2015

The envisaged ideals of 'tax transparency' are being proposed, and legislated, by tax administrationsworldwide. This month's Brockman brief focuses on the fact that mutual and reciprocal tax transparencywith multinational entities (MNEs) remains somewhat elusive. It is now time to briefly assess some of these initiatives to fairly gauge the mutuality of such initiatives.
For the ITR story, go here.

Individualworkers and consumers have shouldered an increasing share of the tax burden in industrialised countries as governments have been forced to become less reliant on taxing corporate profits, according to a report from the OECD.
For the Guardian story, go here.

Whoeverwins thewhite House next yearwill have to dealwith an issue of almost-impenetrable complexity and contentiousness: How to tax multinational companies? On the one hand, large global firms ÔøΩwhich have never been shy about minimizing their taxes through deft accounting maneuvers ÔøΩ are becoming more aggressive. On the other, so are governments, increasingly desperate to raise tax revenue to pay for aging societies and cover persistent budget deficits.
For thewashington Post story, go here.

When James Callaghan introduced corporation tax to Britain in 1965, the Labour chancellor proudly described it as "a new landmark in our fiscal history".

Fifty years on, enthusiasm for the tax is in short supply. It has been complicated by reams of legislation, cut back by governmentswanting to appeal to investors and tarnished by repeated scandals over avoidance.
For the Financial Times story, go here.

After the cost-sharing regulations put a crimp in expatriation of valuable intangibles, taxpayers used partnerships to get around them. They contributed intellectual property to a partnership and allocated the associated income or gain to related foreign partners thatweren't subject to U.S. taxation. They used accepted section 704(c) methods for allocation of built-in gain, but avoided the remedial allocation method.

So Treasury recently announced that itwill issue section 721(c) regulations underwhich section 721 nonrecognition treatmentwill not be permitted unless partnership allocations are made using the remedial allocation method as augmented by the new rules.
For the TNT story, go here. (subscription required)

McDonald's Corp.will become the fourth U.S. multinational to be targeted byEuropean Unionregulators as part of awidening investigation into alleged illegaltaxdeals, two people familiarwith the matter saidWednesday.
TheEuropean Commission, theEU's top antitrust regulator, is expected to announce as soon asThursdaythat it has opened an in-depth probe to establishwhether the fast-food chain'staxarrangements in Luxembourg violateEUlaw, the people said.
For thewall Street Journal story, go here.

Spurred by Pfizer Inc.'s plan to mergewith Ireland-based Allergan Plc, New Jersey lawmakerswant to cut off state contracts or incentives to U.S. companies that move their addresses to countrieswith lower taxes.
Allergan, the maker of Botox, is based in Dublinwith operating headquarters in Parsippany, N.J. Its record $160 billion mergerwith New York-based Pfizer, the maker of Viagra,would result in the largest so-called corporate inversion, inwhich U.S. companies use a merger to take a foreign address and cut their income-tax rates.
For the DTR story, go here. (subscription required)

Regulations issued by the Treasury Department in 2014 to discourage inversions appears to have slowed them down, but since then, companies have created deals that slipped under the rules' threshold, according to a report from the Congressional Research Service.
For the DTR story, go here. (subscription required)

David Ernick of PwC looks at how proposed changes to the U.S. model income tax treaty, substantive changes to tax code Section 482 regulations and other recent actions by Treasury and the IRS indicate that the impact of OECD's BEPS project may be coming to the U.S. sooner than expected.
For the BNA Insight, go here. (subscription required)

The House and Senate held hearings Tuesday on the Organization for Economic Cooperation and Development's Base Erosion and Profit Shifting action plan, also known as OECD BEPS, for combating tax avoidance by multinational corporations.
For the Accounting Today story, go here.

The U.S. Senate Finance Committee and the U.S. Houseways and Means Committee's subcommittee on tax policyheld hearingson Tuesdayto examine the Organization for Economic Cooperation and Development's new proposals on tax base erosion and profit shifting, or BEPS.
For thewall Street Journal story, go here.

