2014

Add Larry Summers to the list of thosewho think the U.S. tax system needs a makeover, and fast.
"It's not viable to continue for five more yearswith the tax systemwe now have," the Clinton-era Treasury secretary and former director of the Obamawhite House's National Economic Council said on CNBC Friday morning.

For the story, go here.

Almost 300 senior tax officials from more than 100 countries and international organisations met in Paris on 25-26 September 2014 during the 19th Annual Global Forum on Tax Treaties to discuss solutions to unintended double non-taxation caused by (BEPS). Following up on the discussions at the 2013 Annual Meeting and the regional consultations on BEPS, participants examined the first set of tax treaty-related recommendations developed under the OECD/G20 BEPS Project and discussed the main tax treaty issues and options concerning the currentwork on the 2015 deliverables to be dispatched in September and December 2015.
For the release, go here.

The European Unionwill step up its probe of Apple Inc. (AAPL)'s tax arrangements in Ireland, revealingwhy it suspects the iPhone maker received an unfair advantage.

Regulatorswill publish tomorrow its reasoning for opening an investigation earlier this year, Antoine Colombani, a spokesman for the European Commission, said in an e-mail. The move is the latest step toward possible repayment of millions of euros of aid.

For the story, go here.

European Union regulatorswill explain as soon as Mondaywhy they believe that tax deals granted to Apple Inc. and Fiat SpA violated EU law, people familiarwith the matter said, marking the next formal step in the bloc's drive against alleged tax avoidance by multinationals.

The European Commission, the EU's central antitrust authority, opened formal investigations in June intowhether tax deals granted to Apple in Ireland, Fiat's finance arm in Luxembourg and Starbucks Corp. in the Netherlands amounted to illegal state support for the companies.

For the story, go here.

The Treasury secretary's new rules to stop inversions might not have teeth, but theywill give chief executiveswho don'twant to desert the country an excuse to resist pressure fromwall Street.
The regulations to limit corporate tax inversions presentedwith great fanfare by Treasury Secretary Jack Lew late Monday are so technical and complicated that they make my teeth hurt. And theywill make your teeth hurt, too, unless you're a tax lawyer or corporate finance geek.
For the article, go here.

President Michelle Bachelet, describing it as a "historic day," signed into law tax legislation thatwill gradually increase Chile's corporate tax rates.
Under thewide-ranging law, signed Sept. 26 after six months of congressional debate and negotiations, the main corporate ratewill rise from 20 percent to 25 percent, butwill no longer count as credit against the liabilities of the owners. Alternatively, companies can pay at 27 percent, earning their owners a 65 percent credit against their own tax liability.
For the story, go here. (subscription required)

Switzerland has published for consultation purposes the Corporate Tax Reform III draft legislative text. The draft legislation is designed to maintain Switzerland's competitiveness as a business location following repeal of current tax regimes and their replacement by new measures. Implementation is not expected until 2018-2020. The current ruleswill remain applicable until then, to help maintain Switzerland's attractiveness as a business location and provide companieswith a stable, long-term environment.

For the PwC Insight, go here.

Things have reached a pretty passwhen the only mainstream publication putting inversions in their proper perspective is a baby boomer entertainment rag. That'd be Rolling Stone (Sept. 11, 2014, at 33):

Inversions are just the tip of the iceberg . . . a strong, bipartisan consensus has, in fact, emerged inwashington: Theworld's richest corporationswill get awaywith fleecing hundreds of billions of tax dollars from the rest of us.

For the story, go here. (subscription required)

ANALYSIS: The US has moved to try and curb the practice of inversion transactionswhich has seen a handful of companies relocate overseas,with many more considering the option. The rule tightening attempts to reduce the benefits of an inversion.

For the analysis, go here.

As some leaders inwashington demonize companies like Raleigh-based Salix Pharmaceuticals for investigating so-called corporate "inversions," they ignore the true culprit: our job-killing, anti-competitive tax code. Because of our too-high corporate taxes, North Carolina and U.S. companies are fighting an uphill battle in global markets, and it's driving some companies to relocate to more business-friendly locales. It's also driving some of them out of business.
It's time for a bipartisan solution to this problem, one thatworks for everyone: the companies involved,workers, families and our governments and communities.
For the story, go here.

