2015

U.S. based industrial companies paid an average 28.6 percent effective tax rate over the past three years, slightly above the 25.9 percdent rate foreign companies in the sector pay, according to a PricewaterhouseCoopers LLP analysis of 2014 data.

The difference between domestic and international companies narrowed from 3.3 percentage points in 2013 to 2.1 percentage points in 2014 as U.S. effective rates dropped and non-U.S. rates increased, the study said. PwC pulled public data from 320 industrial and automotive corporations, 143 ofwhich are U.S.-based.

For the BNA DTR story, go here. (Subscription required)

Joe Stanley-Smith talks to Sue Cooper, group head of tax at global asset management company Schroders, about the financial transaction tax and other challenges facing the financial services sector.
For the ITR story, go here.

The European Commission (EC)will put forward plans to radically change the VAT Directive by allowing member states to introduce their own reduced rates of VAT, International Tax Review understands. No official announcement has been made.
For the ITR story, go here.

In this interviewwith the Tax Foundation, Dr. Gary Hufbauer dissects the profit shifting phenomenon, highlighting the reasons as towhy profit shifting is beneficial and how the current debate concerning the taxation of multinational enterprises is both misconceived and misdirected.
For the interview, go here.

The OECD on August 3 released new tax compliance peer review reports for 12 jurisdictions, including two supplementary reviews for Austria and the British Virgin Islands, both ofwhich improved their compliance ratings after making significant reforms toward greater tax transparency.

For thewWTD story, go here. (subscription required)

Robert Cassanos analyzes the OECD's final report on action 2 of its base erosion and profit-shifting project from a technical and policy perspective and suggestsways to make the hybrid mismatch rules more effective and easier to complywith.
For the Tax Notes special report, go here. (subscription required)

On July 11, 2015, Spain's Ministry of Finance published the Royal Decree 634/2015, of July 10, 2015 approving Corporate Income Tax Regulations (the Regulations) that mandate new transfer pricing documentation requirements,which now incorporates the need for a Country-by-Country Report (CbC Report) in addition to the Master File and Local File.

This is a significant development for Spain in the context of transfer pricing, and a direct result of the recent guidance set forth by the Organisation for Economic Co-operation and Development (OECD) as part of its base erosion and profit shifting (BEPS) initiativewith respect to Action Plan 13: Guidance on the Implementation of Transfer Pricing Documentation and Country-by-Country Reporting.

For the PwC Insight, go here.

Jim Fuller comments on U.S. tax developmentswith international implications, focusing specifically this month on the Microsoft, Illinois Toolworks, and YA Global cases; inversions; comment letters addressing base erosion and profit-shifting discussion drafts; and the U.K. diverted profits tax.
For the TNI story, go here. (subscription required)

Ireland's knowledge development boxwill be designedwithin the parameters of the OECD's modified nexus approach, but also aims to be "the most competitive in class," according to a Department of Finance "feedback statement" published July 30 in response to a recent consultation on the proposed tax regime.
For thewWTD story, go here. (subscription required)

A European Parliament committee formed in thewake of the LuxLeaks disclosures has issued a report that includes a proposal to require recoveries of illegal state aid to be paid to the EU member stateswhose tax baseswere eroded as a result of the aid.
For thewWTD story, go here. (subscription required)

In Part I of a two-part series, Mindy Herzfeld reviews the views of U.S. andwestern businesses on the state of BEPS Action 10, use of the profit-split method; in Part II, shewill contrast those viewswith their counterparts from Communist nations such as China.
For the TNI article, go here. (subscription required)

Ajay Gupta reviews the Tax Court's decision in Altera Corp. v. Commissioner and concludes that barring a statutory change, the case spells the end of the IRS's efforts to require U.S. corporations to include stock-based compensation awards in cost-sharing poolswith foreign affiliates.
For the TNI story, go here. (Subscription required)

In a July 31 letter to Senate lawmakers, a coalition of 56 organizations criticized the Senate Finance Committee's international tax reformworking group report, saying that the proposalwould raise insufficient revenue and incentivize U.S. corporations to shift profits overseas, allowing them to pay a lower tax rate on their offshore profits.
For the TNT story, go here. (subscription required)

