2014

Devon Bodoh, Greg Featherman, and Stephen M. Massed analyze Notice 2014-52 and argue that unlike previous guidance, the notice not only tightens the application of section 7874 but also includes provisions intended to prevent inverted companies from benefiting from several types of post-inversion restructuring transactions.

For the report, go here.

by Joe Kirwin

European Union finance ministers are poised to approve changes to the bloc's parent-subsidiary directive that introduces an anti-abuse clause to reduce tax avoidance by corporate groups.

At the same time, the European Council Dec. 9will give final approval to legislation that extends EU laws regarding information exchange for financial income such as dividends.

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by Ari Shapiro

U.S. and European officials are angry about Irish rules that let some firms pay just 2 percent in corporate taxes. Ireland announced some tax code changes, but few think theywill change things much.

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Now that the election season is behind us and voters have made clear theywant policymakers to break the gridlock and move our country forward, let's hopewashington can finally replace campaign promiseswith political courage.with voters crying out for action on job creation and economic growth, reforming our country's broken international tax system is a great place to start. Indeed, pre-election polling showed that 9 in 10 Americans agreed "the next Congress needs to update the tax code so that itworks better for today's families and businesses.

But two things stand in theway.

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The Joint Committee on Taxation has increased, from USD19.5bn to more than USD33.5bn, its estimate of tax revenue that could be saved over a ten-year period from legislation to restrict corporate inversions introduced by Democrat lawmakers in the United States House of Representatives in May this year.

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A plan by 11 European Union member states to reach an agreement on a financial transactions tax by the end of 2015 is set to fall by thewayside as disagreements over scope of the levy andwho should pay it continue to block a deal, according to a report EU finance ministerswill consider Dec. 8-9.

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by David Jarczyk

David Jarczyk of ktMINE challenges the perception that the Organization for Economic Cooperation and Development'swork on base erosion and profit shifting represents a move away from the arm's-length standard and a surrender to the notion that insufficient market data exists for conducting comparability analyses. In fact, he says, the OECD's latest draft on the transfer pricing of intangibles, far from lamenting the lack of available comparable data, suggests a deeper analysis of independent transactions and behavior by expanding the use of data from public sources.

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Luxembourg's government is on alert for a newwave of tax revelations that Prime Minister Xavier Bettel expects to hit the country this month.

Pierre Gramegna, the nation's finance minister, received a new batch of questions from a group of investigative reporters that indicate more documents revealing alleged sweetheart tax dealswith multinational companieswill be published shortly, Bettel told journalists on Dec. 5 in Luxembourg.

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by Aaron E. Lorenzo

U.S. companies might increase spending overseas under a pair of proposals to change taxes on their foreign income, according to a report issued by the Congressional Research Service.

The proposals,which include draft legislation from retiring Houseways and Means Committee Chairman Dave Camp (R-Mich.) and a bill introduced by Sen. Michael B. Enzi (R-Wyo.), a Senate Finance Committee member,would shift to a permanent exemption of taxes on foreign income from deferral under current law.

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The government might bewilling to adopt a de minimis exception to provide some relief from the anti-skinny-down rule in the IRS's recent section 7874 anti-inversion notice (Notice 2014-52, 2014-42 IRB 712), said John Merrick, special counsel to the IRS associate chief counsel (international), December 4.

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In news analysis, Lee A. Sheppard discusses the controversy over aspects of Luxembourg's tax and ruling policies in thewake of the release of tax documents that show the nation as an enabler of aggressive tax planning.

