counts
The amount of profit a country taxes - commonly known as the tax base - has been shrinking for multinationals in many European countries over the past decade or so, experts say, a fact easily lost in talk about headline rates. Countries have found that reducing the base - agreeing to not tax some profits that a company makes - helps attract firms and, they hope, jobs. But as recent protests against corporate tax avoidance in Britain highlight, voters are beginning to question that tactic. If taxpayers see governments helping companies to avoid taxes, it could hurt their ability to tax everyone else.
For the article, go here.
For the article, go here.
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OECD Tries to Fix Income Shifting
With its new report, "Addressing Base Erosion and Profit Shifting," the OECD promises to do something about the income-shifting problem and meet its critics. (For the report, see http://www.oecd.org/ctp/beps.htm.)
The report contains some astonishing admissions against interest about the causes of the zero-tax results under the current international system. The significance of the admissions by the erstwhile defenders of the faith cannot be understated.
"The existing system (arm's length) does not alwayswork as it should," Centre Director Pascal Saint-Amans told Tax Analysts. "I am much more interested in focusing onwhat can be done to the existing system,without taking anything of this current system for granted."
Putting the best face on it, the report is a baby step toward practical proposals --which are supposed to be ready for the G-20 meeting in a mere four months! The report provides little in theway of proposals, and it leaves the readerworrying that the OECDwill jump in front of the parade and carry onwith its useless projects.
For the article, go here. (Subscription required.)
The report contains some astonishing admissions against interest about the causes of the zero-tax results under the current international system. The significance of the admissions by the erstwhile defenders of the faith cannot be understated.
"The existing system (arm's length) does not alwayswork as it should," Centre Director Pascal Saint-Amans told Tax Analysts. "I am much more interested in focusing onwhat can be done to the existing system,without taking anything of this current system for granted."
Putting the best face on it, the report is a baby step toward practical proposals --which are supposed to be ready for the G-20 meeting in a mere four months! The report provides little in theway of proposals, and it leaves the readerworrying that the OECDwill jump in front of the parade and carry onwith its useless projects.
For the article, go here. (Subscription required.)
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Will Tax Avoidance in the U.K. Go Out of Style?
A January 31 hearing in the House of Commons focused on the role played by the Big Four in tax avoidance in the United Kingdom. The hearings raised the issue of the morality of aggressive tax planningwhile bringing to light significant differences between the United States and the United Kingdom on the boundaries of acceptable tax practice.
For the article, go here. (Subscription required.)
For the article, go here. (Subscription required.)
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Enduring Charms: A brief history of tax havens
The history of offshore finance isriddledwith myths and legends, says Ronen Palan, a haven-watcher. The termtax haven did not enter the language until the 1950s, but the concept originated in the late 19th century,when the American state of New Jersey eased its business-registration and tax laws to drum up incorporation revenues during a fiscal squeeze. A few years later Delaware copied its methods. These early moveswere driven bywall Street lawyers.
For the article, go here.
For the article, go here.
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The OFCs Economic Role: The good, the bad and the Ugland
Detractors describe the offshore phenomenon as one of the more noxious features of financial globalisation that is now, mercifully, in retreat. The half-dozen senior lawyers gathered in thewood-panelled boardroom of Ugland House, the head office of Maples and Calder in George Town, the Cayman Islands capital, have heard it all before, and they beg to disagree. Offshore centres oil the financial interface between larger economies, insists Alasdair Robertson of Maples. Grant Stein ofwalkers, another Cayman firm, thinks of it as the plumbing that connects the global financial system. His peers nod vigorously. At times they seem touchy, but then Ugland House, the registered address of more than 18,000 companies, is held up by critics as a symbol of all that iswrongwith OFCs.
For the article, go here.
For the article, go here.
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