Even a company that named its top beer after a hero of the American Revolution may eventually forsake its home country.
Boston Beer Co., the maker of Samuel Adams beer and Angry Orchard hard cider,would beworth more to a foreign owner unburdened by the U.S. tax structure, founder Jim Koch told a Senate committee July 30. Because of that, Koch says he regularly gets pitches from investment bankers looking to strike a sale. He's been turning them downÔøΩfor now.
For the BNA DTR story, go here. (subscription required)

Several tax-writing senators and an industry advocate reacted positively to lastweek's innovation box proposal from Rep. Charles Boustany, Jr. (R-La.) for a lower tax rate on income from intellectual property, though all said morework is needed.
Boustany himself said as much, soliciting feedback on the draft legislationwhen he and Rep. Richard E. Neal (D-Mass.) jointly released it July 29. The proposed 10 percent rate andwhatwould qualify for that 71 percent discount from the statutory corporate rate of 35 percent are clearly up for debate.
For the BNA DTR story, go here. (subscription required)

Afterweeks of hinting about an "innovation box" tax proposal, U.S. Reps. Charles Boustany, Jr. (R-LA) and Richard Neal (D-MA)wednesday released draft legislation thatwould provide a massive giveaway for high-tech and pharmaceutical companies aswell as other industries that generate income from patents and copyrights. The details of the legislation raise the very serious concern that the "innovation box" could be the tax break minnow that swallows the corporate income taxwhale.
For the Tax Justice blog article, go here.

On July 27, 2015, the U.S. Tax Court issued a stunning rebuke to the IRS by invalidating the part of the Internal Revenue Services' (IRS) cost-sharing regulations under code section 482 that says taxpayers have to take into account, among other costs, the costs of stock-based compensation.The Altera decision should also support the many taxpayerswho have questioned the separate section 482 regulatory requirement that cost-based transfer pricing (e.g., cost-plus pricing for services) must include the cost of stock-based compensation.
For the National Law Review article, go here.

The Global Forum on Transparency and Exchange of Information for Tax Purposes published new peer review reports today for 12 countries or jurisdictions, moving further aheadwith its goal to implement global standards on transparency and exchange of information for tax purposes.
For the OECD release, go here.

With an $8 billion, three-month Highway Trust Fund extension on itsway to the president's desk, congressional attention is turning toward how to pay for a multiyear deal onwhich both chambers can agree.

The Senate passed the bill July 30 on a 91-4 vote, sending H.R. 3236 to thewhite House for signature.

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Houseways and Means Committee members Charles Boustany (R-LA) and Richard Neal (D-MA) on July 29, 2015, released a discussion draft on an 'innovation box' tax regime thatwould provide a 10.15% effective US federal income tax rate for income derived from certain types of intellectual property (IP). The Boustany-Neal discussion draft also includes a proposal intended to facilitate repatriation of IP held in foreign affiliates by providing tax-free treatment. The Boustany-Neal discussion draft does not address other areas of international tax reform.

For the PwC Insight, go here.

The U.S. Tax Court's July 27 ruling in Altera Corp. v. Commissioner could have implications that go far beyond the immediate issue in the case, forcing radical changes in Treasury's rulemaking process andÔøΩsome practitioners sayÔøΩraising fundamental questions about the utility of the arm's-length standard.

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To improve competitiveness the U.S. needs a 25 percent corporate tax rate and a modernized international tax system, Mark A.weinberger of the Business Roundtable said in a July 30 statement in response to a Senate Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations hearing.

For the BRT statement, go here.

European Union member states' "excessively" complex national tax codes allow large multinational company base erosion and profit shifting that is undermining the EU single market, according to an EU Parliament tax committee draft report.

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International Tax News is designed to help multinational organisations keep upwith the constant flow of international tax developmentsworldwide. Among the topics featured in this month's edition are:

For this month's issue, go here.

This month, the Senate Finance Committee's tax reformworking groups released their long-awaited and much-anticipated recommendations for fixing our broken tax code. This is awelcome development, because make no mistake: The time for action is very much upon us, and troubling evidence of this fact is all around.

For the US News story, go here.

