2016

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US group urges Congress to cut OECD funding, claims US harmed by BEPS international tax standards

  • By MNE Tax
by MNE Tax
Representatives about 20 US advocacy groups, in a May 12 letter, urged Congress to stop funding the OECD, arguing that itswork developingworldwide standards to tax multinational corporations is contrary to US interests.
For the MNE Tax News story, gohere.

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Is a U.S. Patent Box a Good Idea?

by Yair Holtzman

It may bewise to give favored tax treatment to intellectual property in exchange for keeping it domestic, evenwithout corporate tax reform.
For the CFO.com story, go here.

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Related-Party Debt Not a Rose: IRS Rules Could Make It Stock

by George R. Goodman & Raj Tanden
George R. Goodman and Raj Tanden of Foley & Lardner examine the operation of the IRS's proposed rules on the treatment of related-party debt and how theywould affect corporate groups. "These regulationswould complicate financial planning and increase tax compliance burdens and uncertainties for groupswith corporate members," the authorswrite.
For the BNA Insight, go here. (Subscription required)

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Endangered Species: The U.S.-Based Multinational

by Ken Brewer
In this article, Ken Brewer argues that politicians arewrong aboutwhat causes inversions andwrong about the cure. He offers suggestions for an effective solution.
For the Tax Notes viewpoint, go here. (subscription required)

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The Ineluctable Logic of Adopting an IP Box Tax Regime

by Ike Brannon
In this article, Ike Brannon argues that the adoption of an intellectual property box regime is an achievable corporate tax reform that could return investment and jobs to the United Stateswhile sacrificing relatively little tax revenue.
For the Tax Notes viewpoint, go here. (subscription required)

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Debt-Equity Rules Harmful, Overbroad, Tax Attorney Tells IRS

by Alison Bennett
The government's controversial debt-equity rules are bad news for taxpayers and spell immediate trouble for ordinary intercompany cash loans, a tax partner at a major law firm told the Internal Revenue Service.
For the DTR story, gohere. (subscription required)

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Fewer Shareholders Pay U.S. Taxes on Dividends

A new study showing that a shrinking fraction of shareholders of U.S. corporations pay taxes on dividends is bolstering a drive to revamp the corporate tax system.

The specter of double taxation,which animates complaints about today's U.S. corporate tax code, is receding, according to a new study from the Tax Policy Center.

For thewall Street Journal story, gohere.

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China targets multinationals that shift profits among countries

  • By EJ Insight

China is planning to require multinationals to disclose more detailed information about their overseas affiliates as part of an international effort against tax evasion.

The proposalwould make it more difficult for large companies to avoid taxes by shifting profits among different countries, thewall Street Journal reports, citing tax consultants.

For the EJI Insight story, gohere.

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Partnership Debt Subject to Earnings-Stripping Rules: Treasury

by Alison Bennett
The controversial new earnings-stripping rules are intended to apply to partnership debt, government officials said, but there is stillwork ahead to craft the contours of that application, including looking at how the debt-equity rules can be harmonizedwith the existing partnership tax regime.
For the DTR story, go here. (subscription required)

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Cash Pools May Get Documentation Break in Debt-Equity Rules

by Alison Bennett
Taxpayerswith common central financing arrangements known as cash pools might get a break on tough documentation requirements at the outset of those pools under controversial earnings-stripping rules, a Treasury official said.
For the DTR story, go here. (subscription required)

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Hong Kong's 16.5 Percent Rate Helps Region Attract U.S. IP

by Kevin A. Bell
Alongwith the region's 16.5 percent tax rate, recent global focus on so-called DEMPE transfer pricing functionsÔøΩthe development, enhancement, maintenance, protection and exploitation of intangiblesÔøΩbenefits Hong Kong as it seeks to attract U.S. group intellectual property.
For the DTR story, go here. (subscription required)

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Treasury Official: Model Treaty Guidance Due This Summer

by John Herzfeld
A technical explanation of aspects of the active-trade-or-business test in the U.S. Model Income Tax Treaty, originally due this spring, is now expected to come out by the end of the summer, a Treasury Department official said.
For the DTR story, go here. (subscription required)

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Study: Australian Corporate Tax Cut to Benefit U.S. Most

by Murray Griffin
Australia's proposal to cut the corporate tax ratewill benefit the U.S. government the most because of existing double taxation agreements thatwould boost U.S. tax revenues, according to a study by the Australia Institute.
For the DTR story, go here. (subscription required)

