2014

Tax reform proposed by Houseways and Means Committee Chair Dave Camp, R-Mich.,would raise $52 billion from businesses but cut passthrough taxes by $234 billion, and a plan cosponsored by Senate Finance Committee Chair Ronwyden, D-Ore.,would raise taxes on all industries except manufacturing, EY said in an October analysis.
For the report, go here. (Subscription required)

The U.S. attempt to block companies from leaving the country for tax reasonswouldn't stop Pfizer Inc.,which is still considering moving America's biggest drugmaker abroad, Chief Executive Officer Ian Read said.
"Ifwe believe the value is still there andwe believe, under our interpretation of these rules, there is still value, I see no reasonwhywewouldn't be able to do an inversion," Read said in an Oct. 28 telephone interview.
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Lynda K.walker, Robert Carroll and M.K. Huffmanwrite that The Tax Council/Ernst & Young LLP Tax Reform Business Barometer for October indicates thatwhile business tax professionals don't see enactment of comprehensive tax reform on the horizon in the next year or two, they do think therewill be significant foundationalwork by the Congress over the next year. Respondents assigned a roughly 50 percent likelihood that a new tax reform planwill be released by the chairmen of the Houseways and Means and Senate Finance committees.
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Pfizer has said there is still "meaningful value" to be found in tax inversions despite awhite House crackdown that has torpedoed a string of high-profile deals and cast doubt onwhether the US pharmaceutical companywill make a fresh bid for the UK's AstraZeneca.

For the story, go here.

This article revisits Marty Ginsburg's law of Moses' rod in the context of inversions, in particular how proposed revisions to the anti-inversion rules could be used to justify new, or even more aggressive, expatriation strategies.while not advocating that any taxpayer or other party pursue specific strategies or that they are "good" from a tax policy standpoint, the goal in examining potential inversion strategies even in the face of anti-inversion rules is to help findways to incorporate antiabuse provisions into the larger structural goals of the income tax.

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On 15 October 2014, the European Commission announced that a new interpretation of the Spanish tax authorities allowing companies to amortise for tax purposes the financial goodwill on indirect shareholdings is incompatiblewith EU State aid rules.
For the PwC Insight, go here.

One aspect of the recently published Finance Bill that caught the eyewas the tweak to the scheme that allows executives of some firms, usually foreign multinationals, to avail of income tax breaks. The idea is the same one that drives our low corporation tax rate; indeed, those same peoplewho avail of that rate are probably the oneswho have also successfully lobbied for favourable tax treatment of some of their employees. No doubt they also describe those employees as "key".
Most countries have constitutions that explicitly say all citizens are equal before the law. Somewhere along thewaywe must have had a referendum that exempted tax law from this imperative.
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Multinational life sciences companies should review their organizational structures and perform scenario planning to assess the likely impacts of the Organisation for Economic Co-operation and Development's (OECD's) Action Plan on Base Erosion and Profit Shifting (BEPS), says a new report from KPMG.
"The Post Base Erosion and Profit Shiftingworld" report looks at the global corporate income tax environment for life sciences multinationals and the impact of BEPS on post-tax profitability. It says national tax policy decisions have a major impact on the competitiveness and market valuation of life sciences companies. There is currently a 27.5 percent spread between the lowest and highest corporate income tax rates in OECD countries,while there is a 24 percent spread in effective corporate income tax rates between the top 20 life sciences companies.
For the story, go here.

Whichever party is in the majority in the House and Senate after the November elections, the next Congress should make repairing our broken tax code a bipartisan priority.
That fix must be comprehensive; more tinkeringwon'twork.
For the blog post, go here.

The OECD/G20 Base Erosion and Profit Shifting (BEPS) Project and the move toautomatic exchange of financial account informationtook centre stagewhen Heads of Tax Administration met on 23-24 October in Dublin, Ireland. Nearly forty delegations, including international and regional tax organisations, participated in theNinth Meeting of the OECD Forum on Tax Administration (FTA)and agreed that ever greater co-operationwill be necessary to implement the results of the BEPS project and automatic exchange of information.

For the OECD release, go here.