Supporters of comprehensive tax reformwere given a glimmer of hope July 8when theSenate Finance Committee released a series of reports providing a framework for a much needed overhaul to our antiquated tax code.The U.S. Chamber of Commerce has long supported and repeatedly called on Congress to enact comprehensive tax reform that promotes economic growth and creates jobs, and there's a flicker of optimism thatwith these reports,we might be moving in the right direction.

For the Forbes story, go here.

bywalter Galvin (The Hill)

Millions ofwords have beenwritten about tax reform in the United States;whywe need it, how to do it, the risks of not doing it and so forth. After awhile, the concept of tax reform blurs into an abstraction, making it more difficult to grasp the issue and properly address it. But very often a case study can cut through the clutter by illuminating a problem and clearing a path toward fixing it.

For the Hill story, go here.

Guidelines set down by the OECD leave Ireland no flexibility in its design of a new patent-based tax regime aimed at multinationals, the Irish finance department said on Thursday.

For the Reuters story, go here.

In a thoroughly laid out investigation on corporate taxation, the Permanent Senate Subcommittee on Investigations on Thursday used Valeant Pharmaceuticals , Burger King's parent company, Restaurant Brands International and Budweiser -maker AB InBev to lay bare how U.S. tax laws have created an un-level playing field for America's largest and most recognizable companies.

For the Forbes story, gohere.

Congress today completed action on a three-month extension of federal highway and transit program authorization,which had been set to expire on July 31. President Obama is expected to sign the short-term highway bill,whichwill allow more time for Congress to continueworking on a long-term highway bill that could include international tax reform provisions.

For the PwC Insight, go here.

by Jenice Robinson (Citizen for Tax Justice)

A report by the Senate Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations on the federal corporate tax system "conveniently ignores the fact that copious tax breaks and loopholes allow U.S. companies [to] pay a relatively low effective tax rate," according to a July 30 release by Citizens for Tax Justice.

For the CTJ report, go here.

by Amy S. Elliott (Tax Analysts)

In a reversal of traditional roles, members of the Senate Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations (PSI) pointed fingers at themselves July 30while all but apologizing to executives from five companies for the pressures that America's corporate tax code places on their businesses.

For the TNT story, go here. (subscription required)

Policy makers should make effective use of environmental taxes to ensure green growth strategies take root in their economies, the Organization for Economic Cooperation and Development said.

The Paris-based organization's 100-page report, released July 27, evaluated the progress of its 34 member countries and a handful of non-OECD emerging economies on implementing the green growth framework it launched in 2011.

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For U.S. multinational companies that pay one of the highest tax rates in theworld, one alternative may not be much sweeter: paying the lowest tax rate in theworld.

Senators exploring changes to U.S. international tax policies at a hearing July 30 came awaywith a cautionary note from a retired executivewho said Congress should reduce the top corporate tax rate from 35 percent to 25 percent and go no lower.

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by Doug Palmer (Politico)

A key tax-writer unveiled legislationwednesday proposing to give companies a special low tax rate on profits stemming from intellectual property, in the first glimpse of an international tax code rewrite House Republicans hope to push through Congress later this year.

The bill, by Rep. Charles Boustany,would create an "innovation box" offering companies a 10 percent tax rate on income derived from innovations, a substantial cut from the 35 percent corporate tax rate they'd otherwise face.

For the Politico story, go here. (subscription required)

By John D. McKinnon (Thewall Street Journal)

House Republicans' quest to overhaul the tax code took a step forwardwednesday, as top members of theways and Means Committee rolled out a plan to stop the migration of U.S. intellectual property to other countries.

The plan -- designed to be broadly appealing to many businesses -- is expected to become one of the cornerstones of a broader revamp of U.S. corporate tax rules that Republicans on the committee are expected to construct in comingweeks.

For thewall Street Journal story, go here.

To help keep research and development aswell as high-paying jobs in America, Rep. Charles Boustany (R-LA) and Rep. Richard Neal (D-MA) today released a bipartisan discussion draft of an "innovation box"ÔøΩor a special, lower tax rate for income derived from intellectual property. They are seeking feedback on their proposal, and an updated version is expected to be included in the broader international tax legislation that theways and Means Committee is pursuing this fall.

