2015

Sometimes, a tax increase saves jobs.

President Obama's fiscal year 2016 budget introduces a one-time 14 percent tax on approximately $2 trillion of so-called unrepatriated foreign earnings. The taxwould raise about $248 billion over the next five years,whichwould be used to help pay for infrastructure projects and replenish the Highway Trust Fund.

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Earlier thisweek, President Barack Obama released details of his proposed federal budget for the fiscal year ending in 2016. The proposal includes a one-time "transition tax" on the offshore profits of all U.S.-based multinational corporations. The President's planwould tax these profits at a 14 percent rate immediately, rather than at the 35 percent rate that should apply absent the "deferral" loophole.
For the CTJ report, go here.

The High Court's recent ruling on quantification in the controlled foreign company (CFC) and dividend group litigation order (GLO) clarifies that the test claimant is entitled to recover compound interest on claims for unlawful corporation tax paid both in open and closed accounting periods. However uncertainty remains aboutwhen, and bywhich court or tribunal, the test claimant may recover the sums due.
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The European Court of Justice (ECJ) has ruled that the UK's cross-border relief rules are compatiblewith European legislation, and threw out the European Commission's (EC's) case against the country.
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by:Katherine Chiglinsky and Thomas Black

U.S. companies including General Electric Co., Microsoft Corp. and Pfizer Inc.would pay $506 billion over the next decade under President Barack Obama's proposal to encourage them to bring back profits held overseas.

That trio tops the list of Standard & Poor's 500 Index companies in earnings reinvested outside the U.S., according to Bloomberg Intelligence analysts Brian Friel and Tiffany Young. Obama's budget estimates the stockpile of corporate earnings outside the U.S. at about $2 trillion.

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Britainwon a court fightwith European Union regulatorswho claimed its tax relief rules discriminate against companieswith cross-border units.
The European Court of Justice in Luxembourg ruled Feb. 3 that the EU failed to back up claims that the U.K. makes it "virtually impossible" for parent companies in the country to use losses on foreign subsidiaries to cut their British tax bill.
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The European Union authorities on Tuesday broadened their drive against tax avoidance by multinational companies, opening an investigation into theway Belgium appeared to grant unfair state aid.
European officials declined to discusswhich companies they suspected of cutting special tax dealswith the Belgian government. But the inquiry is part of awider investigation intowhether other countries and multinational companies have broken European Union competition rules through tax-cutting deals not available to all businesses in those countries.
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by: Amy Thomson (Bloomberg BNA)

Indian authoritieswon't appeal a court ruling that sidedwith Vodafone Group Plc in a tax dispute, as Prime Minister Narendra Modiworks to reassure foreign investors about governance rules in the country.

By accepting the Bombay High Court's October decision in the mobile phone operator's favor, the government hopes to "bring greater clarity and predictability for taxpayers aswell as tax authorities," the Cabinet said in a statement. "Thiswill also set at rest the uncertainty prevailing in the minds of foreign investors and taxpayers."

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Lee A. Sheppard discusses alternative investment funds and the relief they seek from the OECD base erosion and profit-shifting project and examines remarks from the Treasury Department questioningwhether and how that relief should be granted.
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by: Michael Tasselmyer (National Taxpayer Union Foundation)

Policymakers should look to address income inequality through broad, system-wide tax reform thatwould benefit many, rather than the redistributive tax policies and government transfers recommended by the OECD thatwouldwork against only a few, the National Taxpayers Union Foundation said in a January 28 review of an OECD report.

For the report, go here.

by: Frank Clemente (American For Tax Fairness)

A proposal from Sens. Barbara Boxer, D-Calif., and Rand Paul, R-Ky., to cut taxes on repatriated earnings and use the revenue for the Highway Trust Fundwill fail because prior repatriation tax cuts have failed to raise revenue, create jobs, or increase research investment, Americans for Tax Fairness said in a January 29 release.

For the report, go here.

by: Luca Gattoni-Celli (Tax Analysis)

Congress's top two taxwriters on January 29 dismissed the idea of replenishing highway fundingwith a corporate repatriation tax holiday following the release of different bipartisan proposals in the Senate and the House to do so.