A small number of countries, including the U.K., are likely to adopt some of the recommendations from the Organization for Economic Cooperation and Development's draft on hybrids before September 2015, a practitioner said.
Michael Plowgian of KMPG LLP inwashington said Oct. 24 that some countries' political processes may not allow them towait until September 2015,when the OECDwill release additional guidance fleshing out its Sept. 16 proposal to address the tax consequences of hybrid mismatch arrangements.
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Switzerland announced plans for draft legislation thatwould allow it to swiftly amend existing agreements for the avoidance of double taxation to bring them in linewith the Organization for Economic Cooperation and Development's international standard on the exchange of tax information upon request.
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Tax administration chiefs from 38 countries have agreed to cooperate much more extensively in a global effort against offshore tax evasion by large companies andwealthy individuals, and base erosion and profit shifting by multinationals.
Meeting Oct. 23-24 in Dublin, the Forum on Tax Administration (FTA) agreed on a strategy for systematic and enhanced cooperation between tax administrations, based on existing legal instruments. "[The strategy]will allow us to quickly understand and dealwith global tax riskswhenever andwherever they arise," they said in a joint statement at the meeting's close.
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The European Commission has begun preliminary investigations intowhether transfer pricing rulings granted by several EU members constitute state aid. Motivated by fiscal pressures among members and public outrage over multinationals' cross-border tax planning, the investigations are notwithout a basis in jurisprudence. Nevertheless, the potential application of the state aid doctrine to individual advance tax rulings represents a radical expansion.
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One of the stories that firms deserting our country like to tell is that by moving their corporate domicile (but not their actual headquarters) outside U.S. borders to duck taxes, theywill be able to use cash they have parked offshore to expand their operations in the United States.
Sowhen the rules the Treasury issued in September upended the biggest proposed corporate "inversion" in history-Illinois-based AbbVie's $54 billion takeover of Ireland-based Shire - therewaswhining about how the Treasury is killing prospective American jobs.
Towhich I say: Give me a break.
For the article, go here.

Lower taxes and tariffs on information and communications technologywould improve global productivity, according to results of a study that indicated U.S. policy changes could also help at home.
The study, scheduled for release Oct. 27, found negative economic consequences due to slow technological adoption tied to high taxes and tariffs.
Broad agreement to reduce tariffsworldwide on ICT products and services aswell as restrictions on state-imposed taxes common across the U.S. onwireless technologywould benefit businesses and consumers at home and abroad, said Robert Atkinson, one of the study's authors and president of the Information Technology and Innovation Foundation.
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Government policies don't just tumble out of the sky. In almost all countries but for the few unfortunates ruled by tyrants, public policies reflect the policy preferences of citizensÔøΩpreferences somehow aggregated bywhatever government bodies are so empowered. To understand differences across countries in their economic policies, then, it often helps to look for differences across countries in the policy preferences of their citizens.
For the blog post, go here.

When the Obama administration announced new rules last month aimed at making so-called "corporate inversions" less profitable, itwas far from clear just how successful theywould be at discouraging use of the tactic, inwhich a U.S. company purchases another firm in a low-tax country and transfers its headquarters there in order to benefit from lower taxes.
Critics pointed out that the rules left one of the other drivers of inversions, a practice known as "earnings stripping" untouched, and others said the language of the Treasury Department's rulemaking virtually guaranteed legal challenges.
For the story, go here.

Industry and tax professionals have criticised the Tax Justice Network's methodology in its report that alleges nearly one-third of the largest businesses in Australia are dodging taxes.
for the story, go here.

Eric Meier and Ariane Calloud, of Baker & McKenzie, analyse a recent case about potential permanent establishment of a French entity operating under a commissionaire arrangementwith its Swiss principal.
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A sizable number of US public companies have recently executed "tax inversions" – acquisitions that move a corporation's residency abroadwhile maintaining its listing in domestic securities markets.when appropriately structured, inversions replace Americanwith foreign tax treatment of extraterritorial earnings, often at far lower effective rates. Regulators and politicians have reactedwith alarm to the "inversionitis" pandemic,with many championing radical tax reforms. This paper questions the prudence of such extreme reactions, both on practical and on conceptual grounds. Practically, the author argues that inversions are simply not a viable strategy for many firms, and thus the ongoingwave may abate naturally (orwith only modest tax reforms). Conceptually, he assesses the inversion trend through the lens of regulatory competition theory, inwhich jurisdictions compete not only in tax policy, but also along other dimensions, such as the quality of their corporate law and governance rules. He argues that just as US companies have a strong aversion to high tax rates, they have a strong affinity for strong corporate governance rules, a traditional strength of American corporate law.

For the paper, go here.

"In thisworld nothing can be said to be certain, except death and taxes." Benjamin Franklin
"The only difference between death and taxes is that death doesn't getworse every time Congress meets."will Rogers
The IRS and the U.S. Treasury last month announced plans to squelch the trend for businesses to seek foreign tax shelters through corporate inversions. Butwhy are companies fleeing? Because the current corporate tax rate is oppressive. (See BioWorld Today, Sept. 24, 2014.)
For the blog post, go here.

Vietnam's Decree 91 on VAT and corporate income tax (CIT) came into effect on October 15 2014. It includes provisions on deductible expenses, tax incentives for manufacturers and high-technology firms, a reduction in the paperwork required for tax filing and in the corporate tax rate for agricultural businesses,which are all applicable for the 2014 reporting year.

For the story, go here.