The European Parliament's Economic and Monetary Affairs Committee has asked the European Commission to propose legislation to improve tax transparency and EU-wide policy convergence based on thework of the Parliament's special tax rulings committee thatwas approved November 26.
For thewWTD story, go here. (subscription required)

Some members of the Senate Finance Committee and the Houseways and Means Tax Policy Subcommittee are concerned about how U.S. multinationalswill be affected by the OECD's base erosion and profit-shifting project's recommendations and recent Court of Justice of the European Union state aid rulings.
For the TNT story, go here. (subscription required)

Robert Stack, the U.S. deputy assistant treasury secretary for international tax affairs, defended the U.S. role in the OECD's project to combat base erosion and profit shifting, claiming the BEPS proposals could have been more onerous to U.S. multinationals had the government not been involved.
"Across the board, the BEPS deliverables are better than theywould have been had the U.S. Treasury not been heavily involved in their negotiation," Stack testified before the Tax Policy Subcommittee of the Houseways and Means Committee Dec. 1.
For the DTR story, go here. (subscription required)

The European Union's investigations intowhether its member countries have granted illegal state aid to corporations could "call into question" the bilateral relationships between those countries and the U.S., a senior Treasury Department official told Congress.

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The European Parliament Committee for Economic and Monetary Affairs backed a report calling on the European Commission to propose awide range of corporate tax measures by June 2016.
In an overwhelming vote of 45-3with 10 abstentions, the committee Dec. 1 agreed that the European Commission should advance new legislation to improve corporate tax transparency and establish greater convergence and coordination at the EU level to reduce corporate tax avoidance and aggressive tax planning.
For the DTR story, go here. (subscription required)

Lawmakers from both parties are calling for a tax code overhaul to help stanch recent efforts by companies to move to lower-tax jurisdictions.
There is a "critical and urgent need" to overhaul U.S. taxes to stop companies from moving to lower-tax jurisdictions, the chairman of the House subcommittee that oversees tax policy said.
For the DTR story, go here. (subscription required)

This Article develops a framework for the study of the unique effects of corporate inversions (meaning, a change in corporate residence for tax purposes) in the jurisdictions fromwhich corporations invert ("home jurisdictions"). Currently, empirical literature on corporate inversions overstates its policy implications. It is frequently argued that in response to an uncompetitive tax environment, corporations may relocate their headquarters for tax purposes,which, in turn, may result in the loss of positive economic attributes in the home jurisdiction (such as capital expenditures, research and development activity, and high-quality jobs). The association of tax-residence relocationwith the dislocation of meaningful economic attributes, however, is not empirically supported and is theoretically tenuous. The Article uses case studies to fill this gap.
For the article, go here.

In this article, Cragg and Hutchings propose an economic framework for determining the tested party under the comparable profit method for transfer pricing.
For the Tax Notes article, go here. (subscription required)

The section 482 regulations and the recent final base erosion and profit-shifting report on transfer pricing (actions 8-10) from the OECD claim to be implementing the arm's-length standard. In Altera v. Commissioner, the Tax Court recently held a section 482 regulation to be invalid because it couldn't be justified on that basis. Portions of the BEPS report are also difficult to justify on that basis.
This report discusses the history of the arm's-length standard both domestically and internationally. It then discusses how Altera and the BEPS proposals interpreted the arm's-length standard, some possible consequences of Altera, and significant issues arising under the new BEPS proposals.
For the Tax Notes report, go here. (subscription required)

What's going on in theworld of tax for global companies investing in the USA today? PwC's Tax and Investment in the US examines recent issues and events relevant to your business.