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The Italian Budget Law for 2015, effective January 1, 2015, introduces several tax law changes relevant to multinational companies. In addition, recently enacted legislation,while still subject to Italian parliament approval, favorably changes the Italian patent box regime.

For the PwC Insight, gohere.

by: Megan Murphy, Vanessa Houlder and Sam Fleming (Financial Times)

President Barack Obamawill propose raising $238bn by levying a one-off tax on the cash piles held by US companies overseas to repair the US's crumbling roads and bridges. The measure, a key plank of the US president's budget to be outlined on Monday,would impose a 14 per cent "transition" tax on the estimated $2tn in earnings US companies have amassed overseas, thewhite House said on Sunday. For the story, go here.

President Barack Obamawill revive his pitch to revamp business taxes in his budget vision on Monday ÔøΩ including a mandatory 14 percent tax on corporate profits now stashed abroad ÔøΩ to fix roads, bridges and other infrastructure, according to awhite House document.

Obamawill propose tapping taxes on the $2 trillion in profits sitting outside the U.S. to "to make critical new investments in our roads, bridges, transit systems and freight networks as part of a $478 billion, six-year surface transportation reauthorization," according to a summary of the plan.

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President Barack Obama is making an opening bid on overhauling corporate taxes and linking it to boosting infrastructure spending, a move that could clear a rare path toward common ground in a deeply divided capital.

Mr. Obamawants U.S. companies to pay a 14% tax on the approximately $2 trillion of overseas earnings they have accumulated, awhite House official said Sunday. Theywould face a 19% minimum tax on future foreign profits. Companies could reinvest those funds in the U.S.without paying additional tax.

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by: Luca Gattoni-Celli

An unreleased Joint Committee on Taxation report

obtained by Tax Analysts shows that the United States gives more favorable tax treatment to passthroughs than other developed economies, complicating the prevailing narrative that a high corporate rate best illustrates U.S. tax uncompetitiveness.

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The government is looking atways to address concerns raised by insurance companies and others on new guidance to curb corporate inversions, a Treasury Department official said.

Possible changes to the "cash box" and "skinny-down" rules under the anti-inversions Notice 2014-52 are under consideration, Douglas Poms, senior counsel in Treasury's Office of International Tax Counsel, said Jan. 30.

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In news analysis, Lee A. Sheppard discusses how the European Union might dealwith the competing intellectual property tax regimes used by its members. For the article, go here. (subscription required)

by: Steven Mufson

President Obama's budget request set for release Monday includes plans for a six-year, $478 billion publicworks program thatwould be paid forwith a one-time 14 percent tax on overseas corporate profits. For the story, go here.

by: Keith Brockman

Keith Brockman, global tax director at Mars and author of the International Tax Best Practices blog, analyses BEPS Action 6 on preventing treaty abuse, calling for more balance in seeking to avoid double taxation and double non-taxation, and more guidance on the interplay between domestic law and treaty interaction. For the story, go here.

by: Joe Stanley- Smith

The 11 EU member states involved in the financial transaction tax (FTT) aim to broaden its base and lower its rates, in a bid to get the initiative back on track.For the story, go here.

President Barack Obamawill propose that U.S.-based companies pay a minimum 19 percent tax on their future foreign earnings, capturing profits that are now often beyond the government's reach.

Obamawill also seek a 14 percent mandatory tax on about $2 trillion in stockpiled offshore profits, said two people familiarwith his budget proposals, declining to be named because the documentwon't be made public until Feb. 2. Companieswould pay that tax regardless ofwhether they bring the money back to the U.S., the two said, creating a revenue stream the presidentwould use to pay for roads, bridges and other infrastructure projects.

