2013
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Brussels probes multinationals tax deals
By Alex Barker in Brussels, Jamie Smyth in Dublin and Matt Steinglass in Amsterdam (Financial Times)
Brussels is probing Ireland, Luxembourg and the Netherlands over their tax dealswith multinationals paving theway potentially for a formal investigation into illegal sweeteners.
Europes top competition authority has asked the governments to explain their system of tax rulings and give details of assurances given to several specific companies including Apple and Starbucks according to peoplewho have seen the request.
For the article, go here.
Brussels is probing Ireland, Luxembourg and the Netherlands over their tax dealswith multinationals paving theway potentially for a formal investigation into illegal sweeteners.
Europes top competition authority has asked the governments to explain their system of tax rulings and give details of assurances given to several specific companies including Apple and Starbucks according to peoplewho have seen the request.
For the article, go here.
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Congressman Delaney's 'Rebuttal' on His Proposed Tax Amnesty for Offshore Corporate Profits Continues to Misinform
by Citizens for Tax Justice
In July, a letter signed by 30 national organizations and a report from Citizens for
Tax Justice (CTJ) bothwarned members of Congress about a proposal from
Congressman John Delaney of Maryland thatwould have the effect of rewarding
corporations that use offshore tax havens to avoid U.S. taxes. Rep. Delaneys staff
respondedwith a rebuttal that is itself based on misinformation about corporate tax law and about the likely effects of the proposal,whichwould provide a tax amnesty for offshore profits (often euphemistically called a repatriation holiday) for corporations that agree to finance an infrastructure bank.
For the report, go here. For the release, go here.
In July, a letter signed by 30 national organizations and a report from Citizens for
Tax Justice (CTJ) bothwarned members of Congress about a proposal from
Congressman John Delaney of Maryland thatwould have the effect of rewarding
corporations that use offshore tax havens to avoid U.S. taxes. Rep. Delaneys staff
respondedwith a rebuttal that is itself based on misinformation about corporate tax law and about the likely effects of the proposal,whichwould provide a tax amnesty for offshore profits (often euphemistically called a repatriation holiday) for corporations that agree to finance an infrastructure bank.
For the report, go here. For the release, go here.
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Washington D.C. talk on corporate and international tax reform
by Daniel Shaviro (Start Making Sense; Dan Shaviro blogspot)
Yesterday I Acela'd from New York towashington D.C. and back again, so that I could spend most of myworking day at a conference, held on Capital Hill in the Rayburn House Office Building,entitled The Federal Income Tax at 100: How Didwe Get Here andwhere Shouldwe Go Next? A Forum of Tax Policy Experts and Tax Policy Makers.
My mission at the conferencewas to give a 15-minute talk on corporate and international tax reform. In the intro for our panel (which discussed reform optionswithin the existing federal income tax generally), the moderator expressed the hope thatwewould point theway forward, assuming that more dramatic reform options (discussed by the preceding panel)were unavailable. But my talk focused instead onwhy it is so hard to specify the bestway forward on corporate and international tax reform, even in the absence of political obstacles.
For the blog post, go here.
Yesterday I Acela'd from New York towashington D.C. and back again, so that I could spend most of myworking day at a conference, held on Capital Hill in the Rayburn House Office Building,entitled The Federal Income Tax at 100: How Didwe Get Here andwhere Shouldwe Go Next? A Forum of Tax Policy Experts and Tax Policy Makers.
My mission at the conferencewas to give a 15-minute talk on corporate and international tax reform. In the intro for our panel (which discussed reform optionswithin the existing federal income tax generally), the moderator expressed the hope thatwewould point theway forward, assuming that more dramatic reform options (discussed by the preceding panel)were unavailable. But my talk focused instead onwhy it is so hard to specify the bestway forward on corporate and international tax reform, even in the absence of political obstacles.
For the blog post, go here.
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G20 communiqué drives BEPS action forward but implementation will be anightmare
by Matthew Gilleard - ITR
G20 leaders met in St. Petersburg lastweek,with international taxation once again high on the agenda.
For the story, go here.
G20 leaders met in St. Petersburg lastweek,with international taxation once again high on the agenda.
For the story, go here.
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Vodafones 3.8% Taxes on $130 Billion Payday Fuels U.K. Dispute
by Amy Thomson (Bloomberg)
Vodafone Group Plc (VOD)'s $130 billion payout from exiting its Verizonwireless venture is largely passing the tax man by.
U.K. politicians have grilled Google Inc. and Amazon.com Inc. executives on their taxes, and Starbucks Corp. (SBUX) agreed in December to pay a voluntary tax to head off a boycott threat. Vodafone, based in Newbury, England, structured the deal through its holding company in the Netherlands,where it benefited from an exemption rule leaving itwith no taxes due there, either.
The lack of British tax ispretty concerning, Margaret Hodge, chairwoman of the House of Commons Public Accounts Committee, said today on BBC radio as she asked tax officials to review the transaction. Vodafonehas a duty not to aggressively avoid tax, but to pay its fair due to British taxpayers out of the substantialwindfall it is making.
for the story, go here.
Vodafone Group Plc (VOD)'s $130 billion payout from exiting its Verizonwireless venture is largely passing the tax man by.
U.K. politicians have grilled Google Inc. and Amazon.com Inc. executives on their taxes, and Starbucks Corp. (SBUX) agreed in December to pay a voluntary tax to head off a boycott threat. Vodafone, based in Newbury, England, structured the deal through its holding company in the Netherlands,where it benefited from an exemption rule leaving itwith no taxes due there, either.
The lack of British tax ispretty concerning, Margaret Hodge, chairwoman of the House of Commons Public Accounts Committee, said today on BBC radio as she asked tax officials to review the transaction. Vodafonehas a duty not to aggressively avoid tax, but to pay its fair due to British taxpayers out of the substantialwindfall it is making.
for the story, go here.
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Latin American Tax Newsalert: 2014 Mexican Tax Reform proposals eliminate tax consolidation and flat tax, limit maquiladora regime and introduce a new 10% dividend tax
by PwC
Yesterday, the Executive Branch of the Mexican government presented its 2014 Tax Reform package to Congress. The package's most significant proposalswould eliminate the tax consolidation regime, eliminate the Flat Tax (IETU), provide a more limited maquiladora regime, retain the 30% income tax ratewithout reduction, introduce a new corporate-level tax on dividends, limit the deduction of certain related party payments, and eliminate the statutory audit (dictamen fiscal) requirement.
For the PwC Newsalert, go here.
Yesterday, the Executive Branch of the Mexican government presented its 2014 Tax Reform package to Congress. The package's most significant proposalswould eliminate the tax consolidation regime, eliminate the Flat Tax (IETU), provide a more limited maquiladora regime, retain the 30% income tax ratewithout reduction, introduce a new corporate-level tax on dividends, limit the deduction of certain related party payments, and eliminate the statutory audit (dictamen fiscal) requirement.
For the PwC Newsalert, go here.
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In Memphis, Baucus, Camp Call for Fairer, Simpler Tax Code that Makes U.S. More Competitive
by Houseways & Means Committee (website)
Senate Finance Committee Chairman Max Baucus (D-Mont.) and Houseways and Means Committee Chairman Dave Camp (R-Mich.) met todaywith family farmers and local business leaders in Memphis, Tennessee, to talk about the critical need to overhaul the nation's tax code in order to boost its fairness, reduce complexity and improve the economy.