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Debt/Equity Regs May Encourage Foreign Buyout of U.S. Businesses

by Amy S. Elliott
The proposed related-party debt regulations risk creating noneconomic incentives for U.S. companies to become targets for leveraged buyouts, according to one practitioner May 17,with another calling the related provision in the reg package its "most revolutionary part."
For the TNT story, go here. (subscription required)

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New U.S. Model Treaty Evolved From Negotiations

by Lee A. Sheppard
Provisions in the new U.S. model tax treaty evolved from previous negotiations and the development of a limitation on benefits provision for the OECD's base erosion and profit-shifting project, according to Quyen Huynh, Treasury associate international tax counsel.
For the TNT story, gohere. (subscription required)

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Levin Introduces Bill to Target Hopscotch Lending, Decontrolling

by Kat Lucero
The House's top Democratic taxwriter continues to target inversion-related practiceswith new legislation thatwould further restrict a controlled foreign corporation's ability to bypass U.S. taxation using lending and stock ownership strategies.
For the TNT story, go here. (subscription required)

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Countries targeted US companies in BEPS project to increase tax revenue, US Treasury official charges

by Julie Martin
Countries participating in the OECD/G20 base erosion profit shifting (BEPS) project sought to rewrite international tax rules for the digital economy and for intellectual property to increase their tax take at the expense of the United States, said Robert Stack, Treasury deputy assistant secretary (International Tax Affairs), May 13, at a National Tax Association conference inwashington.
For the MNE News story, go here.

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New Model Treaty Seeks Factual Connection' for Activities

by Alex M. Parker
by Alex M. Parker
New language in the U.S. Model Income Tax Treaty seeks to establish a "factual connection" to activities in order to apply the active trade or business test, according to a Treasury Department official.
For the DTR story, gohere. (subscription required)

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Another (Critical) Look at the Inversion Excise Tax

by David I.walker
David I.walker argues that regardless ofwhat one thinks of inversions generally, section 4985 should be repealed or replacedwith a direct penalty on corporate inversions.
For the Tax Notes report, go here. (subscription required)

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Anti-Inversion, Anti-Expatriation, and the Abandonment of Principle

by James M. Maynor Jr.
James M. Maynor Jr. explains how recent U.S. anti-inversion and anti-expatriation legislation represents an abandonment of the benefit principle,which has consistently served as a bedrock of international taxation.
For the Tax Notes report, go here. (subscription required)

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Tax Chiefs Push Ahead With CbC and CRS Data Exchange System

by Stephanie Soong Johnston
The heads of 44 tax administrations have designed and agreed on the creation of a system thatwill enable them to effectively and efficiently share data gathered from the automatic exchange of financial account information under the common reporting standard (CRS) and from country-by-country (CbC) reports.
For thewWTD story, go here. (subscription required)

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Revised India and Mauritius treaty ends decade-long tax debate

by Amelia Schwanke
India and Mauritius have signed a protocol that amends certain measures in their Double Tax Agreement (DTA),whichwill help to prevent tax avoidance as part of the India Government's efforts to tackle BEPS.
For the ITR story, gohere.

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Integration of Corporate and Shareholder Taxes

by Michael J. Graetz & Alvin C.warren Jr.
Integration of the corporate and individual income taxes can be achieved by
providing shareholders a credit for corporate taxes paidwith respect to corporate
earnings distributed as dividends. Integrationwould provide a framework for addressing current concerns for tax incentives for U.S. companies to shift income to foreign affiliates in lower-taxedcountries or to expatriate in "inversion" transactions.
For the draft paper, gohere.

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CbC Reporting Remains Of Concern For US: Boustany

by Mike Godfrey
During a recent hearing on US tax reform, House of Representativesways and Means Tax Policy Subcommittee Chairman Charles Boustany (R – Louisiana) expressed his continuing concern regarding the operation of the proposed US Treasury regulations on country-by-country (CbC) reporting.
For the Tax-News story, go here.

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Integrating the Corporate and Individual Tax Systems: The Dividends Paid Deduction Considered

  • By United States Senate Committee on Finance

The Senate Finance Committee on May 17 held a hearing on corporate tax integration.


For the member andwitness statements from the hearing, go here.