For the release, go here.

Today, Houseways and Means Committee members Charles Boustany (R-LA) and Richard Neal (D-MA) released a bipartisan discussion draft for an "innovation box"ÔøΩa special lower tax rate on income derived from intellectual property. Such a proposal is likely to be part of broader international tax reform that the committee is pursuing, and Chairman Paul Ryan (R-WI) released the following statement in response.

For the release, go here.

Blaming foreigners for homegrown economicwoes is a tradition of sorts in Washington. In recent years, the favored scapegoat has been China and its folkloric trade indiscretions. But, lately, some have taken to demonizing foreign companies for the sins of a broken U.S. corporate tax system. Given the importance of foreign multinationals and their U.S. affiliates to the U.S. economy, let's hope policymakers don't do anythingwe'll regret.

For the Forbes story, go here.

by Nick Bunker (Washington Center for Equitable Growth)

The U.S. financial services sector has undergone quite a bit of reform since the housing and financial crises of 2007-2009 laid low the global economy. Yet concerns about the scope and role of this industry remain a hot topic of debate. A variety of proposals have been offered that either shrink the financial services industry overall by reducing its profits or use rules and regulations to alter its influence across the economy. But it is the often-discussed financial transaction tax that's drawing attention anew among policy thinkers.

For thewashington Center for Equitable Growth story, go here.

by Joseph Lawler (Washington Examiner)

White House economic adviser Jason Furman expressed skepticism Tuesday about a tax idea that has been gaining support on both sides of the aisle in Congress.

Asked if the Obama administration supported an "innovation box," or a special low rate on income from intellectual property, as part of a larger international tax reform, Furman seemed to endorse a different strategy preferred by liberals instead.

For thewashington Examiner story, go here.

by Rahph Cunningham (International Tax Review)

The UK is stepping up the pressure on large businesses to be more transparent about their tax policy and complywith their obligations in a publicway.

For the ITR story, go here.

Keith Brockman, the EMEA tax director for Mars, argues that the new demands for fiscal transparencywhich accompanied the inception of the OECD-led base erosion and profit shifting (BEPS) action plan ignored omnipresent thorns of complexity.

For the ITR story, gohere.

by Ralph Cunningham (International Tax Review)

The official launch of the Tax Inspectorswithout Borders (TIWB) programme has come at a timewhen tax collection could not have a higher profile as a means of helping developing countries generate their own resources rather than rely solely on aid from richer countries.

For the ITR story, go here.

In this exclusive op-ed piece for International Tax Review, Chris Lenon, former head of tax for Rio Tinto and an expertwitness to the Independent Commission for the Reform of International Corporate Taxation (ICRICT), argues that a focus on incentives and ultra low or no tax jurisdictions should be policy makers' priority, rather than ideas included in the commission's report, such as allocation.

For the ITR op-ed, go here.

Joe Stanley-Smith talks to Sue Cooper, group head of tax at global asset management company Schroders, about the financial transaction tax and other challenges facing the financial services sector.

For the ITR interview, go here.

by Ralph Cunningham (International Tax Review)

Tax justice campaignerswere left disappointed by the UN's third international conference on financing for development lastweek as delegates declined to heed their calls to establish a new global tax body,whichwould take over the roles of the UN and the OECD in setting international tax standards and giving guidance.

For the ITR story, go here.

Taxpayer education should have a key role in tax collection strategy because it encourages a culture of tax compliance and leads to stronger domestic resource mobilization in the developingworld, the OECD says in a new guidance book published on July 28.

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Advisers from Deloitte Germany look back at the Federal Tax Court's favourable ruling on the applicability of trade tax to controlled foreign company income.

For the ITR story, go here.

Draft legislation to provide preferential tax rates on intellectual property emerged amidst much fanfare from Republicans and at least one Democrat on the Houseways and Means Committee.

The proposal, floated July 29 by two senior members of the tax-writing panel, Reps. Charles Boustany, Jr. (R-La.) and Richard E. Neal (D-Mass.),would establish a 10 percent tax rate on qualifying income andwaive taxes on repatriated intellectual property until sold, all as part of a U.S. innovation box.

For the BNA DTR story, go here. (subscription required)