“Plain and simple, the tax code is broken. Fixing it is the bestway to spark long-term growth in our economy, create good-paying jobs, and make families lives easier, Baucus and Camp said in a joint statement.Whether it's a chat over coffee in a family's kitchen or a meetingwith business leaders and their employees,were hearing the same thing: the American peoplewant a new tax code that's fair and simple. That'swhat tax reform is about.
For the release, go here.
Senate Finance Committee Chairman Max Baucus (D-Mont.) and Houseways and Means Committee Chairman Dave Camp (R-Mich.) met todaywith family farmers and local business leaders in Memphis, Tennessee, to talk about the critical need to overhaul the nation's tax code in order to boost its fairness, reduce complexity and improve the economy.
“Plain and simple, the tax code is broken. Fixing it is the bestway to spark long-term growth in our economy, create good-paying jobs, and make families lives easier, Baucus and Camp said in a joint statement.Whether it's a chat over coffee in a family's kitchen or a meetingwith business leaders and their employees,were hearing the same thing: the American peoplewant a new tax code that's fair and simple. That'swhat tax reform is about.
For the release, go here.
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Mexican President Announces Tax Overhaul --- Pena Nieto Offers Social-Security System, Unemployment Insurance in Exchange for Higher Levies to Boost Nonoil Revenue
by Juan Montes and Anthony Harrup
President Enrique Pena Nieto, facing protests over his attempts to revamp Mexico's economy, unveiled a long-awaited tax overhaul on Sunday, promising to create a universal social-security system and unemployment insurance in exchange for a series of tax increases that seek to boost the government's nonoil revenue.
The proposal, expected towin congressional approval, seeks to raise rates on top earners to 32% from 30%, introduces a 10% capital-gains tax, and closes some corporate loopholes. It also seeks to slap a special tax on sugary soft drinks, in a countrywhere obesity and diabetes are rising.
For the article, go here.
President Enrique Pena Nieto, facing protests over his attempts to revamp Mexico's economy, unveiled a long-awaited tax overhaul on Sunday, promising to create a universal social-security system and unemployment insurance in exchange for a series of tax increases that seek to boost the government's nonoil revenue.
The proposal, expected towin congressional approval, seeks to raise rates on top earners to 32% from 30%, introduces a 10% capital-gains tax, and closes some corporate loopholes. It also seeks to slap a special tax on sugary soft drinks, in a countrywhere obesity and diabetes are rising.
For the article, go here.
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Losses: IRS Unveils Rules to Stop Taxpayers From Shipping Built-In Losses Into U.S.
by Alison Bennett (Bloomberg)
The Internal Revenue Service unveiled proposed regulations Sept. 6 intended to stop taxpayers from importing losses into the U.S. by using tax-free transfers of loss property to corporations that are subject to federal income tax.
“The bottom line is, the government is trying to stop the dilution of the U.S. tax base, Mark Silverman, a partnerwith Steptoe & Johnson LLP inwashington, told Bloomberg BNA Sept. 6.They're saying,we don't like you bringing in artificial losses that can be used to offset your U.S. income.
For the story, go here. (Subscription required)
The Internal Revenue Service unveiled proposed regulations Sept. 6 intended to stop taxpayers from importing losses into the U.S. by using tax-free transfers of loss property to corporations that are subject to federal income tax.
“The bottom line is, the government is trying to stop the dilution of the U.S. tax base, Mark Silverman, a partnerwith Steptoe & Johnson LLP inwashington, told Bloomberg BNA Sept. 6.They're saying,we don't like you bringing in artificial losses that can be used to offset your U.S. income.
For the story, go here. (Subscription required)
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News Analysis: Rosbif Rules: What Should the OECD Do About Base Erosion?
by Lee A. Sheppard (Tax Analysts, Tax Notes Today)
This article looks at a selection of the proposed actions in the OECD base erosion and profit shifting (BEPS) action plan, making recommendations and predictions. Needless to say, the former may be more aggressive than the latter. The predictions differ from the hopeful statements of the OECD action plan. Some Europeans are getting cold feet, and it is a safe bet that the Americanswill do nothing.
For the article, go here. (Subscription required)
This article looks at a selection of the proposed actions in the OECD base erosion and profit shifting (BEPS) action plan, making recommendations and predictions. Needless to say, the former may be more aggressive than the latter. The predictions differ from the hopeful statements of the OECD action plan. Some Europeans are getting cold feet, and it is a safe bet that the Americanswill do nothing.
For the article, go here. (Subscription required)
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G-20 to Begin Automatic Exchange of Tax Information by End of 2015
by Stephanie Soong Johnston (Tax Analysts, Tax Notes Today)
Leaders of the G-20 nations on September 6 said they expected to begin automatic exchange of information in tax matters between their countries by the end of 2015 and pledged to help developing countries participate in such a system aswell. The group also reiterated its continued support of the OECD's action plan to address base erosion and profit shifting.
In a declaration issued at the end of the group's September 5-6 meeting in St. Petersburg, Russia, the G-20 leaders reaffirmed their commitment to making automatic information exchange the new global standard.
For the story, go here. (Subscription required)
Leaders of the G-20 nations on September 6 said they expected to begin automatic exchange of information in tax matters between their countries by the end of 2015 and pledged to help developing countries participate in such a system aswell. The group also reiterated its continued support of the OECD's action plan to address base erosion and profit shifting.
In a declaration issued at the end of the group's September 5-6 meeting in St. Petersburg, Russia, the G-20 leaders reaffirmed their commitment to making automatic information exchange the new global standard.
For the story, go here. (Subscription required)
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Congress Should Fix Uneven Business Taxation | Commentary
by Dan Danner and Bill Hughes (Roll Call)
Tax reform is a hot topic in Congress these days and for good reason. Our current tax system is broken, complicated and clearly gives preference to some industries over others,which is obviously unfair.
A recent study by the respected accounting firm PricewaterhouseCoopers andwidely read on Capitol Hill showed gigantic disparities among industries. Retailing,wholesaler-distributors and service providers had effective tax rates the rate of taxes they actually paid of 36.4 percent or higher. By contrast, utilities and other industries posted effective tax rates as low as 9.4 percent.
For the article, go here.
Tax reform is a hot topic in Congress these days and for good reason. Our current tax system is broken, complicated and clearly gives preference to some industries over others,which is obviously unfair.
A recent study by the respected accounting firm PricewaterhouseCoopers andwidely read on Capitol Hill showed gigantic disparities among industries. Retailing,wholesaler-distributors and service providers had effective tax rates the rate of taxes they actually paid of 36.4 percent or higher. By contrast, utilities and other industries posted effective tax rates as low as 9.4 percent.
For the article, go here.
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The Group of 20 Tackles Tax Avoidance
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Mexico to Unveil Tax Code Overhaul
by Juan Montes (Wall Street Journal)
Mexican President Enrique Pena Nieto is expected to unveil on Sunday awide-reaching proposal to boost federal tax revenue, a move that could prove politically complicated in a slowing economy.
The planned revamp of the country's tax code forms part of Mr. Pena Nieto's ambitious reform agenda,which he launched shortly after taking office in December. The changes are facing challenges from unions and political groups that oppose plans to modernize the country's education system and its state-run energy industry.
The proposal seeks to simplify the tax code, and reorganize public spending to make it more transparent and efficient. If passed, it could represent the most aggressive tax overhaul in Mexico since the introduction of a single federal sale tax that excluded food and medicines in the late 1970s.