I've shared some interested rankings on tax policy, including a map from the Tax Foundation showingwhich states have the earliest and latest Tax Freedom Days.
There's also a depressing table showing that the United States "earns" a lowly 94th place in a ranking of business-friendly tax system.
So Iwas very interested to see this table from the Tax Foundation revealingwhich countries have the most punitive regimes for penalizing success.
For the table, go here.

Who runs your business? According to Treasury Secretary Jack Lew, or at least implied from the Treasury's new rules aimed at barring many so-called "tax inversions," the government does.
Lew, other administration officials and congressional Democrats decry these transactions as "eroding the tax base" and being "unpatriotic." Lew has said that the companieswhich effect "inversion" transactions are "effectively renouncing their citizenship to get out of paying taxes."
Businessmen, investors, and ordinary Americans should reject each of these spurious self-serving charges and the idea that government has either the right or the responsibility to determine how otherwise law-abiding private companies structure themselves.
For the story, go here.

The federal government recently passed new rules designed to remove the attractiveness of corporate tax inversions. Tax inversions are considered to be a strategy that corporations utilize to improve operational efficiencies and reduce their tax burden.will the new rules accomplishwhat the administration and many members of Congress desire?
The Treasury Department issued four new rules on Monday, September 22, 2014. In this articlewe'll discuss the following:
1) How tax inversionswork.
2) The first two rules.
3)will corporations find away around them?
For the article, go here.

In a passive aggressiveway, former President Bill Clinton recently criticized new rules from the Obama Treasury Department to curb blatant corporate tax dodging.
What does Mr. Clinton think about the Treasury's effort? "Everythingwe are doing now, including these inversion rules," he told CNBC, "I have no problemwith….But…."

Butwhat?

For the blog post, go here.

It's autumn, and Halloween is right around the corner. That's good timing, since the Obama administration has beenworking feverishly all summer to create a new scary character for the year: the corporate tax inversion.
The administration'swork has been a pretty neat trick. Corporate tax inversions can take different forms, but the administration has concentrated on those inwhich a U.S. firm mergeswith a foreign corporation to take advantage of the tax laws of the foreign jurisdiction in the interests of minimizing taxes, maximizing profits, and increasing shareholder value – I'm sorry, I mean in the interest of stealing tax revenue from you and me.
For the blog post, go here.

The OECD's release of seven progress and final reports under the base erosion and profit-shifting initiative represents a major step forward, but morework remains on refining the recommendations and considering how to implement them, Treasury officials said September 24.

For the story, go here. (subscription required)

A Treasury Department official said that itwill be challenging for the countries participating in the international project to combat base erosion and profit shifting (BEPS) to reach a consensus on the project's outstanding transfer pricing issues.

Robert Stack, Treasury's deputy assistant secretary for international tax affairs, said Sept. 24 that there are some "areaswhere consensuswas more difficult." Hewas addressing the Organization for Economic Cooperation and Development's first seven BEPS deliverables, released Sept. 16.

For the story, go here. (Subscription required)

Pfizer Inc. has approached Actavis Plc about a deal that could allow the U.S. drugmaker to move its address overseas and reduce taxes, in a sign the Obama administration's efforts to curtail inversions might fall short.
Pfizer made its approach before the U.S. Treasury Department announced new rules Sept. 22 to make such deals -- called tax inversions -- more difficult, peoplewith knowledge of the matter said. Those changeswon't deter Pfizer, even if they are a complication, one of the people said, asking not to be identified discussing private information.
For the story, go here.