The European Commission announced its directive proposal for a common consolidated corporate tax base (CCCTB) more than three and a half years ago, on March 16 2011. Andreas Eggert discusses how the proposal has developed since then.

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The European Court of Justice should abandon the terms established by the landmark 2005 Marks & Spencer judgment allowing for cross-border corporate group tax relief, the European Union's top legal adviser said in an opinion.
If the EU high court adheres to the Oct. 23 opinion (C-172/13) by ECJ Advocate General Juliane Kokott,which happens in 80 percent of all cases, itwould dismiss a European Commission legal challenge brought against the United Kingdom in an effort to force it to properly apply the Marks & Spencer judgment.
The surprise legal opinion could restrict the fundamental freedom of establishment for companies that is one of the pillars of the EU single market, according tax experts.
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A new study concluding that European Union member states lost more than $200 billion in value-added tax revenue in 2012 underlines the need for changes to the patchwork VAT system, according to the European Commission.
Based on the commission-sponsored study, the difference betweenwhat should have been collected by EU member states andwhatwas actually collectedÔøΩthe "VAT gap"ÔøΩwas $224 billion.
In addition towidely different approaches taken by EU member stateswhen it comes to rates on certain products, the commission said the report, issued Oct. 22, proves EU member states' continued rejection of proposals for more harmonization has significant fiscal costs.
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The Organization for Economic Cooperation and Development's proposed country-by-country reporting template, master file and local file portend a doubling of the transfer pricing compliance burden of multinational companiesworldwide, a London practitioner said.
Patrick Trapp of EY LLP said the Sept. 16 draft guidance under Action 13 of the international plan to combat base erosion and profit shifting constitutes a significant change in transfer pricing documentationÔøΩ"both in focus and in detail, and for most parts of theworld."
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Ireland's finance chief defended his country's tax policies that have encouraged numerous American companies to route profits through his country, but said he alsowelcomes recent U.S. efforts to stifle awave of corporate inversion deals.
Finance Minister Michael Noonan, speaking at the second Finance Tax Policy Conference in Dublin, said the 12.5 percent corporate tax rate set in Ireland's recently announced budget provides investorswith certainty as many countries are changing their policies as part of global tax changes spearheaded by the Organization for Economic Cooperation and Development, under the direction of the Group of 20.
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Countries thatwork together like Ireland and the US "need to be cognisant" of the impact their tax policies have on each other, new US Ambassador to Ireland Kevin O'Malley said in a speech yesterday.


He said cross-border mergers can make the Irish and American economies stronger, but that "these transactions should be driven by genuine business strategies and economic efficiencies, not a desire to shift the tax residence of the parent entities simply to avoid taxes".
For the story, go here.

Pascal Saint-Amans, the director of the Centre for Tax Policy and Administration at the Paris-based Organisation for Economic Cooperation and Development (OECD), told the Irish Independent itwas "common sense" for the Government towait for the conclusion of an examination of patent box schemes elsewhere by Europe before moving.
For the story, go here.

European Union tax regulators suffered a setback as an aide to the bloc's top court sidedwith the U.K. in a clash over the nation's corporate tax system.

Rules that EU authorities criticized for making it almost "impossible" for companies to claim tax relief on non-resident subsidiaries are justified, an adviser to the EU Court of Justice said today.

For the story, go here.

A tax overhaul proposal from Rep. Dave Camp (R-Mich.), chairman of the Houseways and Means Committee, doesn't create a new definition of intangible assets due to "universal" fears among taxpayers that doing sowould create confusion and uncertainty, a committee staffer said.
Sean Hailey, an adviser for the majority onways and Means, said fear of uncertaintywas behind Camp's decision to use a percentage-based formula to identify the intangible-related returns thatwould be taxed under a new provision of Subpart F in the proposal rather than using a definition based on "facts and circumstances."
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Alvin C.warren reviews the basic analytics of deferral and exemption systems for taxing the income of foreign corporate subsidiaries, highlighting some relationships that are not always appreciated in policy discussions.
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Tax savings are not the main driving factorwhen multinational companies outsource their routine functions; rather, those decisions are driven mainly by the desire to reduce costs and standardize, according to a Dell Inc. tax official.
"You do notwant thewhole outsourcing strategy to hinge on the tax savings," said Lionel Nobre, Dell's director of Latin America tax, at the International Fiscal Association conference in Mumbai.
Speaking on a panel devoted to cross-border outsourcing issues, Nobre pointed out that tax incentives and exemptions are affected by changes in the law and in the business aswell as economic changes.
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Three bills introduced in the New Jersey Legislature target domestic corporations that become foreign-incorporated corporations, subsidiaries of a foreign corporation, or shift operations offshore. Precluding inverted companies from obtaining government contracts and state incentives could be a significant cost that companies shouldweigh in their decision to 'invert.'
For the PwC Insight, go here.

