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America can afford tax rate cuts to boost growth, wages, and employment
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America needs comprehensive tax reform
Aswashington prepares for the 114th Congress, the most talked about, not to mention feasible,way to stimulate the economy and expand investment is through comprehensive tax reform.2015 and the new Congress represent the best chance tax reform has had in years. In a recent poll by Public Opinion Strategies, 95 percent of voters agreed that Republicans and Democrats need towork together to update America's tax code.what's more, business leaders arewilling to come to the table in support of a fairer code.with cooperation between the parties, tax reform can put the economy on the right track for decades to come.
With such strong bipartisan support and the backing of key stakeholders, elected leaders of both parties should have the resources and capability to make needed progressÔøΩto simplify our code and reduce the corporate rate to an internationally competitive level.
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What corporate tax reform may look like in 2015
After the Republican-controlled Congress sorts out its new hierarchy, and after it gets done battling President Barack Obama over immigration, thenwill come the time to get some actualwork done.
Atop the priority list, at least from a market perspective,will be meaningful tax reform to address some of the thornier issues of concern to corporate America.
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G20 leaders back unmasking shell companies, automatic exchange of tax information
Leaders of the G20 (group of twenty),which comprises the 19 leading developed and emerging economies of theworld, confirmed in a communiqué at the end of a summit in Brisbane, Australia at theweekend, that they support unmasking the beneficial owners of shell companies and automatically exchangingtax informationwith each other at the end of 2018 at the latest.
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G20 tax reform plan should prevent another Lux leaks
The G20 Communique is good news on the international tax reform front. As part of the G20 commitment to boost economic resilience the Communique commits G20 nations to taking action to ensure fairness in the international tax system. This means they are looking atways to ensure profits are taxedwhere economic activities deriving the profits are performed andwhere value is created.
The most positive statement is the endorsement of the global Common Reporting Standard for the automatic exchange of information between revenue authorities. The G20 also provides strong support for the recommendations coming out of the OECD project on Base Erosion and Profit Shifting (BEPS). And so it should.
For the story, go here.
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FACT SHEET: The G-20 Brisbane Summit
G-20 leaders discussedways to prevent the abuse of anonymous shell companies to facilitate illicit financial flows and agreed to complete an implementation plan to combat corporate tax avoidance by the end of 2015, thewhite House said in a November 16 release about the G-20 Brisbane Summit.
For the fact sheet, go here.
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Jack Lew, Irish Hero
Ireland-based drug company Actavis on Monday announced a $66 billion agreement to buy California's Allergan, maker of the Botox anti-wrinkle treatment. News of the cash-and-stock transaction triggered a rally that made the shares of both companies look prettier. But the deal highlights how desperately U.S. tax policy needs a makeover.
For the editorial, go here.
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G-20 Leaders Commit to Finalizing BEPS Work in 2015
At their November 15-16 summit in Brisbane, Australia, G-20 leaders committed to complete by 2015 the joint action planwith the OECD to address base erosion and profit shifting and unveiled a strategy to increase transparency on beneficial ownership.
In a communiqué issued at the conclusion of the summit, the groupwelcomedwhat it called "significant progress" on the BEPS action plan and promised to complete the remaining action items, including "transparency of taxpayer-specific rulings found to constitute harmful tax practices." The focus on tax rulings follows the November 5 leak of documents exposing the details of preferential advance tax rulings between Luxembourg and more than 300 taxpayers.
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Remarks by President Obama at G20 Press Conference | November 16, 2014
President Obama in November 16 remarks at a G-20 press conference in Brisbane, Australia, praised the G-20 countries for taking new steps towards closing tax "loopholes" for multinational companies and preventing offshore tax evasion and answered questions regarding healthcare tax subsidies and the possibility of another government shutdown.
For the remarks, go here.
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Discussion Draft published covering follow up work on BEPS Action 6: Preventing Treaty Abuse
On 21 November 2014, the OECD released a Public Discussion Draft on 'Follow Upwork on BEPS Action 6: Preventing Treaty Abuse'. The OECD's 16 September 2014 Report on Action 6, noted that furtherworkwas neededwith respect to the precise contents of the OECD's Model Convention provisions and related Commentary, particularly in regard to the Report's draft of a Limitation on Benefits article as an alternative means of addressing treaty shopping.
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Berlin takes aim at Luxembourg tax deals
Berlin has taken a swipe at the new head of the European Commission by questioning the fairness of hundreds of controversial tax deals struckwhile Jean-Claude Junckerwas still Luxembourg's prime minister.