Therewas a timewhen American pharmaceutical companies had finally found away to access the large reserves of cash they had piling up in places like the Cayman Islands. The processwas simple: Acquire a smaller foreign rival, repatriate in the rival's home country and then dip into the offshore moneywithout fear of paying the U.S. corporate tax rate of 35 percent.
But the U.S. Treasury Department effectively undercut that strategy thisweek, issuing new rules thatwill make it a lot harder for U.S. companies to tap into offshore cashwithout paying taxes -- even if they move their headquarters abroad in one of these deals, known as "inversions."
Of the pending inversions, those involving pharmaceutical and related industries seem to be most immediately at peril, tax experts told The Huffington Post, because those companies are the most likely to be pursuing inversions as away to get tax-free access to offshore cash.
For the story, go here.

Thisweek the Obama administration announced new regulations aimed at discouraging the controversial practice of corporate inversions. That'swhat happenswhen a U.S. company mergeswith a foreign partner, so it can move its headquarters overseas and cut its tax bill. As NPR's Jim Zarolli reports, the new rules are likely to slow but not stop the number of inversions now being planned.

For the transcript, go here.

The Obama administration's effort to curb corporate inversions ÔøΩ the strategy of moving company headquarters overseas to dodge U.S. taxes ÔøΩ drew boos from business on Tuesday, and cheers from consumer and labor groups.
No surprise there. But the Treasury Department's rule tweaks to discourage tax-avoidance deals also united everyone on one point: The country needs comprehensive tax-reform legislation.
President Obama himself declared, "There's no substitute for congressional action."
So Congresswill jump right on it.
Kidding!
For the story, go here.

Tennesseewilliamswas famous for concocting American dramaswhere something is terriblywrong but no one iswilling to talk about the underlying problem. That is exactlywherewe are nowwith the Obama administration's attack on "corporate inversions" -- transactionswhere a U.S. company mergeswith a foreign company and locates the parent company abroad to reduce taxes.
For the story, go here.

Imagine how frustrating itwould be to have billions of dollars in cash but be unable to spend it as youwish unless you paid a large part to the Internal Revenue Service.
That could be your problem if youwere running a large multinational corporation based in the United States.
For the story, go here.

The United States' high corporate income tax rate and "dysfunctional"worldwide system of international corporate taxation is hindering U.S. economic growth and placing U.S.workers and employers at a significant disadvantage comparedwith global competitors, the Alliance for Competitive Taxation said in a September 25 release.

For the release, go here.

It is important for U.S. policymakers to take immediate interim steps to slow the pace of tax-motivated corporate inversions until broader corporate tax reform is possible because of the potential U.S. revenue loss and the rapid increase in the number of inversions, the Center for American Progress said in a September 25 report.

For the report, go here.

Corporate inversions –when American companies reincorporate abroad to lower their tax bills – have become a political controversy solely because of the screwiness of the U.S. tax system. If our government taxed companies based on their consumption, or on the income they make on U.S. territory, or onwhere their shareholders live, then the placewhere theywere charteredwould have no tax consequences.
Our government has instead decided to tax theworldwide profits of companies chartered in the United States, and is then shocked that companies prefer to move their charters elsewhere.

For the story, go here.

One day after Treasury Secretary Jack Lew, on behalf of the Obama administration, laid down the first official initiatives to thwart inversions, some of those companies thatwere the primary targets of the administration's efforts respondedwithwhat can justifiably be described as a thumb in Obama's eye.

For the story, go here.

The Treasury department thisweek announced a new set of regulations to crack down on thewave of "corporate inversions," inwhich American companies lower their tax bill by, simply put, relocating their legal corporate addresses overseas. The Obama administration is trying to make these inversions more costly and difficult - but how do theywork? Some answers to your questions:

For the Q&A, go here.

US business groups on Tuesday blasted as counter-productive the government's moves to curb tax inversion mergers that allow a company to escape US taxes.
But analysts said the rules could prove only partly successful at stemming corporate flight, and businesses involved in inversion deals had mixed reactions.
For the story, go here.

An interesting critique of the current corporate tax systemwas made on Monday night.
Our system today is closer towhat Iwould call a "stupid territorial" system that raises little revenue on overseas activitieswhile still imposing substantial distortions associatedwith avoiding the statutory taxes.
So,who made the comment? Mitt Romney? Ted Cruz? Jackwelch?
Try Jason Furman ÔøΩ chairman of thewhite House Council of Economic Advisers.
For the blog post, go here.