For the article, go here.
Mexican President Enrique Pena Nieto is expected to unveil on Sunday awide-reaching proposal to boost federal tax revenue, a move that could prove politically complicated in a slowing economy.
The planned revamp of the country's tax code forms part of Mr. Pena Nieto's ambitious reform agenda,which he launched shortly after taking office in December. The changes are facing challenges from unions and political groups that oppose plans to modernize the country's education system and its state-run energy industry.
The proposal seeks to simplify the tax code, and reorganize public spending to make it more transparent and efficient. If passed, it could represent the most aggressive tax overhaul in Mexico since the introduction of a single federal sale tax that excluded food and medicines in the late 1970s.
For the article, go here.
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OECD Secretary-General Report to the G20 Leaders
by OECD (from OECDwebsite)
OECD Secretary-General Angel Gurría today presented to G20 Leadersground-breaking proposals to tackle tax evasion and avoidance by both companies and individuals.
The proposalsestablishautomatic exchange of information for tax purposesas the new international standard for tax co-operation and set out theAction Plan on Base Erosion and Profit Shifting (BEPS),whichwas first presented to G20 Finance Ministers in Moscow in July 2013.
For the report, go here.
OECD Secretary-General Angel Gurría today presented to G20 Leadersground-breaking proposals to tackle tax evasion and avoidance by both companies and individuals.
The proposalsestablishautomatic exchange of information for tax purposesas the new international standard for tax co-operation and set out theAction Plan on Base Erosion and Profit Shifting (BEPS),whichwas first presented to G20 Finance Ministers in Moscow in July 2013.
For the report, go here.
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G20 to back moves to expose tax evaders
by Vanessa Houlder in London and Javier Blas in Madrid (Financial Times)
The Dutch government has offered to renegotiate loophole-ridden tax treatieswith nearly two dozen developing countries, in a sign of the drive to crack down on avoidance and evasion that is set to intensify at the summit ofworld leaders in Russia thisweek.
Leaders of the G20 countries meeting in St Petersburg are due to throw theirweight behind moves to close corporate tax loopholes and expose tax evaders through greater transparency.
For the article, go here.
The Dutch government has offered to renegotiate loophole-ridden tax treatieswith nearly two dozen developing countries, in a sign of the drive to crack down on avoidance and evasion that is set to intensify at the summit ofworld leaders in Russia thisweek.
Leaders of the G20 countries meeting in St Petersburg are due to throw theirweight behind moves to close corporate tax loopholes and expose tax evaders through greater transparency.
For the article, go here.
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Plan at G-20 Is to Tighten Global Rules on Taxes
by Andrew E. Kramer (New York Times)
Many of the leaders of theworld's richest economies are convening at the eighth Group of 20 summit meeting in St. Petersburg, Russia,with the economicwinds at their back, ready to sign on to a sweeping new set of tax rules for multinational corporations.
They are expected on Friday to agree to enact new tax laws thatwould limit the ability of multinational corporations like Apple and Starbucks to legally avoid paying taxes by operating subsidiaries in certain countries.
For the article, go here.
Many of the leaders of theworld's richest economies are convening at the eighth Group of 20 summit meeting in St. Petersburg, Russia,with the economicwinds at their back, ready to sign on to a sweeping new set of tax rules for multinational corporations.
They are expected on Friday to agree to enact new tax laws thatwould limit the ability of multinational corporations like Apple and Starbucks to legally avoid paying taxes by operating subsidiaries in certain countries.
For the article, go here.
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IRS: Sullivan & Cromwell's Wollman Named New Director, International Strategy, at IRS
by Diane Freda (Bloomberg)
The Internal Revenue Service Aug. 23 announced the selection of Dianawollman as the director for international strategy, a newly created position.wollmanwill be joining the IRS on Sept. 16, reporting to Michael Danilack, deputy commissioner of the international unit of the IRS Large Business and International Division, and the U.S. competent authority.
In the new position,wollmanwill serve as the principal adviser to Danilack on awide range of high-level and sensitive international issues, Paul DeNard, acting commissioner of the IRS LB&I Division, said in announcing the selection. She alsowill oversee the development and implementation of all aspects of the IRS's international strategic programs, including risk assessment, data management, and trend analysis, he said.
For the story, go here. (Subscription required)
The Internal Revenue Service Aug. 23 announced the selection of Dianawollman as the director for international strategy, a newly created position.wollmanwill be joining the IRS on Sept. 16, reporting to Michael Danilack, deputy commissioner of the international unit of the IRS Large Business and International Division, and the U.S. competent authority.
In the new position,wollmanwill serve as the principal adviser to Danilack on awide range of high-level and sensitive international issues, Paul DeNard, acting commissioner of the IRS LB&I Division, said in announcing the selection. She alsowill oversee the development and implementation of all aspects of the IRS's international strategic programs, including risk assessment, data management, and trend analysis, he said.
For the story, go here. (Subscription required)
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Tax Evasion: Multilateral Action on OECD Plan Could Be Best Way to Halt BEPS, Treasury Official Says
by Lydia Beyoud (Bloomberg)
Developing a multilateral instrument to enable countries to limit base erosion and profit shifting (BEPS) could be one of the most critical elements to the success of the Organization for Economic Cooperation and Development's BEPS action plan, a U.S. Treasury Department official said Aug. 22.
For the story, go here. (Subscription required)
Developing a multilateral instrument to enable countries to limit base erosion and profit shifting (BEPS) could be one of the most critical elements to the success of the Organization for Economic Cooperation and Development's BEPS action plan, a U.S. Treasury Department official said Aug. 22.
For the story, go here. (Subscription required)
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IRS scrutinizes certain corporate buyouts involving debt
by Lynnley Browning (Fortune)
Private equity firms, buffeted by challenges to long-held tax breaks and growing scrutiny from regulators, have an ugly new headache: awary look by the Internal Revenue Service at one of their preferred acquisition techniques.
The technique involves loaning cash stockpiled in a fund's offshore affiliate to a related U.S. holding company set up to acquire a separate firm, a multistep move that typically generates lucrative tax deductions and boosts returns to fund investors.
The IRSwants to knowwhether private equity funds and their portfolio companies, meaning firms they acquire, are skirting so-called interest-stripping rules by disguising taxable equity investments as tax-deductible loans, according to senior tax lawyers and accountantsworking for firms and companies under the microscope and to persons close to the IRS.
For the story, go here.
Private equity firms, buffeted by challenges to long-held tax breaks and growing scrutiny from regulators, have an ugly new headache: awary look by the Internal Revenue Service at one of their preferred acquisition techniques.
The technique involves loaning cash stockpiled in a fund's offshore affiliate to a related U.S. holding company set up to acquire a separate firm, a multistep move that typically generates lucrative tax deductions and boosts returns to fund investors.
The IRSwants to knowwhether private equity funds and their portfolio companies, meaning firms they acquire, are skirting so-called interest-stripping rules by disguising taxable equity investments as tax-deductible loans, according to senior tax lawyers and accountantsworking for firms and companies under the microscope and to persons close to the IRS.
For the story, go here.
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Wollman to Fill New LB&I International Strategy Director Position
by Kristen A. Parillo & Andrew Velarde (Tax Analysts, Tax Notes Today)
The IRS Large Business and International Division on August 23 announced that Diana L.wollman of Sullivan & Cromwell LLP in New York has been named director of international strategy, a newly created executive positionwithin LB&I.