Daniel A.witt of the International Tax and Investment Center comments on the changing nature of globalization and the challenges it poses for emerging economies.
For thewWTD article, go here. (subscription required)

The European Union should implement some of the recommendations from the OECD's 15-point action plan on base erosion and profit shifting via new EU tax legislation aswell as revisions to the EU pending directives on the common consolidated corporate tax base (CCCTB) and interest and royalties, according to conclusions EU finance ministerswill approve on Dec. 8.
For the DTR story, go here. (subscription required)

Global statutory corporate tax rateswere virtually unchanged between 2014 and 2015, according to an annual survey released by KPMG LLP.
The average statutory corporate tax rate in 2015was 23.68 percent, comparedwith 23.64 percent in 2014, according to thesurvey.
For the DTR story, go here. (subscription required)

On the cusp of Dec. 1 congressional hearings on the international base erosion and profit shifting project, the Joint Committee on Taxationwarned that U.S. multinational companies may face increased foreign taxation of their non-U.S. operations.
In the Nov. 30 report (JCX-139-15), the JCT said that in one possible scenario, governmentswill introduce domestic rules and tax treaty provisions that restrict opportunities for shifting profits to low-tax or zero-tax countries.
For the DTR story, go here. (subscription required)

Congress should give corporations a tax break on profits generated through creative activity in the U.S. in order to increase economic competitiveness, according to a report released Monday by the Information Technology and Innovation Foundation.
The group urged Congress to add an "innovation box" to the tax code that corporations could check on their tax forms to receive the lower rate for activities such as research.
For The Hill story, go here.

A new report released on Monday says "innovation boxes,"which allow corporations to deduct profits from patents and research activity from their taxeswould allow the US to maintain its global economic footing. But such boxes can be controversial.
For the Christian Science Monitor story, go here.

Long before Pfizer conceived of mergingwith Allergan in a $150 billion deal to rid itself ofwhat its chief executive called an "an uncompetitive tax rate" in the United States, the companywas deploying various tax avoidance strategies dating back to at least 1976.
For the New York Times story, go here.

Pfizer's recent decision to mergewith Irish drugmaker Allergan generated headlines as the latest, and biggest, example of an inversion. Sometimes, the U.S. firmwill moveoperations abroad, but often itwill not. Congress could slow these tax-motivated departures, and preserve our tax base, by imposing an exit tax on U.S. companieswith deferred earnings.

For the Tax Policy Center article, gohere.

The EU Commission is asked to table measures to improve corporate tax transparency, coordination and EU-wide policy convergence in legislative recommendations voted by the Economic and Monetary Affairs Committee on Tuesday. These recommendations build on thework of Parliament's Special Committee on Tax Rulings, set up in thewake of the "Luxleaks" revelations,whose recommendationswere approved at the 26 November plenary session.
For the release, go here.

Houseways and Means Tax Policy Subcommittee Chairman Charles Boustany (R-LA) delivered the following opening statement during a December 1 hearing on the final recommendations recently issued by the OECD on their Base Erosion and Profit Shifting (BEPS) project.
For the statement, go here.

The government of the Netherlands said Friday itwould appeal last month's decision by the European Union that its tax rulingwith Starbucks Corp. amounts to illegal state aid.

In a letter to Dutch parliament, Finance Minister Jeroen Dijsselbloem said he isn't convinced by the European Commission's arguments andwants to provide clarity on the government's practice of tax rulings for international corporations.

For thewall Street Journal story, go here.

The Subcommittee on Tax Policy of the Houseways and Means Committee has scheduled a public hearing for December 1, 2015, on the Base Erosion and Profit Shifting Project conducted by the Organization for Economic Cooperation and Development at the request of the Group of Twenty ("OECD/G20 BEPS Project"). The Senate Committee on Finance has scheduled a public hearing on December 1, 2015, titled "International Tax: OECD BEPS and EU State Aid." This document, prepared by the staff of the Joint Committee on Taxation, provides background on the OECD/G20 BEPS Project, an overview of its findings and recommendations, and a discussion of its potential implications for U.S. tax policy.
For the report, go here.