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The Inadequacy Of BEPS To Fix What's Wrong With The Corporate Income Tax

by Robert Goulder
Conventionalwisdom tells us the OECD's base erosion and profit-shifting initiative is the most significant development in tax policy in decades. Not so, says Reuven Avi-Yonah, a law professor at the University of Michigan and one of the leading critical thinkers in global taxation.
For the Forbes article, gohere.

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Coalition For Tax Competition Letter Urges Congress to Defund the OECD, Oppose BEPS

  • By Center for Freedom and Prosperity
byCenter for Freedom and Prosperity
Despite receiving $74 million in U.S. funding in fiscal 2015, the OECD's final base erosion and profit-shifting project recommendations indicate the OECD has "targeted American corporations for a massive tax grab," the Coalition for Tax Competition said in a May 12 letter to Congress that recommends the United States should cut off its funding.
For the letter, go here.

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U.S. Using BEPS Project to Safeguard Tax Base, Stack Says

by Alexander Lewis
Since the OECD's base erosion and profit-shifting project began, the U.S. has changed its mandate from stamping out tax havens to guarding the tax base at home, according to Treasury Deputy Assistant Secretary Robert Stack.
For the TNT story, gohere. (subscription required)

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Lew Calls for Congress to Strengthen Tax Information Sharing

by Kat Lucero
The United States is among the global leaders in tax information sharing, but congressional action is needed to maintain that status, Treasury Secretary Jacob Lew said May 13.
For the TNT story, go here. (subscription required)

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Economic Analysis: Trending Ideas That Could Shape Future Tax Policy

by Martin A. Sullivan
In this fluid environment, tax ideas that until just recently have been trapped by gridlock could rise to the surface.
For the Tax Notes article, gohere. (subscription required)

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U.S. Official: Unilateral Measures Violate Spirit of BEPS

by Kevin A. Bell
U.S. policy makers are dismayed that members of the OECD's project to combat tax base erosion and profit shifting have already enacted unilateral measuresÔøΩand that more are in theworks, a Treasury official said.
For the DTR story, go here. (subscription required)

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Tough Cash Pool Decisions Ahead Under Debt-Equity Rules

by Alison Bennett
Multinationalswith common cash management structures known as "cash pools" are bracing for a bumpy ride under controversial earnings-stripping rules.
For the DTR story, go here. (subscription required)

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India and Mauritius treaty protocol introduces source-based taxation of shares

  • By PwC

The governments of India and Mauritius signed a protocol amending the countries' tax treaty on May 10, 2016.

Key features of the protocol include the introduction of source-based taxation of capital gains on the transfer of Indian companies' shares acquired on or after April 1, 2017, and source-based taxation of interest income of Mauritian banks and fees for technical services.

For the PwC Insight, gohere.

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U.S. Groups Argue Against Earnings-Stripping Rules

by Richard Rubin
U.S. business groupsasked the Treasury DepartmentThursdayfor more time to analyze rules that tighten restrictions on intercompany debt and make it harder for companies to push taxable profits out of the U.S.
For thewall Street Journal story, go here.

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Heads of tax administrations take big step forward in global tax co-operation

  • By OECD
by OECD
Delivering on the OECD/G20 international tax agenda, through implementation of the Base Erosion and Profit Shifting (BEPS) Project and the Common Reporting Standard (CRS) for the automatic exchange of financial account information, took centre stagewhen heads of tax administrations met on 11-13 May in Beijing, People's Republic of China.
For the OECD release, go here.

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European Parliament Approves Country-by-Country Reporting

by Joe Kirwin
The European Parliament cleared theway for legislation to require multinational companieswith a turnover of 750 million euros ($847 million) or more to provide country-by-country tax and profit information to European Union member state tax authorities.
For the DTR story, gohere. (subscription required)

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Quit Bullying, Fight Corruption in U.S., Tax Havens Say

by Thomas Penny & Stephanie Baker
The global fight against corruption should focus on major jurisdictions rather than bullying small territories, the heads of government of two tax havens toldworld leaders.
For the DTR story, go here. (subscription required)

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Officials Defend Distribution Rule in Anti-Inversion Regs

by Andrew Velarde
IRS and Treasury officials on May 12 defended the bright-line non-ordinary-course-distribution (NOCD) rule of the recent anti-inversion regs, saying itwas necessary to prevent companies from billing themselves as attractive inversion targets.
For the TNT story, gohere. (subscription required)