The criticism fromwolfgang Schäuble, Germany's powerful finance minister, came as Mr Juncker –who served as Luxembourg's prime minister for 18 years until 2013 – took his first public steps to stem a rising furore that is overshadowing his early days as commission president.
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Juncker Fends Off Tax Critics, Seeks Disclosure of Breaks
European Commission President Jean-Claude Juncker sought to blunt an early challenge to his leadership by rebutting allegations that he presided over sweetheart corporate tax deals during almost 19 years as prime minister of Luxembourg.
Juncker said hewon't interferewith a European Union probe of his country's potentially unlawful tax breaks. The investigation may bewidened after lastweek's disclosures by a journalists' group that Luxembourg helped more than 340 companies shave tax bills.
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MEPs have called for an investigation into tax evasion in the EU, threatening greater scrutiny of the new European Commission president, Jean-Claude Juncker, and his long tenure as Luxembourgs prime
MEPs have called for an investigation into tax evasion in the EU, threatening greater scrutiny of the new European Commission president, Jean-Claude Juncker, and his long tenure as Luxembourg's prime minister.
Alde, the liberals' grouping in the European parliament, requested a temporary committee to investigate tax havens after the recent disclosure of hundreds of special tax deals between Luxembourg and many of theworld's largest companies.
The deals allowed companies such as Procter & Gamble and JPMorgan to make use of Luxembourg's law to pay little tax on their earnings. They are now stirring outrage across a continent still reeling from austerity,where many feel the burden of the economic crisis has not been shared equally.
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UK and Germany reach compromise over patent box tax break
George Osborne is set to rein in one of his flagship policies after settling a disputewith Germany over a controversial tax break for intellectual property.
The dealwill remove a potential source of tension between David Cameron and Angela Merkel, the German chancellor, at thisweek's G20 summit in Brisbane. Ms Merkel believes the British regime encourages artificial shifting of profits to countrieswith so-called patent boxes.
For the story, go here.
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Developing countries to play greater role in OECD/G20 efforts to curb corporate tax avoidance
The OECD released today its new Strategy for Deepening Developing Country Engagement in the Base Erosion and Profit Shifting (BEPS) Project,whichwill strengthen their involvement in the decision-making processes and bring them to the heart of the technicalwork. The BEPS Project aims to create a coherent set of international tax rules to end the erosion of national tax bases and the artificial shifting of profits to jurisdictions solely to avoid paying tax.
For the release and report, go here.
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Countries Aren't Waiting on OECD to Implement BEPS
Although the OECD is moving quickly in developing guidance as part of its base erosion and profit-shifting project, taxpayers are likely to face varied levels of implementation of its recommendations by countries desperate to raise revenue, practitioners said at a tax conference in Philadelphia.
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Juncker scandal prompts sniping at European Commission election system
For Jean-Claude Juncker, the new president of the European Commission, the honeymoon is over and some in Europe alreadywant a divorce.
The prime minister of Luxembourg for the better part of 18 years, Juncker took over the European Union's top job on Nov.1 only to be hit by calls to resign a few days later. The sniping came after a group of investigative journalists issued a report detailing secret deals struck by major corporationswith Luxembourg that allegedly allowed them to shave billions of dollars off their global tax bills.
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Inversion Deals Are Moving Forward -- Is Treasury?
Despite Treasury's recent issuance of anti-inversion guidance (Notice 2014-52, 2014-42 IRB 712), it's business as usual for the inversion plans of six U.S. companies and their foreign counterparties.
Medtronic Inc., C&J Energy Services Inc., Mylan Inc., Burger Kingworldwide Inc., Steris Corp., andwright Medical Group Inc. are all poised to complete their planned tax re-domiciles before the second quarter of next year, according to recent quarter-end earnings calls and regulatory filings.
But common among the parties' SEC filings are disclaimers that changes to anti-inversion rules and regulations could adversely affect the tax status of the newly inverted company. Some have developed contingency plans for a possible change in law.
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Business In America Illustrated
U.S. corporations face the highest tax rate and most burdensome international tax rules in the developedworld,which stifles the economy and makeswork and investment more expensive, the Tax Foundation said in a November 10 report discussing types of U.S. businesses, problemswith the U.S. corporate tax system, and the benefits of tax reform.
For the report, go here.
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Juncker Says Luxembourg Tax Deals Similar To Other Nations, Sets Corporate Tax Agenda
European Commission President Jean-Claude Juncker rebuffed calls for his resignation following revelations that Luxembourg made hundreds of secret "sweetheart" tax agreementswith multinational corporations during his two-decade tenure as prime minister and finance minister.
