2015

Leaders of congressional tax-writing committees are questioning the legal basis for U.S. involvement in the country-by-country reporting regime being developed by the Organization for Economic Cooperation and Development.
For the BNA DTR story, go here. (subscription required)

Rep. Paul D. Ryan (R-Wis.) still has hope for reaching a limited deal on U.S. tax policy this year.
"The question is: Canwe take a couple of steps in the right direction, particularlywith international tax laws and international tax rules?" Ryan, chairman of the Houseways and Means Committee, said June 9 in an interview on Bloomberg Television.
For the BNA DTR story, go here. (subscription required)

As if the BEPS project deadlines are not pressure enough, unilateral action by countries is causing additional complexity and uncertainty. After the UK legislated its diverted profits tax – known as the Google tax – Australia is taking action against multinational enterprises (MNEs) that are avoiding a taxable presence in Australia.
For the Economia story, go here.

Do you approve of Congress spending your hard-earned tax dollars on an international organization that lobbies governments, including the U.S. government, to raise taxes? The Organization for Economic Cooperation and Development (OECD)was originally created to collect and publish economic data, and to promote policies that encourage trade among its members. But over the last two decades, it has morphed into an organizationwhose principle focus is to push for higher taxes in both its member and non-member states.
For thewashington Times article, go here.

Proposed new obligations on multinationals to produce country-by-country reports on their financial affairswill have a "massive impact" on them, a leading member of the Organisation for Economic Development and Cooperation has said.
For the Irish Times story, go here.

The leaders of the G7 group of developed countries have reiterated their commitment to reform the international tax system and pledged to come forwardwith "concrete and feasible recommendations" for change later this year.
For the Public Finance International story, go here.

Lawmakers seeking progress on tax reform are considering a new incentive for innovation thatwould help companies that already pay comparatively little in taxes.
The preference, called a "patent box" or "innovation box," essentially gives companies a tax break on income from their intellectual property, making it especially attractive to high-tech and pharmaceutical businesses.
For the Hill story, go here.

Whatwould you think about a corporate income tax regime underwhich the bigger a company's profit margin, the lower its tax rate? Or a system that applies a special low tax rate to profits from selling products onwhich a company enjoys a legal monopoly? Or partial tax exemptions for companieswithwell-known brand names? Such odd tax schemes and variants thereof have recently become popular among lawmakers in many European countries. Now big American companies are calling for the same special tax breaks in the United States. And, unfortunately, some politicians are suggesting that they'd bewilling to oblige.
This paper describes some of the reasons a "patent box" is a bad policy idea.
For the CTJ report, go here.

The OECD has published a discussion draft on the arm's length pricing of intangibleswhen valuation is highly uncertain at the time of the transaction or the intangibles are hard to value[GJ1] . The discussion draft, released 4 June 2015, is part of Action Item 8 of the OECD's Base Erosion and Profit Shifting (BEPS) Action Plan. Action Item 8 is focused on assuring that transfer pricing outcomeswith respect to intangibles are in linewith value creation.

For the PwC Insight, go here.

For the first time in Turkish law, a Court of First Instance declared that the use of secret comparable data to evaluate the arm's length nature of intercompany transactions violates a taxpayer's right to a fair trial and "equality of arms" pursuant to the European Court of Human Rights (Heinrich v. France).
For the PwC Insight, go here.

The OECD isworking toward consensus on outstanding items and is on target to complete the base erosion and profit-shifting projectwith approval by the Committee on Fiscal Affairs on September 22 or 23, according to Pascal Saint-Amans, director of the OECD Centre for Tax Policy and Administration.
For the TNT story, go here. (subscription required)

India's goal of a friendlier tax regime for global companies to help power China-beating economic growth is hitting a manpower hurdle.
Fewer than 20 officials face the complex task ofworkingwith hundreds of multinationals on advance pricing agreements for transfer pricing, people familiarwith the matter said, asking not to be identified as the staffing data aren't public.
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The Organization for Economic Cooperation and Development is on schedule towith the remaining deliverables due under its international project to combat base erosion and profit shifting, the OECD's tax chief said.
The remaining papers for the 15 BEPS action itemswill be presented to the Group of 20 finance ministers at their Oct. 8 meeting in Lima, Peru, said Pascal Saint-Amans, director of the OECD's Center for Tax Policy and Administration.
For the BNA DTR story, go here. (subscription required)

Finalizing the first major piece of its project to combat base erosion and profit shifting (BEPS), the Organization for Economic Cooperation and Development released an "implementation package" for its country-by-country reporting template.
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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 article, go here.

The IRS and Treasury released final regulations under Section 7874 for determiningwhen an expanded affiliated group (EAG)will be considered to have substantial business activities in a foreign country. The final regulations, issued June 3, 2015, adopt,with certain modifications, the temporary regulations issued in 2012 and retain the bright-line rule for determining substantial business activities in a foreign country.
For the PwC Insight, go here.