The Obama administration is not living up to its promise to move the country away from an arrogant, unilateral approach to theworld. And it has not embraced a more consensus-driven, multipolar vision that reflects the fact that America is not the sole player in the global sandbox.
No, I am not talking here about national security or counter-terrorism policy, but rather the telling issue of how governments think about money ÔøΩspecifically the money they are entitled to, as established by their tax policies.
For the article, go here.

Despite the Obama administration's action to reduce inversions, it should prioritize tax reform thatwould cut rates, broaden the base, and reform international taxation because inversions are a symptom of tax code distortions, Committee for a Responsible Federal Budget President Maya MacGuineas said in a September 23 statement.

For the statement, go here.

The bestway to address corporate tax inversions is by modernizing the U.S. business tax system and encouraging U.S. investment, but Treasury's proposed regulations on inversions go in the opposite direction and "amount to a Band-Aid solution thatwill only make mattersworse," the Business Roundtable said in a September 23 release.

For the release, go here.

The Obama administration's plan for executive action against corporate tax "inversions" is finally out, and it's a potentially significant one. Inversion is the process bywhich a U.S. corporation mergeswith a foreign one so as to pay taxes on overseas income at the other country's lower rates. The new plan, announced late Monday by Treasury Secretary Jack Lew,would crack down on it in severalways.
For the editorial, go here.

Many economists are downgrading their expectations for U.S. growth. So naturally the ObamaTreasury thisweek rolled out a plan to discourage investment in America.
The regulations are ostensibly to prevent so-called corporate inversions, inwhich U.S. companies acquire foreign firms and then relocate their legal headquarters offshore for tax purposes. But the practical impactwill be to make it harder to make money overseas and then bring it back here.
For the editorial, go here.

The Obama administration's move to tighten rules on corporate inversions should discourage new deals, at least for awhile, by making them harder and less profitable, tax experts said. On Tuesday it alreadywas roiling some pending transactions.
Thisweek, Treasury officials used five sections of the U.S. tax code to launch an assault on inversions. They made it tougher for companies to access their overseas cashwithout having it taxed at U.S. rates, and they tightened standards for a merger to qualify as an inversion.
For the story, go here.

New rules from the Treasury Department are likely to slow the offensive practice that allows American companies to avoid taxes by mergingwith foreign rivals. Known as corporate inversions, these are complex, modern variations on the practices of yesteryear,when companies dodged their taxes by moving their addresses to post office boxes in the Caribbean.
For the editorial, go here.

Inversions, the hottest deal structure onwall Street, appear to be safe for now. But they just became less profitable and more difficult to pull off.
Late Monday, the Treasury Department announced a series of measures intended to crack down on the deals, inwhich United States companies reincorporate abroad to lower their taxes.
But the consensus among corporate adviserswas thatwhile the new rules might make some deals less lucrative, theywould not halt the rush of companies seeking tax relief abroad.
For the story, go here.

New Treasury guidance aimed at making inversions more difficult to accomplish aswell as substantially reducing the tax benefit from inverting includes several significant changes to existing rules, but only punishes yet-to-be completed inversions, a practitioner said September 23.
"The transactions that they are targeting are a significant part of post-inversion planning," Layla J. Aksakal of Miller and Chevalier said.
For the story, go here. (subscription required)

Despite continued red flags raised by the financial services and banking industry, ItalyÔøΩin its rotating European Union presidency roleÔøΩsaid it expects an agreement by the end of 2014 on a "first step" financial transactions tax thatwill be imposed in 11 EU member states.
Speaking Sept. 23 before a European Banking Federation conference on taxation, Italian official Susanna Masi,who serves in the Cabinet of Italian Finance Minister Pier Carlo Padoan andwho is coordinating thework, said that negotiations are at a "very sensitive" stage as officials try to resolve issues related to the tax's scope. In particular, these issues include handling shares and derivatives, aswell aswhere to assess the levy and how to dealwith intermediary and collection concerns.
For the story, go here. (subscription required)