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The European Commissionwill put forward its proposals on regulating tax rulings in the first quarter of 2015, commission spokeswoman Vanessa Mock said.
Mock,who spoke to reporters in Brussels, said EU Tax Commissioner Pierre Moscoviciwill respond by the end of theweek of Dec. 1 to a letter from German, French and Italian finance ministers on corporate taxationÔøΩspecifically, curbs on tax-lowering deals for companies.
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Chinawill step up itswork to combat multinationals' tax avoidance and cooperate in global efforts to build a fair international tax system "inwhich the tax matches the economic activity," a senior Chinese tax official said.
In an interview posted on the tax authority'swebsite Dec. 1, Zhang Ziyong, deputy director of China's State Administration of Taxation, said Chinawill cooperate on multilateral efforts to fight tax avoidance, increase information-sharingwith other countries and help other developing countries improve their tax collection capabilities.
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by EU

The European Commission filed two European Court of Justice complaints against Spanish tax laws that allegedly discriminate against investments in foreign bonds and nonresident companies.

After failing to convince Spain to alter the tax laws, the EU executive body filed a complaint Nov. 26 claiming that the country's inheritance tax laws give reduced rates on bonds issued by local governments. But the reduced rates aren't availablewhen an inheritance includes bonds from a foreign country, the commission said.

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By Vanessa Houlder

Corporation tax has fallen from more than half to less than a quarter of the total tax paid by Britain's biggest businesses since 2007, according to a survey published onwednesday.

The findings by the 100 Group of finance directors, representing FTSE 100 companies, highlight a "consistent trend" towards the taxation of people, production and property, rather than profits.

For the story, go here.

Liechtenstein is no longer the "whipping boy" of internationalwatchdogs as it seeks to shed a reputation as a blacklisted tax haven and adopts global standards on data sharing, the country's top diplomat said.

A month after the Alpine principality joined governments around theworld in signing an agreement on automatic data exchange, Liechtenstein Foreign Minister Aurelia Frick said her nation of 37,000 is changing its business model.

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The UK has lost its top slot in a league table of multinational companies' favourite tax regimes, in spite of George Osborne's flagship policy of cutting taxes to attract business to Britain.

The UK's popularity increased slightly but itwas leapfrogged by Ireland,which is expected to be less affected than some rival countries by the international crackdown on tax avoidance, according to a survey by KPMG, professional services group.

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The UK government released a statement on December 2 that sets out how the OECD plans to move forwardwith new rules for preferential intellectual property (IP) regimeswithin the base erosion and profit shifting (BEPS) project.

For the PwC Insight, go here.

Piet Battiau, head of consumption taxes at the OECD's Centre for Tax Policy and Administration, believes the OECD isworking effectivelywith other multilateral organisations and that common ground is being found on key indirect tax issues.
For the story, go here.

Should profits derived from a ride in an Uber car in London be taxed in the U.K.? How about clicking on a Google ad, or buying a song on Apple's iTunes?
U.K. treasury chief George Osborne onwednesday introduced a new 25% tax on foreign companies' profits derived from economic activity in the U.K. -- aiming to rein inwhat the government says is tax avoidance by multinationals shifting their tax burden to lower-tax regimes.
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As some in Europe call for multinational companies to pay more taxes, Britain onwednesday proposed a new 25 percent tax on the local profits of international companies, including tech giants like Google that use complicated structures to reduce their tax burden.
George Osborne, the British chancellor of the Exchequer, said multinational companies that use these complicated tax structures to move profits from their British operations to jurisdictions like Ireland and Luxembourg,where companies pay less corporate tax, should pay more of their share.
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The OECD seems to be taking await-and-see approach on recognizing the compliance burdens associatedwith country-by-country reporting, practitioners said December 3.
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The UK announced plans to raise over £1bn over the next five years from a new "diverted profits" tax on multinationals but detailswere scanty and advisers said itwas not clear how the levywouldwork.

The measurewas unveiled by George Osborne onwednesday as part of his Autumn Statement of tax and spending measures to "make sure that big multinational businesses pay their fair share".

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The U.K. became the latest country to take aim at multinational tax avoidance, announcing a new levy on companies that "artificially" shift their profits into havens, a move prompted by growing international outrage at maneuvers used by businesses including Google Inc., Apple Inc. and Starbucks Corp.