LB&I acting Commissioner Paul DeNard made the announcement in an internal bulletin to IRS employees. The bulletin states thatwollmanwill begin her new position September 16 andwill report to Michael Danilack, LB&I deputy commissioner (international). In her new role,wollmanwill serve as the principal adviser to Danilack on awide range of high-level and sensitive international issues andwill oversee the development and implementation of all aspects of LB&I's international strategic program, including risk assessment, data management, trend analysis, training, and knowledge management capabilities.
For the story, go here. (Subscription required)
The IRS Large Business and International Division on August 23 announced that Diana L.wollman of Sullivan & Cromwell LLP in New York has been named director of international strategy, a newly created executive positionwithin LB&I.
LB&I acting Commissioner Paul DeNard made the announcement in an internal bulletin to IRS employees. The bulletin states thatwollmanwill begin her new position September 16 andwill report to Michael Danilack, LB&I deputy commissioner (international). In her new role,wollmanwill serve as the principal adviser to Danilack on awide range of high-level and sensitive international issues andwill oversee the development and implementation of all aspects of LB&I's international strategic program, including risk assessment, data management, trend analysis, training, and knowledge management capabilities.
For the story, go here. (Subscription required)
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BEPS Won't Target U.S. Multinationals, Stack Says
by Matthew R. Madara (Tax Analysts, Tax Notes Today)
U.S. multinationals should be assured that the OECD's base erosion and profit-shifting (BEPS) project is not focused on targeting U.S. multinationals, according to Robert Stack, Treasury deputy assistant secretary (international tax affairs).
At an August 22webinar sponsored by the KPMG Tax Governance Institute, Stack explained that the United States views the BEPS discussion as a conversation on tax reform rather than tax morality and that U.S. policywill not be directed toward "naming and shaming."
For the story, go here. (Subscription required)
U.S. multinationals should be assured that the OECD's base erosion and profit-shifting (BEPS) project is not focused on targeting U.S. multinationals, according to Robert Stack, Treasury deputy assistant secretary (international tax affairs).
At an August 22webinar sponsored by the KPMG Tax Governance Institute, Stack explained that the United States views the BEPS discussion as a conversation on tax reform rather than tax morality and that U.S. policywill not be directed toward "naming and shaming."
For the story, go here. (Subscription required)
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Economic Analysis: Example 13 of the OECD Revised Intangibles Draft
by Martin A. Sullivan (Tax Analysts, Tax Notes Today)
Let's ask a simple question that is central to the debate on base erosion and profit shifting. If a company performs and controls all of its research and development in one country and if a subsidiary in another country funds that research,where should the profits from the resulting intellectual property be taxed?
The view of the OECD on this topic has evolved. In its June 2012 discussion draft, the OECD left the funding entitywith little hope of getting any profits unless it conducted some real activities: "Neither legal ownership, nor the bearing of costs related to intangible development, taken separately or together, entitles an entitywithin a [multinational] group to retain the benefits or returnswith respect to intangibleswithout more."
But in its revised discussion draft on transfer pricing aspects of intangibles released on July 30, the OECD allows a limited return to accrue to the funding subsidiary.
So from the point of view of multinationals that like to fund their research out of subsidiaries in low-tax jurisdictions, this approach is an improvement over the original draft. But the revised draft denies tax plannerswhat they reallywant: the right to park potentially huge upside excess profits to subsidiaries in tax havens that are assigned the costs of research.
For the article, go here. (Subscription required)
Let's ask a simple question that is central to the debate on base erosion and profit shifting. If a company performs and controls all of its research and development in one country and if a subsidiary in another country funds that research,where should the profits from the resulting intellectual property be taxed?
The view of the OECD on this topic has evolved. In its June 2012 discussion draft, the OECD left the funding entitywith little hope of getting any profits unless it conducted some real activities: "Neither legal ownership, nor the bearing of costs related to intangible development, taken separately or together, entitles an entitywithin a [multinational] group to retain the benefits or returnswith respect to intangibleswithout more."
But in its revised discussion draft on transfer pricing aspects of intangibles released on July 30, the OECD allows a limited return to accrue to the funding subsidiary.
So from the point of view of multinationals that like to fund their research out of subsidiaries in low-tax jurisdictions, this approach is an improvement over the original draft. But the revised draft denies tax plannerswhat they reallywant: the right to park potentially huge upside excess profits to subsidiaries in tax havens that are assigned the costs of research.
For the article, go here. (Subscription required)
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News Analysis: The OECD's Special Measures
by Lee A. Sheppard (Tax Analysts, Tax Notes Today)
Practitionerswere rattled in Julywhen the OECD's action plan on base erosion and profit shifting (BEPS) mentioned that "special measures" might be required to correct deficiencies in the arm's-length method. Marlies de Ruiter, head of the tax treaty, transfer pricing, and financial transactions division of the OECD's Centre for Tax Policy and Administration, described these special measures at the August 27 session of the International Fiscal Association's annual congress in Copenhagen, Denmark.
Historically, OECD transfer pricing guidance did not recognize synergies. Now they have to be recognized. "Group-ness needs to be recognized," de Ruiter said. The integration of multinational corporations must be recognized because it produces additional profits (or excess returns, in the lingo of economists).
For the article, go here. (Subscription required)
Practitionerswere rattled in Julywhen the OECD's action plan on base erosion and profit shifting (BEPS) mentioned that "special measures" might be required to correct deficiencies in the arm's-length method. Marlies de Ruiter, head of the tax treaty, transfer pricing, and financial transactions division of the OECD's Centre for Tax Policy and Administration, described these special measures at the August 27 session of the International Fiscal Association's annual congress in Copenhagen, Denmark.
Historically, OECD transfer pricing guidance did not recognize synergies. Now they have to be recognized. "Group-ness needs to be recognized," de Ruiter said. The integration of multinational corporations must be recognized because it produces additional profits (or excess returns, in the lingo of economists).
For the article, go here. (Subscription required)
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U.S. Taxation of Cross-Border Investment -- 12 Questions
by Jamesw.wetzler (Tax Analysts, Tax Notes Today)
Everyone agrees that the U.S. system of taxing cross-border investment needs repair, but the problem is that there is little agreement on how to fix it. U.S. tax laws affect the behavior of both taxpayers and foreign governments along several decision-making margins, all ofwhich should be taken into account by the thoughtful policymaker. The following are 12 questions policymakers should be asking before they initiate reform measures.
For the article, go here. (Subscription required)
Everyone agrees that the U.S. system of taxing cross-border investment needs repair, but the problem is that there is little agreement on how to fix it. U.S. tax laws affect the behavior of both taxpayers and foreign governments along several decision-making margins, all ofwhich should be taken into account by the thoughtful policymaker. The following are 12 questions policymakers should be asking before they initiate reform measures.
For the article, go here. (Subscription required)
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Lilian Faulhaber to advise OECD on ways to curb tax avoidance by global companies
by Boston Univ, School of Law
Associate Professor of Law Lilian Faulhaberwill bring her tax law expertise to an international effort to curb the practice of corporations paying little or no taxes in the various countries inwhich they conduct business. Starting September 1, Faulhaberwill take a two-year leave of absence from BU Law to serve as an Advisor to the Organisation for Economic Co-operation and Development (OECD).
For the release, go here.
