2015

At the close of the first year since the implementation of the Foreign Account Tax Compliance Act on July 1, 2014, practitioners are finding that its burdens are meeting expectations, but see no sign of the nightmare scenarios that some had feared might occur.
For the TNT story, go here. (subscription required)

Taxpayers continue towrestlewith big questions a year after the Foreign Account Tax Compliance Act opened for business.
Acknowledging that the Internal Revenue Service is doing its best to implement a complex law, issues still remain as the reach of FATCA goes global, practitioners told Bloomberg BNA in a series of interviews.
For the BNA DTR story, go here. (subscription required)

Many Japanese taxpayers have encountered difficulties in corporate tax examinations,whenwhat are generally considered transfer pricing issues have been challenged by the Japanese tax authorities not under the transfer pricing legislation, but under the "donation rules" of the Japanese Corporate Tax Act.

These challenges may arise evenwhere the taxpayer's transfer pricing is at arm's length, or more dramatically, evenwhere the taxpayer's transfer pricing leaves more than arm's length profit in Japan. In such cases, most taxpayers have trouble understanding the basis for the tax authorities' approach. This confusion can be further compounded by the fact that adjustments made under the donation rules,which typically give rise to double taxation, are not eligible for the mutual agreement process.

For the PwC Insight, go here.

The Organization for Economic Cooperation and Development's "soft law" approachwill be more effective in combating base erosion and profit shifting than the European Commission's rules-based approach because it is backed by awide range of countries, according to a senior U.K. tax official.

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Australia's Tax and Superannuation Laws Amendment (2015 Measures No.1) Bill 2015 received Royal Assent on June 25, 2015. Therefore, the third and final element of the Investment Manager Regime (IMR 3) has now become law (the Act).

Broadly, the Act exempts foreign funds (including eligible US onshore and offshore funds) from Australian tax on Australian-source gains. The final legislation addresses a number of issues identified in the last exposure draft, discussed in the March 19, 2015, PwC Insight.

For the PwC Insight, go here.

In news analysis, Lee A. Sheppard looks at how new regulations might change the treatment of convertible debt instruments.
For the Tax Notes article, go here. (subscription required)

The United Nations says thework of the international project to combat base erosion and profit shifting, including changes to double taxation treaties, should be coordinatedwith the provisions of international investment agreements.

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Robert B. Stack discusses the progress made so far on, and the future of, the base erosion and profit-shifting project.
For the Tax Notes viewpoint, go here. (subscription required)

In economic analysis, Martin A. Sullivan discusses how multinationals are pushing for a U.S. patent box because of the potentialweakening of check-the-box rules.
For the Tax Notes article, go here. (subscription required)

Governments are failing to leverage taxes to curb the negative effects of energy use on the environment but are becoming increasingly interested in using taxation as a policy tool to promote sustainable resource development, the OECD said June 25.
For thewWTD story, go here. (subscription required)

The United Nations Conference on Trade and Development said June 25 that multinational enterprises avoid $200 billion in taxes annually by routing investments through offshore financial hubs, some ofwhich are in tax havens.
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In a June 25 letter to U.S. Treasury Secretary Jacob J. Lew, three U.S. business groups asked Treasury to "continue to advocate strongly for clear, detailed agreement" on the rules countries arewriting to combat base erosion and profit shifting.
In their letter, the National Foreign Trade Council, the Software Finance & Tax Executives Council, and the United States Council for International Business asked Treasury to ensure that the BEPS projectwill provide countrieswith domestic and international instruments thatwill "better align rights to taxwith economic activity."
For the BNA DTR story, go here.

The European Commission is on the defensive over its list of 30 tax havens that failed to include even a single EU member state,with criticism led by the Organization for Economic Cooperation and Development, the Tax Justice Network, the European Parliament, and a host of countries or independent territories targeted.
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Patent boxes can lure companies to move their intellectual property to a jurisdiction, butwithout conditions requiring the incentive to be backedwith local research and development, the policy can have a negative effect on local innovation, according to a new study.
"The size of the tax advantage is negatively correlatedwith the local R&D," said the European Commission study, released June 18. "This suggests that the effects of patent boxes are mainly of a tax nature."
For the BNA DTR story, go here. (subscription required)

Thirty-nine of theworld's biggest economies continue to tax diesel for transport use at lower rates than gasoline, despite scientific evidence that diesel fuel is more damaging to the environment and human health than gasoline, according to a report by the Organization for Economic Cooperation and Development.

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French corporate tax legislation stipulates that profit distributions from a subsidiary to a French parent company are not, in principle, taxed at the parent. Excluded from this is a 5% proportion representing the charges incurred by the French parent company in connectionwith its holding in the subsidiary.
For the ITR story, go here.

Developing countries are losing around $100 billion a year in revenues because foreign investors are channelling profits through offshore zones to avoid tax, a study by U.N. think-tank UNCTAD said onwednesday.
"Tax avoidance practices therefore are responsible for a significant leakage of development finance and resources," UNCTAD Secretary-General Mukhisa Kituyi told a news conference.
For the Reuters story, go here.