In his end-of-year statement to Parliament in London today, Chancellor of the Exchequer George Osborne said the U.K. governmentwill introduce a 25 percent tax on "profits generated by multinationals from economic activity here" that are moved out of the country. He named no companies.

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U.S. companies that have already carried out inversions are likely to cost the government a record $2.2 billion or more in lost tax revenue next year, double the amount in 2014, according to calculations based on companies' financial results.

That doesn't include the impact of companies that shift their legal addresses abroad in the future,which one Congressional study pegged at about $2 billion a year over the next decade. Since the first inversion in 1982, the deals have cost more than $9.8 billion in inflation-adjusted dollars, the calculations based on data compiled by Bloomberg show.

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Tax commissioners from 17 countries in the Asia-Pacific region have agreed to establish a joint regional task force to share compliance tactics, increase tax transparency and help countries tackle base erosion and profit shifting.
At the 44th meeting of the Study Group on Asian Tax Administration and Research (SGATAR), hosted by the Australian Tax Office in Sydney Nov. 27, ministers forged a regional plan to tackle multinational profit shifting.
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Germany, France and Italy urged European Union regulators to speed up andwiden curbs on tax-lowering deals for companies, saying the EU should adopt rules by the end of next year.
Measures should go beyond greater transparency and company registries to a "general principle of effective taxation" to stem the EU's lack of "tax harmonization" that entices companies to cherry-pickwhere they pay, according to a joint letter by Finance Ministerswolfgang Schaeuble (Germany), Michel Sapin (France) and Pier Carlo Padoan (Italy) to the European Commission.
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Government officials from the United States, the U.K., Australia, and Canada, participating in a roundtable on the OECD's base erosion and profit-shifting project November 30 at the annual conference of the Canadian Taxation Foundation, agreed that the implementation of country-by-country reporting is inevitable.
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Liechtenstein is no longer the "whipping boy" of internationalwatchdogs as it seeks to shed a reputation as a blacklisted tax haven and adopts global standards on data sharing, the country's top diplomat said.

A month after the Alpine principality joined governments around theworld in signing an agreement on automatic data exchange, Liechtenstein Foreign Minister Aurelia Frick said her nation of 37,000 is changing its business model.

For the story, go here.

Corporation tax has fallen from more than half to less than a quarter of the total tax paid by Britain's biggest businesses since 2007, according to a survey published onwednesday.

The findings by the 100 Group of finance directors, representing FTSE 100 companies, highlight a "consistent trend" towards the taxation of people, production and property, rather than profits.

For the story, go here.

The European Commission filed two European Court of Justice complaints against Spanish tax laws that allegedly discriminate against investments in foreign bonds and nonresident companies.
After failing to convince Spain to alter the tax laws, the EU executive body filed a complaint Nov. 26 claiming that the country's inheritance tax laws give reduced rates on bonds issued by local governments. But the reduced rates aren't availablewhen an inheritance includes bonds from a foreign country, the commission said.
For the story, go here. (subscription required)

In 2015, the European Union's new approach for administration and sourcing of value-added tax on business-to-consumer sales of telecommunications, broadcasting and electronic services begins.
This approachwill be a significant change for vendors and countries because it requires destination sourcing for all vendors for these sales. To alleviate some of the challenges of this change, a "mini One Stop Shop" (MOSS) compliance option is available.
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George Osborne, UK Chancellor of the Exchequer, presents his final Autumn Statement nextweek, before the general election on May 7 2015. The tax focuswill be on maintaining UK competitiveness through policy that creates a business-friendly environment.
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Though base erosion and profit shifting (BEPS) took the front seat during meetings between global leaders on November 15 and 16 at the G20 forum, country leaders also expressed concern over the taxation of intellectual property (IP). Patent box regimes in particularwere mentioned as a method used by large corporations to exploit tax incentives.
For the story, go here.

Piet Battiau, head of consumption taxes at the OECD's Centre for Tax Policy and Administration, believes the OECD isworking effectivelywith other multilateral organisations and that common ground is being found on key indirect tax issues.
For the story, go here.