Called before the European Parliament,where some lawmakers have demanded he resign, Juncker insisted that the Luxembourg tax agreementswere legal and that 22 other European Union member states have similar arrangementswith multinational companies.
"There probablywas a certain amount of tax avoidance in Luxembourg, as in other EU countries," Juncker said Nov. 12. "We find this everywhere in Europe because there is insufficient tax harmonization in Europe."
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OECD Aims to Create Regional Tax Networks As Part of BEPS Plan for Developing Nations
The Organization for Economic Cooperation and Development announced a new initiative to help developing countries in efforts against tax avoidance and base erosion,whichwill include developing regional tax networks andwill allow several developing nations to participate in meetings of the OECD's Committee on Fiscal Affairs.
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Germany, U.K. Reach Agreement On Proposed Limits for Patent Boxes
The German and U.K. governments have resolved their dispute overwhether patent boxes, such as the U.K.'s, constitute a harmful tax practice by agreeing that the benefits of such preferential tax regimes should be limited to jurisdictionswhere the taxpayer has undertaken the intellectual property research and development.
Under a joint statement issued Nov. 11, the two governments said theywill propose rules to the Organization for Economic Cooperation and Development thatwould prevent companies from obtaining tax benefitswhen they shift patents and intellectual property developed in one jurisdiction to a different jurisdiction.
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Irish Finance Bill 2014 clarifies grandfathering proposals for non-irish residents
In the October Budget, the Minister for Finance announced the intention to change the Irish tax residency rules. These changeswill apply to Irish incorporated companies resident in non-treaty jurisdictions, butwith a generous six-year grandfathering provision for existing investors.
As originally drafted, the 'grandfathering provisions'would have beenwidely available to all companieswhichwere incorporated in Ireland before January 1, 2015, regardless of ownership or activity. Amendments to this draft legislation have now been proposed in order to limit the ability to access these grandfathering provisions.
For the PwC Insight, go here.
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Sources of Government Revenue in the OECD, 2014
OECD countries collectively raise the most revenue from consumption taxes and social insurance taxes, and the United States relies the most on individual income taxes, the Tax Foundation said in a November 12 release.
For the release, go here.
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World's Top Finance Leaders to Consider Base Erosion, Profit Shifting Plan in Australia
The leaders of the Group of 20 major economieswill consider the next steps for their financial regulation agenda andwillwork to close loopholes in the international tax system as a part of a multi-year Base Erosion and Profit Shifting (BEPS) programwhen they meet Nov. 15-16 in Brisbane, Australia.
G-20 leaderswill continue to advance their two-yearwork program to update international tax rules for the 21st century by closing loopholes in the international tax systems and strengthening public finances through its two-year BEPSwork plan.
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Starbucks Unit Swapped Millions of Euros for Roasting Art
Starbucks Corp. may have unfairly lowered its tax bills by routing profits through Dutch subsidiaries, European Union regulators said as they continued to investigate sweetheart fiscal deals between multinational companies and national governments.
"The Dutch authorities confer an advantage" on Starbucks Manufacturing EMEA BV through tax agreements that may have constituted illegal state aid, according to a European Commission letter outlining its case to Dutch officials posted on the EUwebsite today.
The Dutch authorities allowed Starbucks Manufacturing to transfer profits through royalty payments to a unit outside the country that "could be overestimated," the EU said in the letter dated June 11. The regulator's findings are preliminary.
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Brussels slams Netherlands over Starbucks tax deal
An EU probe into sweetheart tax deals is confronting the Netherlands by alleging it artificially lowered Starbucks' tax bill through approving a complex, irrational and inappropriate corporate structure.
In a 40-page letter outlining its preliminary conclusions from its probe, the European Commission alleges the US coffee chain paid less tax than it should have done under Dutch law, and that this is a form of favourable treatment that amounts to an illicit state subsidy.
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GST reform expected to make appearance in Australia's 2015 white paper
In 2015, the Australian government is releasing awhite paper on tax policy reform,which analysts expectwill include suggestions to increase the goods and services tax (GST) rate and expand its base.
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Digital drag: ICT taxes are useful revenue-raisers, but low rates encourage long-term growth
A new study analysing the effects of different levels of ICT-related taxes and tariffs around theworld has been published by the Information Technology & Information Foundation,with recent changes affecting India noted.
For the story, go here.
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Indian Parliament's winter session to agree upon GST implementation
The long-awaited goods and services tax (GST) is very likely to be discussed in the Indian Parliament'swinter session, and the tax could be introduced in April 2016.
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European Commission to Revise CCCTB Proposal With Optional Tax Rates
The European Commission plans to propose a new version of the Common Consolidated Corporate Tax Base legislation that likelywill exclude the current option provision to the plan and may also include harmonized corporate tax rates.