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Coalition Renews Push to Cut U.S. Funding for OECD

by Alex M. Parker
A coalition of free-market advocacy groups is renewing its campaign for the U.S. to sever funding to the OECD in thewake of the organization's project to combat tax base erosion and profit shifting.
For the DTR story, go here. (subscription required)

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IRS Advises Agents on Taxpayer Use of Section 482

by Dolores Gregory
If a U.S. taxpayer adjusts the book price of a transactionwith a foreign parent to reflect an arm's-length price, it must report the corrected amount on a timely filed original Form 1120, the IRS said in a new international practice unit.
For the DTR story, go here. (subscription required)

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Give Us More Time on Debt-Equity Rules, Groups Ask Treasury

by Alison Bennett
Nearly two-dozen business and industry groups are asking the government to back down on the effective date for controversial earnings-stripping rules and offer months of additional time for commentsÔøΩa sign of the growing pressure on the Treasury Department to ease up on the regulations.
For the DTR story, go here. (subscription required)

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Tax Treaty Break From Inversions Rules Possible: Treasury

by Alison Bennett
Multinationals could get a break under controversial inversions rules if they don't get a better tax deal under the treaty in a new "third country" than they did in the jurisdiction they left, a Treasury Department official said.
For the DTR story, gohere. (subscription required)

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Debt-Equity Bifurcation Could Expand Beyond Related Parties

by Laura Davison
The Treasury Department could decide towrite rules allowing the government to break up debt contracts into debt and equity pieces for transactions that don't involve related parties, an official said.
For the DTR story, go here. (subscription required)

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European Green Party: U.S. Should Be On Tax Haven List

by Joe Kirwin
The U.S. should be listed as a tax haven if it doesn't take steps to expose beneficial owners of companies and if the OECD's common reporting standard isn't adopted, the European Green Party said.
For the DTR story, go here. (subscription required)

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Report Calls U.S. Multinationals' Tax Disadvantage Exaggerated

by Ryan Finley
The United States' comparatively high corporate tax rate and taxation ofworldwide income haven't made U.S. multinationals uncompetitive, and lowering the rate or adopting a territorial systemwon't fixwhat'swrongwith the current system, according to a reportwritten by economist Kimberly A. Clausing.
For the TNT story, go here. (subscription required)

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A new boost to transparency in international tax matters: 6 new countries sign agreement enabling automatic sharing of country-by-country reporting

  • By OECD
by OECD
As part of continuing efforts to boost transparency by multinational enterprises (MNEs), Canada, Iceland, India, Israel, New Zealand and the People's Republic of China signed today the Multilateral Competent Authority agreement for the automatic exchange of Country-by-Country reports ("CbC MCAA"), bringing the total number of signatories to 39 countries. The signing ceremony took place in Beijing, China.
For the OECD release, go here.

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The Necessary and Valuable Economic Role of Tax Havens

Simply stated,when politicians have toworry that jobs and investment can cross borders, they are less likely to impose higher tax rates and punitive levels of double taxation. Interestingly, even the statist bureaucrats at the Organization for Economic Cooperation and Development agreewith me,writing that tax havens "may hamper the application of progressive tax rates." They think that's a bad thing, of course, butwe both agree that tax competition means lower rates.

So Iwas very surprised to see some economists signed a letter saying that so-called tax havens "serve no useful economic purpose."

For the Cato article, gohere.

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If Everyone Is a Tax Haven, No One Is

by Alan Cole
The European Green Party today labeled the United States a tax haven, particularly singling out the states of Arkansas, Colorado, Delaware, Indiana, Iowa, Maryland, Michigan, Mississippi, Missouri, New York, Ohio, Oklahoma, Pennsylvania, and Virginia. That's a lot of states, places that most just consider ordinary areas inwhich to do business.
For the Cato article, gohere.

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PE changes increase risk of tax exposure in jurisdictions where a company has no legal entity

  • By International Tax Review

Multinational enterprises (MNEs) are facing new challenges arising from OECD's developments regarding the determination of a taxable presence in a foreign countrywhere the company operateswithout a legal entity.


For the ITR article, go here.

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Section 385 proposed regulations would vitiate internal cash management operations

  • By PwC

by PwC

On April 4, 2016, Treasury and the IRS proposed regulations under section 385. The Proposed Regulations appear to be intended to limit the effectiveness of certain tax planning techniques by recharacterizing certain related-party financings as equity, evenwhere the financing is in the form of straight debt instruments.

For the PwC Insight, gohere.

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