With the participants in the OECD's base erosion and profit-shifting project having agreed on limiting returns to cash boxes, the focus in 2015will be on determiningwhere the displaced returns should be allocated, Robert Stack, Treasury deputy assistant secretary (international tax affairs), said September 23.
For the story, go here. (subscription required)

Developing countries need specific guidance and tools to help them benefit from international efforts to fight tax evasion by big companies andwealthy individuals, according to a pair of Organization for Economic Cooperation and Development reports.
The Paris-based organization on Sept. 22 released a road map for helping developing countries participate in the OECD global standard for automatic exchange of information (AEOI) and also released the second half of its report on how base erosion and profit shifting affects developing economies.
For the story, go here. (subscription required)

Calvin H. Johnson proposes increasing the repatriation tax in the future to induce corporations to repatriate their foreign earnings now.

For the viewpoint, go here. (subscription required)

Treasury's proposed guidance against corporate tax inversions is an important first step toward making it harder for corporations to claim foreign status to avoid U.S. taxes, but only congressional action can put a stop to the practice, Citizens for Tax Justice Director Robert McIntyre said in a September 23 statement.

For the statement, go here.

The Treasury Department (Treasury) and Internal Revenue Service (IRS) issued Notice 2014-52 (the Notice) on September 22, 2014, addressing certain cross-border business combination transactions, termed 'inversions' in the Notice. Treasury and IRS view such transactions as motivated in substantial part by the ability to undertake certain post-transaction steps designed to
reduce US taxation that the IRS and Treasury believe represent tax avoidance transactions. The Notice announces the intention to issue regulations under Sections 304(b)(5)(B), 367, 956(e), 7701(l), and 7874.

For the Insight, go here.

Former President Clinton declined to call tax inversions "unpatriotic" on Tuesday, shying away from a term that President Obama has used repeatedly against companies that take advantage of the maneuver.

Speaking at the Clinton Global Initiative, hewas asked toweigh in on the practice bywhich a company moves its address to another country to avoid U.S. tax rates. The Democrats have been attacking inversions ahead of the midterm elections.

"Are corporate inversions unpatriotic?" CNBC's Becky Quick asked.

"Well,whether it is or not, companies ÔøΩ particularly those that are answering to shareholders ÔøΩ have a short-term perspective. A lot of these companies feel duty-bound to pay the lowest taxes they can pay," Clinton responded.

For the story, go here.

Corporate America is scrambling to figure out how the Obama administration's new rules for offshore tax deals could affect their business plans ÔøΩ and their bottom lines.

Business leaders have to navigate a maze of highly technical new rules on the offshore tax deals known as inversions, on obscure maneuvers known as "hopscotch" loans and the "de-controlling" strategy.

With the Treasury Departmentwarning that it's laying the groundwork for even more administrative actions, some businesses might bewonderingwhether high-profile tax deals are evenworth the trouble.

For the story, go here.

The Tax Foundation's International Tax Competitiveness Index ranks the United States tax code 32nd out of 34 OECD countries. An obvious question to ask, then, iswhy the U.S. remains sowealthy, and so successful at creating new businesses.
A report from Harvard Business School – a survey on U.S. competitiveness – helps answer this question.
For the blog post, go here.

Rivalry between governments to attract capital and labour can lead to pro-growth policies. That this comes from the power of people to "votewith their feet" has been known for long. For instance, itwas the palpable threat ofworkers and investors deserting them to choose more hospitable economies like the US and Europe that led countries like India to lower economic barriers. Yet public intellectuals have preferred to uphold governments' supposed "right to tax" over citizens' right to keepwhat they earn.

For the story, go here.

America has taken its first concrete steps to stop US companies from moving their headquarters overseas, in a movewhich could scupper tens of billions of dollars-worth of deals already in the pipeline.
The clamp-down follows months of controversy over the so-called "tax inversion" schemes,which typically see an American company buy up a foreign firm and move their headquarters to the new country primarily so that it can take advantage of a lower rate of corporate taxation. President Barack Obama has denounced tax inversion deals as "unpatriotic" and has urged Congress to stop them.
For the story, go here.