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The OECD's December 19 discussion draft on risk, recharacterization, and special measures "is not a document that the United Stateswould agree to in its current form," Brian Jenn, attorney-adviser, Treasury Office of International Tax Counsel, said January 30.
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The administration proposal to tax foreign earnings U.S. companies have parked offshore fills in important details of a plan that officials have been discussing in broad terms for several years.
One prominent feature is that itwould be mandatory. Instead of relying on ultralow tax rates to induce companies to bring their money home voluntarily, as some lawmakers have recently proposed, President Barack Obamawants to impose a 14% tax on those profits. He alsowould tax future foreign profits at 19% -- far lower than his proposed 28% top rate for corporate profits and the existing 35% top rate.
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Claiming troublesome chapters could undermine the arm's-length principle, a Treasury Department official said the U.S.won't support the current issued by the OECD under its Base Erosion and Profit Shifting (BEPS) plan.
"This isn't a consensus document," said Brian Jenn, an attorney-adviser in Treasury's Office of International Tax Counsel and a U.S. delegate to the Organization for Economic Cooperation and Development's BEPS project.
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In addition to espousing various principles to guide the enactment of comprehensive tax reform, Spitzer askswhywe should only lightly tax an activitywe seek to discourage (consumption of carbon-based sources of energy)while heavily taxing an activitywe seek to encourage (employment). The views expressed here are strictly his own.
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The Swedish tax agency haswarned that tax planning undertaken by companies involving external loans related to acquisitions may pose a threat to the Swedish corporate tax base.
In 2009, Sweden introduced rules imposing restrictions on the deductibility of interest on intragroup loans used for intragroup acquisitions of shares. In 2013, these ruleswere tightened so that under the main rule, tax deduction for interest payments on all loans from affiliated companies may be denied
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Spain's secretary of state for the Treasury announced that in 2015 the governmentwill adopt the Organization for Economic Cooperation and Development's proposed country-by-country reporting template, under Action 13 of the international project to combat base erosion and profit shifting (BEPS), according to EY LLP.
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European Union finance ministers completed an overhaul of EU parent-subsidiary legislation designed to eliminate double taxation from hybrid loan mismatches aswell add an anti-abuse rule to curb tax avoidance and aggressive tax planning by corporate groups.
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by European Commission

With the Council's adoption of the anti-abuse clause of the Parent Subsidiary Directive today, the European Union is living up to its pledge of tackling tax evasion and aggressive tax planning. Today,we are building on the existing EU legislative framework to ensure a level-playing field for honest businesses in the EU's Single Market andwe are closing down loopholes that could be exploited for aggressive tax planning. This achievement paves theway for other measures in this area. In particular,we are committed to extending the automatic exchange of information on tax rulings andwewill present a legal proposal by Spring 2015," said Pierre Moscovici, European Commissioner for Economic and Financial Affairs, Taxation and Customs.

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Thomas J. Brennan and Robert L. McDonald show that the delta test in prop. reg. section 1.871-15 can be affected by superficial labeling, and they propose improved alternatives.
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Perhaps surprisingly, this Article has shown that the debate over formulary apportionment is little more than an alternative path to the larger debate overworldwide taxation versus territorial taxation. The present U.S. international income tax regime for U.S. MNEs is an implicit, overly-generous, and incoherent quasi-territorial system that relies on residence rules, source rules, and the arm's-length approach to apportion international business profits between domestic income that is currently taxable by the United States and foreign income that is effectively exempt, or nearly so, from U.S. taxation because of deferral and cross-crediting. This version of territoriality is quite ugly because it is highly complex and it imposes only modest restraints on the ability of U.S. MNEs to shift income out of the U.S. tax base to low-tax foreign countries.

For the paper, go here.

by PwC

The March 1, 2015, implementation date for South Africa's newwithholding tax on interest is fast approaching. Thewithholding taxwas initially intended to take effect January 1, 2015. However, itwas further delayed to give domestic debt issuers and the South African Revenue Service time to put administrative compliance measures in place. This Tax Insight covers some aspects of the new tax that South African interest payers and foreign recipients should consider before March 1.

For the PwC Tax Insight, go here.

President Barack Obama lastweek called on Congress to close tax loopholes that allow some corporations to avoid paying their fair share of taxes at the expense of hardworking Americans.

Congress must act now to close a loophole that could allow corporate tax dodgers towalk awaywith $34 billion over the next 10 years. For the article, go here.

The ECJ has provided precision to the technical debate on fixed establishment around article 44 of the VAT directive, relating specifically to fixed establishment in the context of an e-commerce activity, inwelmory v Dyrektor Izby Skarbowejw Gdansku (C-605/12). For the story, go here.