Associate Professor of Law Lilian Faulhaberwill bring her tax law expertise to an international effort to curb the practice of corporations paying little or no taxes in the various countries inwhich they conduct business. Starting September 1, Faulhaberwill take a two-year leave of absence from BU Law to serve as an Advisor to the Organisation for Economic Co-operation and Development (OECD).
For the release, go here.
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A Holiday From Taxes, and Often From the Strings Attached
by Victor Fleischer (New York Times)
Large multinationals based in the United States among them General Electric, Pfizer, Apple and Citigroup have been hoarding record amounts of cash overseas, mainly because of the 35 percent tax theywould have to pay if they brought it back to the United States.
The American Jobs Creation Act of 2004 offered a temporary tax holiday that allowed firms to repatriate cash at about a 5 percent tax rate, but therewere strings attached. The repatriated moneywas to be used only on permissible activities like research and development, capital expenditures and pension funding. Itwas not to be used for shareholder dividends or share repurchases.
The purported goal of the legislationwas to create jobs, not simply to enrich shareholders at the expense of federal tax revenue. In recent years, companies have lobbied for another tax holiday.
For the story, go here.
Large multinationals based in the United States among them General Electric, Pfizer, Apple and Citigroup have been hoarding record amounts of cash overseas, mainly because of the 35 percent tax theywould have to pay if they brought it back to the United States.
The American Jobs Creation Act of 2004 offered a temporary tax holiday that allowed firms to repatriate cash at about a 5 percent tax rate, but therewere strings attached. The repatriated moneywas to be used only on permissible activities like research and development, capital expenditures and pension funding. Itwas not to be used for shareholder dividends or share repurchases.
The purported goal of the legislationwas to create jobs, not simply to enrich shareholders at the expense of federal tax revenue. In recent years, companies have lobbied for another tax holiday.
For the story, go here.
Posted on
News Analysis: Picking Apart the OECD BEPS Action Plan
by Lee A. Sheppard (Tax Analysts, Tax Notes Today)
"Transfer pricing is collapsing under its ownweight,"will Morris of General Electric remarked at the August 28 session of the International Fiscal Association's annual congress in Copenhagen, Denmark.
This and other admissions against interest flavored a panel discussion of the OECD base erosion and profit-shifting (BEPS) action plan ,which featured Pascal Saint-Amans, head of the OECD Centre for Tax Policy and Administration, and Mikewilliams, director of business and international tax at HM Revenue & Customs.
Morriswas referring to transfer pricing documentation and compliance, but could just as easily have been referring to other aspects of the current system that the action plan proposes to fix. Businesseswant mutual agreement procedures addressed quickly, but Saint-Amans cautioned that reformswould take time.
For the story, go here. (Subscription required)
"Transfer pricing is collapsing under its ownweight,"will Morris of General Electric remarked at the August 28 session of the International Fiscal Association's annual congress in Copenhagen, Denmark.
This and other admissions against interest flavored a panel discussion of the OECD base erosion and profit-shifting (BEPS) action plan ,which featured Pascal Saint-Amans, head of the OECD Centre for Tax Policy and Administration, and Mikewilliams, director of business and international tax at HM Revenue & Customs.
Morriswas referring to transfer pricing documentation and compliance, but could just as easily have been referring to other aspects of the current system that the action plan proposes to fix. Businesseswant mutual agreement procedures addressed quickly, but Saint-Amans cautioned that reformswould take time.
For the story, go here. (Subscription required)
Posted on
Economic Analysis: New Insight on Repatriation Holiday Not a Game Changer
by Martin A. Sullivan (Tax Analysts, Tax Notes Today)
The most common use of the $312 billion of funds repatriated under the provisions of the American Jobs Creation Act of 2004was for cash acquisitions and not, aswidely believed, distributions to shareholders. That is the finding of a new study by professor Thomas J. Brennan of Northwestern University Law School.
For the article, go here. (Subscription required)
The most common use of the $312 billion of funds repatriated under the provisions of the American Jobs Creation Act of 2004was for cash acquisitions and not, aswidely believed, distributions to shareholders. That is the finding of a new study by professor Thomas J. Brennan of Northwestern University Law School.
For the article, go here. (Subscription required)
Posted on
Where the Money Really Went: A New Understanding of the AJCA Tax Holiday
by Thomas J. Brennan (Northwestern Univ. School of Law)
International tax policy debate has been informed by a belief based on prior research that, notwithstanding legal prohibitions, shareholder payouts in 2005 accounted for $0.60-$0.92 per dollar repatriated under the AJCA tax holiday. The author analyzes total payouts that year and prove that this belief is actually false. He uses constrained regressions to determinewhat spending really occurred. Legal restrictions mattered. Twenty firms represented 56% of repatriated cash and spent heterogeneously during 2005-2009,with $0.78 per repatriated dollar going to AJCA-permissible uses, including cash acquisitions ($0.54) and debt reductions ($0.16). Smaller repatriators spent at least $0.61 per dollar on AJCA-permissible uses.
For the paper, go here.
International tax policy debate has been informed by a belief based on prior research that, notwithstanding legal prohibitions, shareholder payouts in 2005 accounted for $0.60-$0.92 per dollar repatriated under the AJCA tax holiday. The author analyzes total payouts that year and prove that this belief is actually false. He uses constrained regressions to determinewhat spending really occurred. Legal restrictions mattered. Twenty firms represented 56% of repatriated cash and spent heterogeneously during 2005-2009,with $0.78 per repatriated dollar going to AJCA-permissible uses, including cash acquisitions ($0.54) and debt reductions ($0.16). Smaller repatriators spent at least $0.61 per dollar on AJCA-permissible uses.
For the paper, go here.
Posted on
Tax Policy: Debate Lingers on Repatriation Tax, as Study Suggests Tax Break Benefits U.S. Operations
by Marc Heller (Bloomberg)
Companies that return profits to the United States may see a lighter tax burden if Congress passes rewrite of the tax code. But howwould they use that money?
That question is at the heart of the congressional debate over how best to tax repatriated earnings of U.S. companies' foreign operations, and a new study takes aim at congressional Democrats' assertion that corporate shareholders stand to benefit the most.
Thomas J. Brennan, a law professor at Northwestern University, found that during the last repatriation tax holiday, in 2005, companies spent most of the repatriated money on cash acquisitions and debt reduction,with lesser amounts on research and development, share repurchases and dividends. That finding contrastswith an earlier study embraced by some lawmakers that estimated as much as 60 cents to 92 cents on each repatriated dollarwent to shareholder payouts thatwere not permissible under the federal tax holiday.
For the story, go here. (Subscription required)
Companies that return profits to the United States may see a lighter tax burden if Congress passes rewrite of the tax code. But howwould they use that money?
That question is at the heart of the congressional debate over how best to tax repatriated earnings of U.S. companies' foreign operations, and a new study takes aim at congressional Democrats' assertion that corporate shareholders stand to benefit the most.
Thomas J. Brennan, a law professor at Northwestern University, found that during the last repatriation tax holiday, in 2005, companies spent most of the repatriated money on cash acquisitions and debt reduction,with lesser amounts on research and development, share repurchases and dividends. That finding contrastswith an earlier study embraced by some lawmakers that estimated as much as 60 cents to 92 cents on each repatriated dollarwent to shareholder payouts thatwere not permissible under the federal tax holiday.
For the story, go here. (Subscription required)
Posted on
Tax Evasion: G-20 Leaders Set to Endorse OECD Anti-Base Erosion Plan
by Daniel Pruzin (Bloomberg)
The Group of 20 leaders are on track to endorse a new global initiative to crack down on questionable tax practices of major corporations, according to officials involved in the talks.