With Republicans taking control of the Senate there has been talk of tax reform as a potential areawhere the Obama ddministration and the Republican controlled Congress can agree. There is awidespread view that the Internal Revenue Code is in need of reform. Previous efforts at tax reform by Congress, however, have created a complex, inefficient and inequitable federal tax system.
While past tax acts often are repletewith reference to "tax reform" or nomenclature like "jobs creation," they generally serve neither to truly reform the tax system or create many American jobs. One must therefore bewary of tax reform thatwould continue this pattern. Imagine, however, if the next round of tax reformwere crafted by thosewho embody the ideals of Senator Jefferson Smith, portrayed by Jimmy Stewart, in the 1939 movie classic directed by Frank Capra, "Mr. Smith Goes towashington."

For the blog post, go here.

Modest global economic forecasts, continuing high unemployment, and downshifts in potential output should spur governmentswith a greater sense of urgency to fully employ monetary, fiscal and structural policy levers to support growth, notably in Europe, according to theEconomic Outlook.

For the Economic Outlook, go here.

The U.S. corporate tax system is broken. The current method of taxing the profits of large, publicly traded corporationswas designed for an economy inwhich international investmentwas relatively unimportant and most corporate profitswere produced by tangible assets, such as machinery and buildings. It doesn'tworkwell in today's economy,which features increasing globalization and a rising share of profits coming from patents, brand reputation, and other intangible property.

For the blog post, go here.

Paying taxes has become easier over the past year for medium-sized companies around theworld, a new report from theworld Bank Group and PwC has found.
The average time it takes a company to complywith its tax obligations dropped by four hours last year, according to the study. The average number of payments required from companies also fell to 25.9 each year, and 264 hourswere required to achieve tax compliance.
For the story, go here.

The Treasury Department is undertaking a broad review of U.S. tax treaties to consider their role in facilitating the growing use of corporate inversions, a department official said.
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Public comments are invited on a discussion draftwhich dealswith follow-upwork mandated by the Report on Action 6 ("Prevent the granting of treaty benefits in inappropriate circumstances") of the BEPS Action Plan.

For the OECD release, go here.

Bermuda, the richest of the UK's overseas territories, has snubbed David Cameron's call to rip away the "cloak of secrecy" by creating a public register of the ultimate owners of its companies.

Bob Richards, finance minister, said: "Ifwe agree to a public registerwhile our competitors around theworld do not,wewill put ourselves at a distinct disadvantage, severely damaging our economy."

For the story, go here.

The OECD on November 21 released a discussion draft inviting comments on additionalwork to be done on anti-treaty-abuse measures developed as part of its base erosion and profit-shifting project.
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Without acquiescing to changing the anti-skinny-down rules in the IRS's recent anti-inversions notice, Robert Stack, Treasury deputy assistant secretary (international tax affairs), acknowledged November 21 that implementing the current bright-line rules may produce unexpected results.
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Theworld Bank and PricewaterhouseCoopers have announced their joint publication of Paying Taxes 2015, a global study of medium-sized companies that found the average time required to meet tax obligations and average amount paid in taxes have decreased over the last 10 years.
For the report, go here.

The OECD's base erosion and profit-shifting project should avoid increasing companies' compliance burdens by creating solutions that are the most administrable and the least prone to dispute, according to Robert Stack, Treasury deputy assistant secretary (international tax affairs).
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Large corporations are avoiding their fair share of taxes and Congress should address this by reducing the use of tax havens, eliminating "wasteful" corporate subsidies, and closing tax "loopholes" that encourage excessive executive compensation, the Center for Effective Government and the Institute for Policy Studies said in a November report.

For the report, go here.

The so-called 36-month rule in the excess distribution test could pullwhat otherwisewould have been normal business deals into the expanding section 7874 anti-inversion regime, making it more likely that Treasurywould characterize non-abusive cross-border merger and acquisition transactions as inversions, a practitioner said November 18.
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