In a move designed to head off the controversy over revelations stemming from Luxembourg "sweetheart" tax agreements signedwith multinational companies by European Commission President Jean-Claude Junckerwhen hewas prime minister and finance minister of Luxembourg, the European Commission also said the new proposalwill take into account the Organization for Economic Cooperation and Development guidelines on base erosion and profit shifting.
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OECD announces three-part plan to open BEPS talks to more developing countries
The OECD has unveiled a plan to bring more developing countries into the discussions on base erosion and profit shifting. But tax justice campaigners have given it only a guardedwelcome.
For the story, go here.
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A Hitchhiker's Guide to Outbound International Tax Reform
In this article, the authors argue that although some U.S. international income tax reforms, such as limitations on earnings stripping, can be handled by targeted legislative action, broad reform of the U.S. international income tax system should take place only as part of a general revision of the U.S. corporate income tax.
For the paper, go here.
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EC says Netherlands tax deal with Starbucks constitutes state aid
The European Commission has released a preliminary view that an advance agreement struck between Starbucks and the Dutch government constitutes state aid.
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UK and Germany agree on joint proposal regarding preferential IP regimes: good news for UK patent box?
The UK and German governments on November 11, 2014, announced a proposal that they co-developed to advance negotiations on new rules for preferential intellectual property regimeswithin the G20/OECD base erosion and profit shifting (BEPS) project. If agreed, this is a key development for the UK patent box. Germany had led opposition to patent box regimes,while the UKwas in the minority in opposing the nexus approach as set out in the September OECD BEPS paper on Harmful Tax Practices.
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News Analysis: International Changes the United States Shouldn't Have Made
The United States is not serious about taxing U.S. multinationals on their foreign income and does not need the revenue.
This fundamental understanding is amply demonstrated by the U.S. attitude toward the base erosion and profit-shifting project,which is a polite pretense of participationwith quiet undermining. European efforts to change laws to extract tax from U.S. multinationals are metwith U.S. proposals to enact a minimum tax thatwould still have the effect of encouraging foreign investment.
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Treasury Pick From Lazard to Back Corporate Inversion Curbs, Podesta Says
Antonioweiss, the Lazard Ltd. executive chosen to be a top lieutenant to Treasury Secretary Jacob J. Lew,will endorse efforts to curb corporate inversions,white House counselor John Podesta said.
That may ease tension overweiss's role as an adviser in several high-profile inversions. Sen. Elizabethwarren (D-Mass.), a populist foe ofwall Street, opposes the nomination because ofweiss's involvement in those inversions, a person familiarwith her position said.
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News Analysis: Luxembourg Rulings and Tax Provisions
The furor over the release of more than 300 tax rulings prepared by PricewaterhouseCoopers LLP for submission to Luxembourgwill likely lead to more negative portrayals of cross-border tax planning and structuring. The public debate may result in changes to tax laws and additional investigations by prosecutors and lawmakers. At the same time, the outcry raises questions about the extent towhich shifts in public acceptance of some types of corporate behavior may result in changes to professional practice.
Changes to corporate tax practice caused by informal pressure and social regulation are not easily reconciledwith accounting rules for how andwhen to recognize and measure tax positions.
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OECD sees plans by G20 nations topping global growth target
The OECD said on Friday the plans of G20 nations to boost theworld economy could beat their target of adding 2 percentage points to global growth by 2018, though geopolitical risks such as Ukraine and Ebolawere mounting.
Angel Gurria, the secretary-general of the Paris-based Organisation for Economic Co-operation and Development, said that the more than 1,000 measures proposed since Februarywould exceed the target, over the next five years, if implemented.
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'Luxleaks' will refocus the G20 on tax reform
The G20 started in 1999 as a somewhat technical grouping of finance ministers and central bankers. That all changedwith the Global Financial Crisiswhich turned it into a virtual 'global government' comprising a regionally balanced choice of theworld's largest economies, represented at the leadership level.
The personal presence of national leaders at the annual G20 Summit from then on has insured its intensely political nature. The crises in the Middle East, Ukraine and the triangle between China, Japan and the USÔøΩ not to mention the newly announced US-China climate deal ÔøΩ are thus likely to dominate thisweekend's summit in Brisbane, threatening to push financial and fiscal tasks to the background.
Enter 'Luxleaks', the unearthing by the International Consortium of Investigative Journalistsof an important number of confidential 'tax rulings' by the Luxembourg Government ensuring favourable corporate tax rates for a number of globally active companies including some of the largest and best-known names in international business.
Just in time to grab the headlines back for a core G20 issue: tax.