The Base Erosion and Profit Shifting (BEPS) Action Plan drawn up by the Organization for Economic Cooperation and Developmentwas endorsed by the finance ministers of the 20 most industrialized nations at their July 20 Moscow meeting and is set to be approvedwithout changes, the officials said as they gathered Sept. 3 in St. Petersburg, Russia.
For the article, go here. (Subscription required)
The Group of 20 leaders are on track to endorse a new global initiative to crack down on questionable tax practices of major corporations, according to officials involved in the talks.
The Base Erosion and Profit Shifting (BEPS) Action Plan drawn up by the Organization for Economic Cooperation and Developmentwas endorsed by the finance ministers of the 20 most industrialized nations at their July 20 Moscow meeting and is set to be approvedwithout changes, the officials said as they gathered Sept. 3 in St. Petersburg, Russia.
For the article, go here. (Subscription required)
Posted on
The Slaughter & Rees Report: Counting theGimmick-Hungry Yobs Digging Gold from Rock and Roll
from Slaughter & Rees Report
The Bureau of Economic Analysis of the U.S. Department of Commerce released comprehensive revisions to America's GDP accounts. Tracking the value of a country's total output of goods and services has long required a judicious amount of art beyond science. For example, the basic framework for most countries GDP accountswas set generations agowhen outputwas predominantly agriculture and manufacturing. As services have grown more important—often through the creation of entirely new industries, such as information technology—statistical agencies have endeavored to keep pace.
Lastweek's data revisionswere massive (dating back to 1929)while also extremelywell designed and executed (the leaders and staff of the BEA have long set a standard towhich other countries aspire). The most important changewas to treat spending on research and development and on entertainment, literary, and artistic originals as an investment rather than an expense.
We think these new data carry at least three important policy messages for all countries.
First, any comprehensive tax reform should not favor a specific type of business or income. In particular, many voices argue that manufacturing is special and should receive tax preferences, such as a lower corporate tax rate. Butwhy should the fruits of intangible assets, many ofwhich are embodied in services, not manufactured goods (e.g., software), be taxed more heavily?
For the report, go here.
The Bureau of Economic Analysis of the U.S. Department of Commerce released comprehensive revisions to America's GDP accounts. Tracking the value of a country's total output of goods and services has long required a judicious amount of art beyond science. For example, the basic framework for most countries GDP accountswas set generations agowhen outputwas predominantly agriculture and manufacturing. As services have grown more important—often through the creation of entirely new industries, such as information technology—statistical agencies have endeavored to keep pace.
Lastweek's data revisionswere massive (dating back to 1929)while also extremelywell designed and executed (the leaders and staff of the BEA have long set a standard towhich other countries aspire). The most important changewas to treat spending on research and development and on entertainment, literary, and artistic originals as an investment rather than an expense.
We think these new data carry at least three important policy messages for all countries.
First, any comprehensive tax reform should not favor a specific type of business or income. In particular, many voices argue that manufacturing is special and should receive tax preferences, such as a lower corporate tax rate. Butwhy should the fruits of intangible assets, many ofwhich are embodied in services, not manufactured goods (e.g., software), be taxed more heavily?
For the report, go here.
Posted on
How treaty changes and high taxes are harming Argentina
by Matthew Gilleard - ITR
Companies operating in Argentina face high levels of tax and uncertainty because of treaty changes, meaning low foreign investment figures are unlikely to change anytime soon.
For the article, go here. (Registration required)
Companies operating in Argentina face high levels of tax and uncertainty because of treaty changes, meaning low foreign investment figures are unlikely to change anytime soon.
For the article, go here. (Registration required)
Posted on
Japan: Multinationals in Japan More Cautious, Unlikely Affected by BEPS, Practitioners Say
by Yuriko Nagano (Bloomberg)
While Japan's finance minister has declared support for the Organization for Economic Cooperation and Development's action plan on base erosion and profit shifting (BEPS), corporations based in the country might not feel much of an impact, partners at two Big Four firms told BNA Aug. 7.
“Japanese multinationals tend to be a little more cautious in their tax planning than foreign multinational corporations and so, as a group, they may be less impacted than foreign multinationals that have adopted structures outlined by OECD, said Ryann Thomas, partner at PricewaterhouseCoopers Tax in Japan. Japan Minister of Finance Taro Aso issued a statement of support for the OECD BEPS project July 19.
For the article, go here. (Subscription required)
While Japan's finance minister has declared support for the Organization for Economic Cooperation and Development's action plan on base erosion and profit shifting (BEPS), corporations based in the country might not feel much of an impact, partners at two Big Four firms told BNA Aug. 7.
“Japanese multinationals tend to be a little more cautious in their tax planning than foreign multinational corporations and so, as a group, they may be less impacted than foreign multinationals that have adopted structures outlined by OECD, said Ryann Thomas, partner at PricewaterhouseCoopers Tax in Japan. Japan Minister of Finance Taro Aso issued a statement of support for the OECD BEPS project July 19.
For the article, go here. (Subscription required)
Posted on
Company Profits Without Borders Spurs Government Scrutiny
by Alison Bennett (Bloomberg)
Policymakers around theworld are stepping up efforts to tighten rules because a growing slice of corporate profits isnt taxed in any country.
Multinational companies can legally structure transactions so they dont pay tax anywhere, creatingstateless income that is coming under attack as countries seek to fill budget gaps. The Obama administration, Organization for Economic Cooperation and Development and tax officials from other countrieswant to reach a consensus on how to combat the issue,with more than a dozen proposals beingweighed, Bloomberg BNA reported.
For the story, go here.
Policymakers around theworld are stepping up efforts to tighten rules because a growing slice of corporate profits isnt taxed in any country.
Multinational companies can legally structure transactions so they dont pay tax anywhere, creatingstateless income that is coming under attack as countries seek to fill budget gaps. The Obama administration, Organization for Economic Cooperation and Development and tax officials from other countrieswant to reach a consensus on how to combat the issue,with more than a dozen proposals beingweighed, Bloomberg BNA reported.
For the story, go here.
Posted on
Microsoft, IBM Top List of U.S. Tech Firms with Biggest Overseas Profit Hauls
by Jordan Robertson (Bloomberg)
When it comes to the politically inflammatory issue of U.S. companies holding trillions of dollars in profits overseas, two tech firms get the lion's share of attention and blame for the practice: Apple and Cisco Systems.
That's because their chief executive officers, Tim Cook and John Chambers, have been among the most vocal lobbyists for a tax holiday to bring the cash home at a rate lower than the 35 percent currently required by the U.S. government.
Yet Apple and Cisco aren't the biggest hoarders of overseas cash. According to Bloomberg Rankings,which looked at the regulatory filings of the 70 companies in the S&P 500 Information Technology Index and the five in the S&P 500 Internet & Catalog Retail Index, the distinction belongs to Microsoft and IBM.
For the story, go here.
When it comes to the politically inflammatory issue of U.S. companies holding trillions of dollars in profits overseas, two tech firms get the lion's share of attention and blame for the practice: Apple and Cisco Systems.
That's because their chief executive officers, Tim Cook and John Chambers, have been among the most vocal lobbyists for a tax holiday to bring the cash home at a rate lower than the 35 percent currently required by the U.S. government.