First therewere patent trolls, now there are patent boxes.
The discussion over how to best overhaul the U.S. tax system has taken a sudden and, to some, unexpected turn toward a tax incentive policy that already is ubiquitous in Europe: the patent box.
To understand the policy andwhy it has suddenly gotten so much focus is to understand how much the ground has shifted in the global tax debate.
For the Bloomberg BNA story, go here.

Pushing forward efforts to boost transparency in international tax matters, the OECD today released a package of measures for the implementation of a new Country-by-Country Reporting plan developed under the OECD/G20 BEPS Project.
For the OECD release, go here.

The United States should simplify the tax system by capping or eliminating personal income tax deductions, removing tax preferences from the business tax, and changing the tax treatment of multinationals to limit base erosion and profit shifting, the IMF said in Article IV mission-concluding comments released May 28.
For the IMF comments, go here.

In news analysis, Lee A. Sheppard reports on a recent conference in Milan that discussed the future of the OECD's base erosion and profit-shifting proposals in Europe.

For the Tax Notes article, go here. (subscription required)

Fundamental reform of the entire tax codewill likely remain elusive until after President Barack Obama leaves office.while he has never indicated awillingness to lead such an effort, he has indicated openness to reforming corporate taxation, proposed his own plan, and in­cluded it in his past two budgets. House and Senate leaders have indicated interest in business-only reform,which includes corporations and pass-through businesses. Given this opening, there is the chance for a deal. Business tax reform is necessary because the U.S. has the highest corporate tax rate in the developedworld and is one of the only countries that taxes businesses on their foreign income.

For the Heritage report, go here.

Australia sees the OECD'swork on transfer pricing under the base erosion and profit-shifting project as key to completing itswork on fighting corporate tax avoidance, Rob Heferen, executive director of the Australian Treasury's Revenue Group, told members of the Australian Senate Economics Legislation Committee June 2.
For theworldwide Tax Daily story, go here. (subscription required)

Under the United Kingdom's current financial position, "it is very criticalwe do everythingwe can to tackle tax avoidance," David Gauke, member of Parliament and financial secretary to the Treasury said in London on June 1.
For theworldwide Tax Daily story, go here. (subscription required)

The Netherlands,which has already implemented the EU directive that banks and financial institutions include country-by-country (CbC) financial results in their annual reports, has announced its support of an EU move toward requiring public CbC reporting for all multinational enterprises.
For theworldwide Tax Daily story, go here. (subscription required)

In a June 4 report, the Congressional Research Service described the current system of taxing international businesses in the U.S. and examined alternative proposals for international tax reform.
For the CRS report, go here. (subscription required)

The OECD on June 4 proposed a new section D.3 to Chapter VI of the transfer pricing guidelines on the pricing of hard-to-value intangibles and the use of ex post information for limited purposes to address information asymmetry.
For the TNT story, go here. (subscription required)

The Organization for Economic Cooperation and Development's discussion draft on "hard-to-value intangibles" represents a victory for U.S. officialswho had opposed the use of special measures to set a price for such transactions.
For the BNA DTR story, go here. (subscription required)

The United States has the most damaging business tax system in the developedworld because it taxes its businesses at high rates, taxes them on theirworldwide income and denies them the ability to deduct the cost of their investments at the time they make them.
Yet rather than focus on fixing these problems, Congress is reportedly dithering by trying to createwhat is known as a "patent box."
For the Daily Signal story, go here.

Argentina and Chile have signed a new double tax treaty to replace the agreement unilaterally terminated by Argentina in 2012. Ignacio Rodriguez and Andres Edelstein of PwC in Argentina outline the new structuring opportunities that are available for taxpayers.
For the International Tax Review article, go here.

An independent global tax overhaul panel issued a report calling for formulary apportionment to replace the arm's-length standard as the system for allocating income among related companies.
For the BNA DTR story, go here. (subscription required)

Harvey Poniachek of Rutgers Business School looks at the impact that the OECD's base erosion and profit shifting project could have on transfer pricing practices of multinational enterprises, particularlywith respect to intangibles.
For the BNA DTR Insight, go here. (subscription required)

Offshore company formations continued ticking upward last year,with growth more dramatic in some jurisdictions than others, according to data compiled by a company that provides offshore legal services.
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Businesses pushing against patent boxes should cool their heels, said a lawmaker putting together such a plan.
Rep. Charles Boustany Jr. (R-La.) said businesses shouldwait to see his bill before blasting the tax breaks.
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The Internal Revenue Service isn't backing down from the tough hurdles companies have to meet to prove their business activities in foreign countries are substantial.
Practitioners said the largely unchanged 25 percent bright-line test in rules issued June 3 under tax code Section 7874will be difficult to meet for companieswith business around the globe and likely are a sign that the government is continuing its crackdown on inversions.
For the BNA DTR story, go here. (subscription required)

India raised the rate of its service tax from 12.36% to 14% on Monday, inwhat is seen as a stepping stone for the introduction of its country-wide GST in April 2016.
For the International Tax Review story, go here.