For the story, go here.
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On Comprehensive Tax Reform, the Question Is NotIf butWhen
On both sides of the aisle and and at both ends of Pennsylvania Avenue, almost everyone inwashington says it is time for comprehensive tax reform.
Stakeholders from nearly every industry have skin in the gamewhen it comes to tax reform. Closing so-called loopholes that provide incentives to one industry or anotherwill instigate knock-down-drag-out political fights.
For the story, go here.
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European IP tax regimes set for reform after UK-Germany agreement
The scope of the UK Patent Box regime is to be restricted after Germany and the UK reached agreement to reduce the competitive advantages it provides. The restrictions are likely to be extended to other European intellectual property (IP) tax regimes.
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Portugal announces 2015 Budget, Green Taxation Reform and investment tax benefits
Following the major corporate income tax (CIT) reform that entered into force on January 1, 2014, Portugal has become more stable. The 2015 State Budget proposes minor changes to this CIT regime. Notably, the Budget includes a reduction of the standard applicable CIT rate from 23% to 21%.
Moreover, in order to increase competitiveness, the Portuguese government has approved the new Investment Tax Code. The Codewill reinforce the existing investment tax benefits and adapt them to the new European Union State aid framework.
For the PwC Insight, go here.
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European Commission explains State aid investigation in the Netherlands
The European Commission (EC) has published its opening decision in the formal investigation into transfer pricing agreements between Starbucks and the Dutch tax authorities. The Commission had already communicated this investigation through a press release issued on June 11, 2014. The current decision, issued November 14, 2014, explains the reason for this investigation, and specifies the additional informationwhich the EC has requested from the Netherlands.
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BEPS Project Must Address CFC Issues to Be Effective, Shay Says
The OECD's base erosion and profit shifting initiative is facing a significant issue in how it addresses controlled foreign corporations because European case law currently restricts the scope of EU members establishing CFC regimes, Stephen E. Shay of Harvard Law School said November 14.
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European Commission Rules Against Dutch Transfer Pricing Deal for Starbucks
The transfer pricing arrangements Starbucks Corp. used to pass profits through its European subsidiary based in the NetherlandsÔøΩa deal approved by the Dutch governmentÔøΩconstitutes illegal state aid, the European Commission ruled.
In the latest challenge of "sweetheart" tax rulings EU member states have granted multinational companies to attract foreign direct investment, the commission Nov. 14 said the Dutch government allowed Starbucks to exclude the cost of coffee beanswhen it declared a taxable profit equal to a percentage of its costs.
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Europe Takes Aim at Deals Created to Escape Taxes
American companies have plowed more money into the Netherlands than any other country in theworld -- for five years running.
This does not reflect a new fascinationwith pot or pancakes. It is about the taxes, or lack of them.
The laws in Netherlands shield a variety of profits from taxation, making it attractive for big multinational companies like Starbucks, Google and IBM to set up offices. Even rock stars like the Rolling Stones and U2 have taken advantage of Dutch tax shelters.
For the story, go here.
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E.U. Accuses Starbucks and Netherlands of Making Unfair Tax Deal
European Union authorities have accused the Netherlands of making a special dealwith Starbucks that helped the company lower its taxes, creating unfair advantages over other countries in the bloc.
The report by the bloc's competition authority, made public on Friday, is a preliminary finding in a review of Starbucks' arrangementswith the Netherlands. It is the latest sign of mounting concern, and indignation, over the scale of tax breaks for multinational companies in a period ofweak growth and high unemployment in many parts of Europe.
For the story, go here.
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Scope of Leaked Tax Accords Took Luxembourg by Surprise
Luxembourg's governmentwas taken by "complete surprise" by the amount of files revealed lastweek in a report detailing hundreds of secret corporate deals that allegedly helped multinationals dodge taxes during Jean-Claude Juncker's tenure as the nation's prime minister.
The publication of a "tsunami" of more than 500 so-called tax rulings executed by the government between 2002 and 2010 "totally astonished" Luxembourg Finance Minister Pierre Gramegna, he told journalists at a briefing yesterday in Luxembourg.
For the story, go here.
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Starbucks Unit Swapped Millions of Euros for Roasting Art (1)
A Dutch unit of Starbucks Corp. paid millions of euros to a U.K.-based arm of the company that isn't taxed in Britain in exchange for a technique to roast coffee beans.
Exaggerated tax-deductible royalty payments for this technique may have allowed Starbucks to unfairly lower its Dutch taxes, the European Union said as it continues to probe sweetheart fiscal deals for multinationals. The EU findings are preliminary.
For the story, go here.