Yet Apple and Cisco aren't the biggest hoarders of overseas cash. According to Bloomberg Rankings,which looked at the regulatory filings of the 70 companies in the S&P 500 Information Technology Index and the five in the S&P 500 Internet & Catalog Retail Index, the distinction belongs to Microsoft and IBM.
For the story, go here.
Posted on
Q&A: Essential facts about US tax inversions
by Anousha Sakoui (Financial Times)
A tax inversion is a legal transactionwhereby a company becomes the subsidiary of another company in another country and, as a result, the original company becomes subject to the tax laws of the foreign country instead.
These inversions can take different forms. The first casewas a cosmetics company called Helen of Troy in 1993. Incorporated in the US, it created a shell company in the tax haven of Bermuda, and made it the parent company of the US business.
However, following the deal, the US Internal Revenue Service (IRS) issued a clampdown against such transactionswhere theywere being carried out purely to avoid US taxes. It issued the first rules against anti-inversion in 1996.
Why arewe still talking about this today, then?
For the story, go here.
A tax inversion is a legal transactionwhereby a company becomes the subsidiary of another company in another country and, as a result, the original company becomes subject to the tax laws of the foreign country instead.
These inversions can take different forms. The first casewas a cosmetics company called Helen of Troy in 1993. Incorporated in the US, it created a shell company in the tax haven of Bermuda, and made it the parent company of the US business.
However, following the deal, the US Internal Revenue Service (IRS) issued a clampdown against such transactionswhere theywere being carried out purely to avoid US taxes. It issued the first rules against anti-inversion in 1996.
Why arewe still talking about this today, then?
For the story, go here.
Posted on
Tax bills help drain US corporate base
By Anousha Sakoui in London and James Politi inwashington (Financial Times)
For Doug Holtz-Eakin an adviser to Senator John McCain during his 2008 presidential campaign the relocation of some of the USs biggest companies to overseas tax domiciles brings back memories of Inbevs takeover of Anheuser-Busch that year.
When the Belgian brewer completed the deal, it not only cut jobs at the American groups headquarters in St Louis, Missouri it turned the operation into a mere US subsidiary of a global group based in Belgium.
When international mergers and acquisitions occur, the headquarters are not in the US, notes Mr Holtz-Eakin. Youre not going to see anyone do inbound headquarter investment [into the US]. I think its a big deal.
For the story, go here.
For Doug Holtz-Eakin an adviser to Senator John McCain during his 2008 presidential campaign the relocation of some of the USs biggest companies to overseas tax domiciles brings back memories of Inbevs takeover of Anheuser-Busch that year.
When the Belgian brewer completed the deal, it not only cut jobs at the American groups headquarters in St Louis, Missouri it turned the operation into a mere US subsidiary of a global group based in Belgium.
When international mergers and acquisitions occur, the headquarters are not in the US, notes Mr Holtz-Eakin. Youre not going to see anyone do inbound headquarter investment [into the US]. I think its a big deal.
For the story, go here.
Posted on
US acquirers cut taxes by relocating to Europe after mergers
by Anousha Sakoui in London and James Politi inwashington (Financial Times)
Michigan-based pharmaceuticals group Perrigo has said its acquisition of Irish biotech company Elanwill lead to re-domiciling in Ireland
A growing number of US companies are set to save hundreds of millions of dollars in tax by relocating to Europe after completing takeovers on the continent.
For the story, go here.
Michigan-based pharmaceuticals group Perrigo has said its acquisition of Irish biotech company Elanwill lead to re-domiciling in Ireland
A growing number of US companies are set to save hundreds of millions of dollars in tax by relocating to Europe after completing takeovers on the continent.
For the story, go here.
Posted on
Tax Evasion: Global Scrutiny of Stateless Income Growing Among Officials, Lawmakers, World Leaders
by Alison Bennett (Bloomberg)
The phenomenon of stateless income is growing in prominence on theworld stage,with lawmakers, key officials in the Obama administration, the Organization for Economic Cooperation and Development, and tax officials from other countries all throwing a spotlight onwhat is perceived as a growing problem.
For the article, go here. (Subscription required)
The phenomenon of stateless income is growing in prominence on theworld stage,with lawmakers, key officials in the Obama administration, the Organization for Economic Cooperation and Development, and tax officials from other countries all throwing a spotlight onwhat is perceived as a growing problem.
For the article, go here. (Subscription required)
Posted on
Corporate Tax Reform: Will the Third Time Be the Charm?
by Clint Stretch (Tax Analysts, Tax Notes Today)
Congress has reformed the corporate income tax not once, but twice, since President Reagan called for tax reform in his 1984 State of the Union address. Business leaders contemplating the next corporate tax reform effortwillwant to ask many questions, but at the core there is one essential question:will it be any different this time around?
For the article, go here. (Subscription required)
Congress has reformed the corporate income tax not once, but twice, since President Reagan called for tax reform in his 1984 State of the Union address. Business leaders contemplating the next corporate tax reform effortwillwant to ask many questions, but at the core there is one essential question:will it be any different this time around?
For the article, go here. (Subscription required)
Posted on
Economic Analysis: Another Pharmaceutical Inversion to Ireland; More on the Horizon
by Martin A. Sullivan (Tax Analysts, Tax Notes Today)
Another U.S. company has sidestepped the anti-inversion rules of section 7874 and is moving its legal domicile to Ireland. Perrigo Co., a Michigan-based provider of healthcare products, and Elan Corp. PLC, a Dublin-based biotechnology company, jointly announced July 29 that they intend to merge into a new Irish companywith the Perrigo name.
This news follows the May 20 announcement by New Jersey-headquartered Actavis Inc. and Dublin-basedwarner Chilcott that the two companies agreed to combine into a single company called Actavis PLC domiciled in Ireland. As in the proposed Perrigo-Elan deal, the U.S. party in the Actavis-Warner Chilcott deal is significantly larger than its Irish counterpart.
The announcements of these two similar deals are noteworthy because they are only the most visible part of a larger phenomenon. One recent news report described a behind-the-scenes frenzy of mergers and acquisitions activity motivated by U.S. companies seeking to lower their taxes by mergingwith Irish companies. About prospective mergers in the pharmaceutical industry, onewall Street analyst is quoted as saying, "Everyone's trying to find these strategies to lower their tax rates."
For the article, go here. (Subscription required)
Another U.S. company has sidestepped the anti-inversion rules of section 7874 and is moving its legal domicile to Ireland. Perrigo Co., a Michigan-based provider of healthcare products, and Elan Corp. PLC, a Dublin-based biotechnology company, jointly announced July 29 that they intend to merge into a new Irish companywith the Perrigo name.
This news follows the May 20 announcement by New Jersey-headquartered Actavis Inc. and Dublin-basedwarner Chilcott that the two companies agreed to combine into a single company called Actavis PLC domiciled in Ireland. As in the proposed Perrigo-Elan deal, the U.S. party in the Actavis-Warner Chilcott deal is significantly larger than its Irish counterpart.
The announcements of these two similar deals are noteworthy because they are only the most visible part of a larger phenomenon. One recent news report described a behind-the-scenes frenzy of mergers and acquisitions activity motivated by U.S. companies seeking to lower their taxes by mergingwith Irish companies. About prospective mergers in the pharmaceutical industry, onewall Street analyst is quoted as saying, "Everyone's trying to find these strategies to lower their tax rates."