In a joint letter to Heads of State and Government of the European Union ahead of thisweek's European Council meeting, European Commission President Barroso and European Council President Van Rompuy inform about the key issues coming up for discussion at the G20 summit in Brisbane (Australia) on 15-16 November 2014.
For the release, go here.

This publication considers action 13 of the OECD's BEPS Action Plan, aimed at re-examining transfer pricing documentation requirements ÔøΩ and in particular providing for more information from taxpayers. Such informationwill offer useful indicators for risk assessment and allow tax administrations to better focus their limited resources.
For the updates, go here.

Six years after the onset of the economic crisis, French growth remainsweak. France faces great challenges as it seeks to boost its competitiveness and its medium-term growth potential and to transform its economic and social structures so as to preserve all that it has achieved in a context of heavy pressure on the public finances. The reforms that it undertakes todaywill determine its productivity tomorrow and its place in theworld economy.
Studies consistently show that, in order to improve business competitiveness, France should give priority to reforms in four areas.
For the study, go here.

Ireland adopts first mover advantage including commitment to a best-in-class knowledge development box – a clear roadmap for the future.

For the story, go here.

On the first floor of a rust-colored building near the main railway station, Marius Kohl spent years engineering this country's most valuable export: tax relief.
As head of a federal agency called Societes 6, Mr. Kohl approved thousands of tax arrangements for multinational corporations, sometimes helping them save billions.
For the story, go here.

Modifications to subpart F rules included in the comprehensive tax reform draftreleased February 26 by Houseways and Means Committee Chair Dave Camp, R-Mich., could be changed and "fleshed out" in the future, Ray Beeman, former tax counsel and special adviser for tax reformwith the committee, said October 21.
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Italy's Ministry of Economic Development and the Italian Treasury announced a plan to change the calculation method of the value of trademarks, patents and some types of intellectual property, in order to lower the tax bill on those assets.
The plan is in response to the relocation of headquarters outside Italy by several large Italian companies,which left at least in part to save on their tax bills.
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The European Commission has referred Belgium to the Court of Justice for imposing a higher tax rate on foreign collective investment undertakings (CIUs) from other European Union member states than on those established domestically.
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A number of American corporations are making news, and not in a goodway.
They have announced mergerswith foreign companies so they can avoid paying U.S. taxes. They are seekingwhat is called a "tax inversion" and it allows an American corporation to mergewith a foreign corporation, move their headquarters overseas, andwith some accounting manipulations avoid paying most of their U S taxes.
For the article, go here.

Irish officials are examining the feasibility of a 6.25 per cent rate on a new corporate tax scheme as the Government moves to shore up inward investment after its decision to scrap the controversial "Double Irish" mechanism.
While this is one of several options under discussion, such a ratewould apply to a new "knowledge box" scheme inwhich a preferential ratewould be levied on assets such as patentswhich are managed from Ireland and located here.
For the story, go here.

Amendments to the Australian thin capitalization rules have been granted Royal Assent. The amendments are part of the Tax and Superannuation Laws Amendment (2014 Measures No. 4) Act 2014 (the act),which makes numerous changes first announced in the Australian Federal Budget released on May 14, 2013.

The thin capitalization measures apply to tax years commencing on or after July 1, 2014. This defers application of the rules for companieswith a calendar year-end for Australian tax purposes to tax years commencing January 1, 2015.

For the PwC Insight, go here.

The Irish government decided lastweek to get rid of a tax loophole that has helped big multinational companies like Apple and Google avoid paying billions in taxes to any government at all. But hold the champagne: Ireland couldwell replace one problematic tax policywith another, leaving aggressive tax avoidance pretty much intact.
For the editorial, go here.

Senate Finance Committee Chairman Ronwyden (D-Ore.) said hewill keep pushing legislation to curb corporate inversions, even as the Treasury Department's administrative moves may be quelling the tide.
In a statement Oct. 17,wyden said hewould continue discussions about inversion-related measures andwelcomed news that directors of AbbVie Inc. had abandoned a proposal to buy Dublin-based drugmaker Shire.

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With some companies reconsideringwhether to pursue inversions following Treasury's notice about forthcoming guidance to address the issue, Senate Finance Committee Chair Ronwyden, D-Ore., is monitoring the pace of inversion transactions to determinewhether stopgap legislation is still needed orwhether it canwait for comprehensive tax reform.

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The OECD is trying to determine the appropriate return for intangible assets in various action items of its base erosion and profit-shifting project.
Action item 8 on intangibles has proved so controversial that the OECD has had to postpone part of the project until later this year. In the report on harmful tax practices, the OECD has determined that a preferential intellectual property regime should not be considered harmful if its tax benefit depends on the performance of substantial activities in the relevant jurisdiction. However, the OECD members have not been able to agree onwhat substantial activities means.
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