While the U.S. is plagued by inertiawhen it comes to tax policy, the rest of theworld hasn't been standing still. The biggest change of late has been the completion of the Organization for Economic Cooperation and Development's (OECD) Base Erosion and Profit Shifting Project, or BEPS, a multiyear endeavorwith the express goal of deterring multinational corporations from shifting their profits across countries to exploit tax rate differentials.

For The Hill story, go here.

It is important that lawmakers add an innovation box to U.S. corporate tax law. Otherwise, the United Stateswill continue to lose global economic competitiveness, especially in innovation-based
industries.
For the ITIF release, go here.

Again, A U.S.-based multinational corporation is mergingwith a foreign counterpart,with the intent to pay taxes at the other country's lower rate. By joining forceswith Ireland-based Allergan, pharmaceutical-maker Pfizer may reduce its effective tax rate from26percentto 17percent. And once again, U.S. politicians are denouncing the deal as a demonstration of corporate America's allegiance to profits above its responsibility to help pay for the government that enforces patent rights, among other beneficial services. Last year, Congress's Joint Committee on Taxation projected that all such tax-driven mergers, known as "inversions,"would erode federal revenue to the tune of$33.6billion over the next decade.
For thewashington Post editorial, go here.

A proposed European financial-transactions tax is foundering as 11 participating nations try to meet a December deadline to decide how to charge levies on an array of financial products.
For the DTR story, go here. (subscription required)

The U.S. government should addresswhether multinationals can claim foreign tax credits for taxes paid to countries asserting jurisdiction beyond the "conventional limits" as digital commerce becomes more prevalent, the New York State Bar Association Tax Section said.
For the DTR story, go here. (subscription required)

A European Parliament recommendation for more regulation and greater transparency of special corporate tax arrangements in the European Unionwould limit the policy tools available to governments in smaller EU nations, a Maltese member of the assembly said.
For the DTR story, go here. (subscription required)

The president of Poland signed a bill on October 27, 2015, that amends the Corporate Income Tax (CIT) and Personal Income Tax Acts. The changes include introduction of an anti-abuse rule designed to prevent unlawful tax practices used to obtain tax benefits through the participation exemption for dividends and through other profit-sharing payments to residents of European Union (EU) Member States.

For the PwC Insight, gohere.

Over the past few years, politicians in both parties have expressed enthusiasm for lowering federal tax rates. This makes sense: many economists have found that high tax rates hurt economic growth and international competitiveness. Meanwhile, the U.S. levies some of the highest rates in theworld on corporations, capital gains, and dividends.
For the Tax Foundation article, go here.

Youwon't find many issues that Donald Trump and Hilary Clintonwill agree on this election cycle, but they do concur on the idea that corporate inversions–like the $155 billion merger between Pfizer and Allergan that has the pharma giant reincorporating in Ireland–are bad for America.
For the Fortune story, go here.

Thewhite House declined to comment on Pfizer's acquisition of Allergan, the biggest-ever tax inversion deal, but said Congress should take legislative action to prevent dealswhere companies lower their taxes by reincorporating overseas.
White House spokesman Josh Earnest on Monday told reporters the Treasury Department has tried to discourage tax inversionswith a series of administrative actions and said the pace of deals has slowed because of those actions.
For the Reuters story, go here.

An ageing industrial estate in theworking-class Dublin suburb of Clonshaugh is an unexpected place to find evidence of the global corporate tax avoidancewar. Yet the site, testament to Ireland's central role in the biggest shake-up in the global pharmaceuticals industry for a generation, is a crucial link in the controversial phenomenon of tax inversions.
For the Financial Times story, go here.

Italy has updated its rules governing transactionswith parties located in tax havens.
For the ITR story, go here.

A deal to resolve the political debate over Northern Ireland's corporate tax autonomy has been announced,whichwill lead to a 12.5% Northern Irish corporate tax rate from April 2018.

For the ITR story, go here.