Imposing a tax on repatriated earnings to fund highways "would impede progress toward the vital goal of overhauling our outdated tax system," the Alliance for Competitive Taxation said in a June 24 statement inwhich it also expressed support for revenue-neutral tax reform thatwould cut the corporate tax rate and reform international taxation.
For the ACT statement, go here.

Taxing repatriated foreign earnings to fund the Highway Trust Fund "would imperil the ability to achieve meaningful tax reform" if done in a stand-alone manner as opposed to comprehensive tax reform that could include repatriation proposals as part of international tax reform, Markweinberger of the Business Roundtable said in a June 24 statement.
For the BRT statement, go here.

The OECD and the Global Forum on Tax Transparency and Exchange of Information,which it organises, have moved to assert their preeminence as the international bodies that discuss and decide on transparency and exchange of information standards.
For the ITR story, go here.

At a June 24 Houseways and Means Select Revenue Measures Subcommittee hearing, Thomas Barthold, Joint Committee on Taxation chief of staff, summarized three proposals by former Houseways and Means Committee Chair Dave Camp, President Obama, and Sens. Rand Paul, R-Ky., and Barbara Boxer, D-Calif., to tax foreign income at a reduced rate.
For the testimony, go here.

The leading European Parliament political group urged the European Commission to expedite legislative plans for a revamped Common Consolidated Corporate Tax Base and release a new version of the proposal by the end of 2015 to take advantage of the political climate supportive of corporate tax law change.

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In the search for away to finance the dwindling Highway Trust Fund, some House Republicans are considering a transition toward a territorial tax system in combinationwith taxing repatriated foreign earnings.

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The U.S.won't need to issue new regulations to implement changes to the OECD transfer pricing guidelines proposed under actions 8, 9, and 10 of the base erosion and profit-shifting project, according to Brian Jenn, attorney-adviser in the Treasury Office of International Tax Counsel.
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It is "crunch time" for the Organization for Economic Cooperation and Development to reach consensus on the transfer pricing action items under its international project to combat base erosion and profit shifting, a U.S. Treasury Department official said.

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While lawmakers have raised questions aboutwhether the U.S. Treasury Department has the authorityÔøΩas it has claimed it doesÔøΩto implement the OECD's country-by-country reporting template, practitioners say the administration probably is on solid ground.

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The debate resumes over making credits for R&D investments permanent, as the U.S. House of Representatives endorsed a bill to that effect in May before it heads to the Senate and then maybe on to thewhite House.
Key questions on the best approach to credits, according to experts atwharton and New York University, include: Should incentives encourage some kinds of research over others? Should investments simply be fully expensedwhen made? And, should the credits be made permanent?
For thewharton article, go here.

With China poised to complete its VAT roll-out in the second half of this year and India hoping to introduce GST in 2016, the next few yearswill see 2.5 billion people paying consumption tax more efficiently than ever before.
For the ITR story, go here.

Jenswittendorff analyzes the key changes in the new OECD discussion draft that aims to align the guidelines on cost sharingwith recent changes regarding intangibles and risk allocation.
For the TNI viewpoint, go here. (subscription required)

Multinational entities from the banking and energy industries avoid the aggressive tax policies common in the digital economy for straightforward business reasons, industry representatives told the Special Committee on Tax Rulings and Other Measures Similar in Nature or Effect in Brussels June 23.
For theworldwide Tax Daily story, go here. (subscription required)

French oil company Total S.A. pays its fair share of tax in the countrieswhere its drilling operations take place, a company official told a European Parliament tax committee hearing, adding that Total has closed three subsidiaries based in Panama, the Bahamas and the Cayman Islands.

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U.S. lawmakers are exploring a new corporate tax break thatwould benefit companies already adept at avoiding taxes.
The idea -- known as a patent box or innovation box --would impose a lower tax rate on income generated from patents and other intellectual property housed in the U.S. Thiswould aid technology and pharmaceutical companies trying to maintain low tax rates that they've achieved by booking income in overseas tax havens.
For the Bloomberg Business article, go here.

MEPs are to debate the European Commission's corporate taxation action plan onwednesday eveningwith tax Commissioner Pierre Moscovici,who tabled it on 17 June. The plan,whichwould introduce a common corporate tax base (CCTB), follows the Commission's March proposal for automatic exchange of tax rulings between tax authorities and the Commission.
For the European Parliament release, go here.

On 22 May 2015,interested partieswereinvited to commenton arevised discussion draftwhich includes proposals on how to dealwith the follow-upwork on Action 6 (Prevent treaty abuse) of theBEPSAction Plan. The OECDis grateful to the commentators for their input andnow publishes the comments received.
For the comments, go here.

Campaigners say the European Commission's tax transparency consultation, designed to find out if the publicwould support extra disclosure from corporate taxpayers as away of combating tax evasion and aggressive tax planning in the EU, does not go far enough.
For the ITR story, go here.