The IRS has chosen to pursue a hard-line economic substance litigation strategy that treats transactions structured to take advantage of foreign tax credits the same as earlier tax shelters, such as Son-of-BOSS, but hasn't achieved the same level of success.
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Diana Furchtgott-Roth suggests that eliminating the corporate income taxwould reduce the complexity of the tax code, attract investment to the United States, and increase economic growth.
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The tax laws in Ukraine have been changing rapidly. Several new laws introduce significant amendments to the Ukrainian Tax Code. These amendments are designed to (1) simplify Ukrainian tax administration to ease the conditions of doing business in Ukraine and improve the country's investment climate, and (2) raise revenue to finance government expenses. Thus, these measures could have both positive and negative impacts on Ukrainian taxpayers.

This Tax Insight focuses on the most significant changes to the Ukrainian corporate profits tax rules.

For the PwC Tax Insight, go here.

Tax reform proposed by former Houseways and Means Committee Chair Dave Campwould discriminate against the intangible property (IP) of foreign affiliates of U.S.-based multinationals, raise taxes on IP income, and stimulate inversions, Matthew J. Slaughter said in a January report sponsored by the Tax Innovation Equality Coalition.

For the report, go here.

The Korean Supreme Court ruled that payments made for the use of patents registered outside Korea for domestic use is not considered Korean-source income. Thus, royalty payments made by Korean-based payers to foreign persons for the use of certain patents registered outside Korea for manufacturing, distribution or other functionswithin Korea is not subject to tax in Korea. As a result, some US taxpayers should consider seeking refund claims for taxeswithheld on payments from Korea.
For the PwC Insight, go here.

Although the international project to combat base erosion and profit shifting (BEPS) is only half finished, thework done so far by the Organization for Economic Cooperation and Developmentwill trigger radical changes in multinational structures in 2015 and beyond, practitioners said. Among the high-profile casualties anticipated are intellectual property cash boxes in zero-tax jurisdictions; 2015 could be the year they go away.

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The growth of global tax transparency is expected to leap ahead in 2015ÔøΩmeaning companies, individual taxpayers and financial institutions must exercise new levels of caution, practitioners told Bloomberg BNA.
With more than 100 intergovernmental agreements under the Foreign Account Tax Compliance Act and dozens of countries signing on to participate in the Organization for Economic Cooperation and Development's common reporting standard, the groundwork is being laid for a new level of cross-border information sharing, they said.
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Norway's Finance Ministry has released a special Tax Commission report that recommends the country's corporate tax rate be reduced and special measures be introduced to prevent the diversion of investment to other countries.
The Tax Commission, a government group appointed in 2013,was mandated to assess the Norwegian corporation tax regime in light of capital taxation and recent international trends. The report, released Jan. 5, includes analysis of and recommendations for improving the corporate tax regime.

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It is an article of faith among many tax reformers that the U.S. should shift from aworldwide tax system to a territorial regime inwhich U.S.-based multinational corporations pay U.S. tax only on their domestic income. Such a stepwould reduce or eliminate tax on the dividends these firms receive from their foreign affiliates.

But a new analysisof the territorial tax systems of four nations suggests that much of the conventionalwisdom surrounding such a model falls somewhere betweenwishful thinking and myth.

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From April 1, Japan is cutting its famously high effective corporate tax rate by 2.51 percentage points down to 32.1%,with further increases scheduled for 2016. The government has also approved a reduction on losswrite-offs and improved tax incentive schemes as Abenomics takes off in 2015. For the story, go here.

The new corporate tax legislation is the most significant of its kind in Brazil for many years, not least because of its effect on accounting.For the story, go here.

An examination of the territorial tax systems in the United Kingdom, Japan, Germany, and Australia shows that the United States is not practically bound to any international norm, Rosanne Altshuler of Rutgers University, Stephen Shay of Harvard Law School, and Eric Toder of the Urban Institute said in a January 21 report.For the report, go here.

During a January 21 public consultation on a discussion draft on action 7 of the OECD's base erosion and profit-shifting project, representatives of various industry groups criticized the draft's more permissive standards for finding a permanent establishment.

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