For the article, go here. (Subscription required)
Posted on
VAT: OECD VAT Guidelines Need Clear Definition Of Permanent Establishment, Businesses Say
by Rick Mitchell (Bloomberg)
Recent draft international guidelines on value-added tax should be revised to clearly definewhat a businessestablishment is for the purpose of applying VAT to services and intangible goods across multinational enterprises, and to clearly explain how the guidelines interactwith existing transfer pricing rules, practitioners, business groups and multinationals said in comments released Aug. 5.
The Paris-based Organization for Economic Cooperation and Development,whose 34 member countries include theworld's advanced economies, released some 31 comment letters regarding the 63-page consolidated version of the draft OECD International VAT/GST Guidelines that it published Feb. 4 and accepted comments on until May 4.
For the story, go here. (Subscription required)
Recent draft international guidelines on value-added tax should be revised to clearly definewhat a businessestablishment is for the purpose of applying VAT to services and intangible goods across multinational enterprises, and to clearly explain how the guidelines interactwith existing transfer pricing rules, practitioners, business groups and multinationals said in comments released Aug. 5.
The Paris-based Organization for Economic Cooperation and Development,whose 34 member countries include theworld's advanced economies, released some 31 comment letters regarding the 63-page consolidated version of the draft OECD International VAT/GST Guidelines that it published Feb. 4 and accepted comments on until May 4.
For the story, go here. (Subscription required)
Posted on
Ending the Lockout of Overseas Earnings: An Update
by Douglas Holtz-Eakin & Gordon Gray (American Action Forum)
In 2011, the American Action Forum produced an analysis assessing the benefits of corporate tax reform. Among the reforms examined in the paperwas a temporary tax holiday on foreign earning by U.S. multinationals to encourage the repatriation of those funds. In order to inform the current debate, this update reexamines that analysis. At the time, the temporary policywas estimated to produce an increase of $360 billion in GDP and add 2.9 million jobs. Over the past year and a half, some key elements underpinning that analysis have changed. Those changeswould combine to, on net, increase the effect on the economy from a repatriation policy. Based on these revisions, a future repatriation policy could be expected to add $440 billion to GDP and 3.5 million jobs. Of course,with a permanent reform, the pace of the return of fundswould likely be lower and stretch out the timing of these impacts.
The underlying methodology of this update remains consistentwith the initial estimate.
For the report, go here.
In 2011, the American Action Forum produced an analysis assessing the benefits of corporate tax reform. Among the reforms examined in the paperwas a temporary tax holiday on foreign earning by U.S. multinationals to encourage the repatriation of those funds. In order to inform the current debate, this update reexamines that analysis. At the time, the temporary policywas estimated to produce an increase of $360 billion in GDP and add 2.9 million jobs. Over the past year and a half, some key elements underpinning that analysis have changed. Those changeswould combine to, on net, increase the effect on the economy from a repatriation policy. Based on these revisions, a future repatriation policy could be expected to add $440 billion to GDP and 3.5 million jobs. Of course,with a permanent reform, the pace of the return of fundswould likely be lower and stretch out the timing of these impacts.
The underlying methodology of this update remains consistentwith the initial estimate.
For the report, go here.
Posted on
Think-tank urges US to switch to territorial tax system
by James Politi (Financial Times)
US companieswould repatriate as much as $1.6tn or the bulk of the cash they have stashed overseas if America overhauls the treatment of international earnings in a sweeping reform of the corporate tax code, a Republican-leaning think-tank said on Tuesday.
The American Action Forum led by Doug Holtz-Eakin, a former director of the Congressional Budget Office during the Georgew. Bush administration is trying to build the case for the US to switch to a territorial tax system that imposes minimal taxes on foreign earnings.
For the story, go here.
US companieswould repatriate as much as $1.6tn or the bulk of the cash they have stashed overseas if America overhauls the treatment of international earnings in a sweeping reform of the corporate tax code, a Republican-leaning think-tank said on Tuesday.
The American Action Forum led by Doug Holtz-Eakin, a former director of the Congressional Budget Office during the Georgew. Bush administration is trying to build the case for the US to switch to a territorial tax system that imposes minimal taxes on foreign earnings.
For the story, go here.
Posted on
Tax Treaties: U.S., Belgian Competent Authorities Agree To Authorized OECD Approach to PE Profits
by Molly Moses (Bloomberg BNA Daily Tax Report )
The United States and Belgium have agreed to attribute profits to permanent establishments consistentwith the approach in the Organization for Economic Cooperation and Development's 2010 Model Tax Convention, according to an agreement made public Aug. 6.
For the story, go here. (Subscription required)
The United States and Belgium have agreed to attribute profits to permanent establishments consistentwith the approach in the Organization for Economic Cooperation and Development's 2010 Model Tax Convention, according to an agreement made public Aug. 6.
For the story, go here. (Subscription required)
Posted on
Rodriguez Continues Narrow Interpretation of Subpart F
by Andrew Roberson, David Noren, and Genevieve Tokic
Andrew Roberson, David Noren, and Genevieve Tokic provide observations on the Fifth Circuit's recent decision in Rodriguez v. Commissioner,which upholds a literal application of the rules under subpart F.
For the article, go here. (Subscription required)
Andrew Roberson, David Noren, and Genevieve Tokic provide observations on the Fifth Circuit's recent decision in Rodriguez v. Commissioner,which upholds a literal application of the rules under subpart F.
For the article, go here. (Subscription required)
Posted on
Convenient Myths
by Georgewhite (Tax Analysts, Tax Notes Today)
Georgewhite rebuts the myth that unrepatriated earnings of multinational corporations' foreign subsidiaries are trapped overseas.
For the article, go here. (Subscription required)
Georgewhite rebuts the myth that unrepatriated earnings of multinational corporations' foreign subsidiaries are trapped overseas.
For the article, go here. (Subscription required)
Posted on
Importance of Location Savings Called Into Question
by Matthew R. Madara (Tax Analysts, Tax Notes Today)
Recent interest in location savings may be misplaced, according to empirical analysis examiningwhether multinational corporations (MNCs) experience increased profitability after entering low-cost jurisdictions. Shanto Ghosh of Deloitte Tax LLP explained on July 31 that preliminary research he has performed to date indicates that few MNCs have a statistically significant increase in profitability after entering into China and India.
Location savings has become an increasingly important transfer pricing issue andwas among several items added to the OECD's discussion draft on the transfer pricing aspects of intangibles. David Ernick of PricewaterhouseCoopers LLP said the addition of the new section in the revised draft addressing location savings and other factors is important.whereas the prior draft merely stated that the added factors are not intangibles but are more like comparability factors, the new draft better defines the terms and how to account for them in a comparability analysis, he said.
For the story, go here. (Subscription required)
Recent interest in location savings may be misplaced, according to empirical analysis examiningwhether multinational corporations (MNCs) experience increased profitability after entering low-cost jurisdictions. Shanto Ghosh of Deloitte Tax LLP explained on July 31 that preliminary research he has performed to date indicates that few MNCs have a statistically significant increase in profitability after entering into China and India.
Location savings has become an increasingly important transfer pricing issue andwas among several items added to the OECD's discussion draft on the transfer pricing aspects of intangibles. David Ernick of PricewaterhouseCoopers LLP said the addition of the new section in the revised draft addressing location savings and other factors is important.whereas the prior draft merely stated that the added factors are not intangibles but are more like comparability factors, the new draft better defines the terms and how to account for them in a comparability analysis, he said.
For the story, go here. (Subscription required)
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