A powerful business lobby is sounding thewarning to lawmakers about a global effort to crack down on offshore tax evasion.
The National Association of Manufacturerswarned the top congressional taxwriters that the so-called Base Erosion and Profit Shifting project "could have a negative impact on the global competitiveness of companies in the United States and threaten the jobs of U.S.workers."
For The Hill story, go here.

An international campaign to stamp out corporate tax dodgingwill fail and G20 leading economies should instead adopt a global minimum tax rate for multinationals, a coalition of 10 charities and human rights bodies said.
For the Reuters story, go here.

The Silicon Valley Tax Directors Group, representing 67 high-technology companies, has asked the OECD to delete a key provision of the organization's recent draft on cost contribution arrangements.
For the BNA DTR story, go here. (subscription required)

Eliminating a tax benefit tied to overseas investmentwould pay for reintroduced legislation to boost domesticwages and benefits, said one of the bill's chief sponsors, Senate Minoritywhip Dick Durbin (D-Ill.).

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

Sweeping proposals to tackle the "broken" system of taxing companies' profits through a radical shake-up of the rules and a global minimum corporate tax rate have been put forward by an international panel of development experts.

The panel called for a fundamental overhaul of the global tax system by adopting a scheme called "formulary apportionment"which involves using a formula to carve up profits between the countrieswhere multinationals operate.

For the Financial Times story, go here.

International Tax News is designed to help multinational organisations keep upwith the
constant flow of international tax developmentsworldwide.

For this month's issue, go here.

Patent boxesÔøΩtax breaks for research and development that are ubiquitous in EuropeÔøΩmay be making theirway across the Atlantic.
Almost overnight, andwith an abruptness that has taken many staffers by surprise, patent, intellectual property or "innovation" boxes have become the focus in congressional debates over how to overhaul the U.S. tax system.

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

On 29 April 2015, the OECD invited comments from interested parties on adiscussion drafton revisions to Chapter VIII of the Transfer Pricing Guidelines on Cost Contribution Arrangements. Thiswork relates to Action 8 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.

Amazon made headlines around theworld thisweekwhen it announced that itwould change theway it accounts for revenue from retail sales in Europe. Under the new arrangement, Amazonwill book all revenue from retail sales in individual countries in those countries, rather than routing the profits through Luxembourg,which has the lowest corporate tax rate in the European Union.
Consider this the first inwhatwill soon become a rapid succession of major tax policy shifts among multinational corporations operating in Europe. The cause? In aword: BEPS.
For the Forbes article, go here.

Key taxwriters in Congress are indicating that once Congress disposes of pending trade legislation, theywill turn to their top legislative priority: reaching a consensus on international and business reform by the end of the summer.
In recentweeks, a major concept has emerged in tax reform discussions: the establishment of a patent or innovation box.
For the JD Supra Business Advisor article, go here.

Manal Corwin is the National Leader of the International Tax practice of KPMG LLP and Principal in Charge ofwashington National TaxÔøΩInternational Tax Policy. She is the former Deputy Assistant Secretary for International Tax Affairs in the Office of Tax Policy at the U.S. Treasury Department.
In this interviewwith the Tax Foundation, Ms. Corwin examines how the profit shifting phenomenon is changing the global tax landscape andwhat that means for the business community and for governments. In addition, Ms. Corwin highlights the benefits and possible implications of increased cooperation from aworldwide and U.S. perspective.
For the Tax Foundation interview, go here.

Recently published draft amendments of the Personal Income Tax (PIT) and Corporate Income Tax (CIT) acts introduce a number of new transfer pricing (TP) documentation requirements. These changeswill have a significant impact on taxpayers undertaking related party transactions.

For the PwC Insight, go here.

On 22 May 2015, the Organisation for Economic Co-operation and Development (OECD) released a revised discussion draft in connectionwith the follow upwork on Action 6 on the prevention of treaty abuse under the Base Erosion and Profit Shifting (BEPS) Action Plan.

For the EY Global Tax Alert, go here.

The value-based approach to services contributed to a cost contribution arrangement described in the OECD's discussion draft on action 8 of the base erosion and profit-shifting project is a departure from existing OECD transfer pricing guidelines, the Tax Executives Institute said in comments submitted May 28.
For the TEI comments, go here.

The "Irish double and Dutch sandwich" tax arrangement came under intense scrutinywhen a special European Parliament tax committee visited Ireland and the Netherlands as part of its probe into tax rulings offered to multinational companies.

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