Countries should seek towiden their tax revenue bases by combating tax evasion, reducing tax relief on mortgage payments, capital gains, and stock options, and lowering high labor taxes, IMF Managing Director Christine Lagarde said in a June 17 speech.
For the speech, go here.

An international project to combat base erosion and profit shifting (BEPS) has hidden implications for indirect taxes such as value-added and general sales taxes, a panel of practitioners said.
Under Action 1 of the Organization for Economic Cooperation and Development's BEPS project, the OECD issued revised guidelines for VAT/GST to clarify that the jurisdiction to tax digital transactions goes to the location of the consumer.
For the BNA DTR story, go here. (subscription required)

The Treasury Department is hoping to release a final revised U.S. model tax treaty by the end of the year and is seeking comments on proposed changeswithin the next 90 days, Treasury International Tax Counsel Danielle Rolfes said.

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The thesis of this Article is that the construct of source and residence as two competing and irreconcilable doctrines is largely incorrect as a legal matter. Rather, both source rules and residence rules can and should be thought of solely as instrumental tools to divide taxing authority in a globalizedworldwith mobile capital. Under this approach, there is no reasonwhy "source" rules as a doctrinal matter need to be used only for "source" taxation as an economic matter, or that "residence" rules as a doctrinal matter need be used for "residence" taxation as an economic matter. Instead, the source rules as a doctrinal matter can actually be used to solve the problems of the residence rules as a doctrinal matter. Put differently, source and residence as doctrinal rules can converge into a single concept in the modern global economy.
For the Florida Law Review paper, go here.

French corporate tax legislation stipulates that distributions of profits from a subsidiary to a French parent company are not, in principle, taxed at the parent.
For the International Tax Review story, go here.

The European Commission launched its much-anticipated Action Plan on Corporate Taxation yesterday, basing it on the idea of the Common Consolidated Corporate Tax Base as a 'holistic solution to corporate tax reform' and the principles of ensuring effective taxation and increasing transparency.
For the International Tax Review story, go here.

The Tax & Accounting business of Thomson Reuterswas lucky enough to secure an exclusive interview thisweekwith Pascal Saint-Amans, director of the Center for Tax Policy and Administrationwith the Organization for Economic Cooperation and Development (OECD).widely referred to as "the face of tax," Saint-Amans is the tip of the OECD's swordwhen it comes to the controversial BEPS initiative.
For the Forbes interview, go here.

While corporate-only tax reform may appear to be less complicated and more expeditious than comprehensive reform, there are reasons to believe that the goal of revenue neutrality and economic growth are at oddswith each other.
For the Tax Foundation report, go here.

On 4 June 2015, interested partieswere invited to comment on a discussion draft on Action 8 (Hard-to-value intangibles) of the BEPS Action Plan. The OECD is grateful to the commentators for their input and now publishes the comments received.
For the comments, go here.

When a major corporation is found to be paying little or no taxes, public backlash and media furor over the issue may ensue. Some governments maywell be just finewith it,while others like U.S. may take steps to ensure companies pay more tax. Sometimes, companies being in a non-taxpaying position properly reflects appropriate tax policy. That explanation, however, does not sell lattés,which iswhy in 2012, after the British public grew outraged over the discovery that Starbuckswas paying no corporate taxes in the U.K., the coffee retailer actually volunteered to justwrite a cheque to the government. The reputational damage to Starbucks' brand, the company calculated,was notworth the money itwas saving in avoiding taxes, even if itwas doing so perfectly legally. The fear of this kind of reputational damage can foil the very taxation policies that governments design specifically as a means to tax corporations fairly, efficiently and competitively.
For the paper, go here.

In economic analysis, Martin A. Sullivan analyzeswhether a U.S. patent box could be tailored to support domestic manufacturing.
For the Tax Notes article, go here. (Subscription required)

In another exclusive article for International Tax Review, Keith Brockman, EMEA tax director of Mars, discusseswhat other countries may do to achieve the objectives of the UK's diverted profits tax (DPT),whichwas developed as a two-pronged attack: on transactions having insufficient economic substance and the avoidance of permanent establishment (PE).
For the International Tax Review article, go here.

The globalwar on low tax rates entered a new stage this month as the Organization for Economic Cooperation and Development (OECD) released guidelines for intrusive paperwork requirements for multinational companies. Hang onto yourwallets -- and your proprietary corporate data.
For thewall Street Journal article, go here.

Mindy Herzfeld discusses the United States' recent criticism of key elements of the OECD's base erosion and profit-shifting project and explains how, from the beginning, Treasury officials may have miscalculated their power to steer the project in a favorable direction.
For the Tax Notes International article, go here. (subscription required)

The OECD's base erosion and profit-shifting project is not turning out to be quite as consensus-based as it purported to be and has plenty of pitfalls for American business interests, an economistwith an international trade policy organization said June 19.
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