2016

It has to be said that this isn't theway that you'd normally think about it. But this is the assertion: corporate tax avoidance actually reduces the profit that companies make. The mechanism is that the tax avoidance increases the cost of capital to the firms. How that happens is that the variance of corporate tax flows increases as a result of the tax avoidance and this increased variance makes investors desire higher returns: or, the same thing, onlywilling to supply capital at higher costs (which, for the company, is at a lower valuation).
For the Forbes story, go here.

It's hard to have a productive discussion about base erosion and profit shiftingwithout getting the premises right. First, the OECD's BEPS project is not going to produce thewindfall revenue gains that some governments and accounting firmswere counting on. Second, the United States is only pretending to cooperate.without an understanding of those two things, BEPS discussions are just polite people talking past each other.
For the TNT story, go here. (subscription required)

Mindy Herzfeld summarizes a recent global tax policy conference hosted by the Irish Tax Institute and the Harvard Kennedy School, focusing on the OECD's progress on base erosion and profit shifting and its possible new mandate to examine how tax laws affect innovation and growth.
For the TNI story, go here. (subscription required)

In the second article in a series on the development of an international tax dispute resolution process, the authors examine the lessons that can be learned from the alternative dispute resolution mechanisms used by the IRS.
For the TNI story, go here. (subscription required)

Philip Lowe comments on U.S. assertions that U.S. companies have been unfairly targeted by the EU state aid investigations.
For the TNI article, go here. (subscription required)

The IRS has issued final regulations that eliminate one exception to the coordination rule between asset transfers and indirect stock transfers for some outbound asset reorganizations and modify another exception for section 351 exchanges so that it's consistentwith the remaining asset reorganization exception.
For a summary and the full text of the regs, go here. (subscription required)

The IRS released final regulations that continue its efforts to prevent U.S. companies from doing tax-free repatriations and put the brakes on some corporate inversion deals.

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U.S. multinationals are concerned that new OECD standards for permanent establishments, under the BEPS action plan, create undue costs and administrative burdens that may force them to change theway they operate abroad.

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IRS examiners could be putting corporate interest deductions that take money out of the U.S. under increased scrutiny.
A new guide for auditors on how to treat deductible interest payments under tax code Section 163(j) could be another step in the government's fight to stop the flow of untaxed money offshore, practitioners told Bloomberg BNA.
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The IRS is telling its agents to look closely at assertions by controlled foreign corporations that income isn't taxable foreign personal holding company incomeÔøΩand to recharacterize that income if it doesn't matchwhat companies are saying.

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A senior U.S. Treasury official confirmed that the agencywon't accept U.S. multinational companies' country-by-country reports until after mid-2016, much to the chagrin of international tax planners.
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The OECD's base erosion and profit-shifting project's objective to "consolidate rather than coordinate" international tax rules could result in less economic competition and diversity, higher compliance costs, andweakened taxpayer rights, Jason J. Fichtner and Adam N. Michel of George Mason University's Mercatus Center said in a March report.
For the report, go here.

The disclosure of country-by-country reporting data to the public should be avoided to protect bigger companies from unfair competition from smaller companies thatwould not be covered by the provisions, Irene Yates, vice president for corporate tax at McDonald's Corp., told members of the European Parliament March 15.
For thewWTD story, go here. (subscription required)

The European Commission should play a key role in coordinating, overseeing, and assessing the effectiveness of the automatic exchange of country-by-country reports among EU member states, according to a member of the European Parliament's Committee on Economic and Monetary Affairs.
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George Osborne, UK chancellor of the exchequer, has delivered his Budget 2016 speech, criticising "large companies that exploit loopholes"while lowering corporation tax to attract multinationals. The big 'winners'were small and medium-sized enterprises.
For the ITR story, go here.

Chancellor of the Exchequer George Osborne's decision to cut corporation tax to 17 percent by 2020will bring the U.K. rate to the second lowest among developed countries.
For the Bloomberg Business story, go here.

To curb tax avoidance by multinational corporations, the U.K.'s 2016 budget contains proposals to cap interest relief, limit the use of intragroup royalty payments to shift profits from the United Kingdom, and extend hybrid mismatch rules to cover permanent establishments, Chancellor of the Exchequer George Osborne said.
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Both Democratic and Republican House appropriators on March 16 criticized the chamber's budget forwhat they considered its failure to address the problem of U.S. corporations fleeing the country for more favorable tax conditions, but the measure ultimately passed a House Budget Committee markup.
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Despite its lengthy new discussion of risk and its invention of an awkward acronym for analyzing intangibles, the OECD's report on actions 8 through 10 (transfer pricing) of the base erosion and profit-shifting project is based on familiar transfer pricing principles, according to officials from the OECD and Treasury.
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The OECD's efforts to establish a peer review process to monitor countries' performance in resolving mutual agreement procedure cases are "well advanced," and it expects to have the reviews ready for Germanywhen it takes over the G-20 presidency in 2017, according to the OECD's tax chief.
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Although officials from the United States, France, and the OECD have stressed that the final report on action 13 (transfer pricing) of the base erosion and profit-shifting project doesn't indicate any new preference for profit-split methods, tax authorities in Mexico and China say profit splits may be necessary to account for the value of all parties' contributions.

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The USwill not share country-by-country report (CbCR) informationwith foreign authoritieswho choose to make the reports public, said deputy assistant secretary at the US Treasury Robert Stack.
For the ITR story, go here.

International Tax News is designed to help multinational organisations keep upwith the constant flow of international tax developmentsworldwide. Among the topics featured in this month's edition are:

• Australia's multinational anti-avoidance legislation
• The new bill mandating automatic exchange of information in Hong Kong
• Poland's general anti-avoidance rule
• The European Commission's anti-tax avoidance package

Congress should pass legislation to allow the IRS to participate in the internationally agreed common reporting standard for automatic exchange of financial account information, IRS Commissioner John Koskinen said March 14.
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The U.S. should use the OECD's common reporting standard instead of the Foreign Account Tax Compliance Act reporting requirements so the country is operating on a common transmission system, IRS Commissioner John Koskinen said.

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The OECD's new six-step analysis of risk for transfer pricing purposes is conceptually alignedwith the U.S. treatment of risk under tax code Section 482 regulations, a U.S. Treasury official said.

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An Intel Corp. tax executive said Ireland's 12.5 percent company tax rate gives the Emerald Isle a huge advantage over the U.S. in attracting U.S. investment.
Ronald Dickel, vice president of global tax at Santa Clara, Calif.-based computer chip giant Intel, said the tax rate difference between the two nations is huge,which "encourages us to invest overseas."
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Houseways and Means Chairman Kevin Brady on Monday put international tax reform first in line for the committee this year. But it's not all good news for the Ciscos and Facebooks of theworld.
For the Politico story, go here.

This article handles the timely and urgent challenge of international corporate tax avoidance that fills the headlines of leading newspapers, monopolizes political debates between presidential candidates and influences the life of every Americanwho is losing more than 100 Billion U.S. dollars in tax revenues annually,while demanding fair taxation of citizens and multinationals.

The author calls upon Congress to enact a new Internal Revenue Code provision that requires a minimum global effective corporate tax rate. According to his proposal, if the global effective corporate tax rate (of any U.S. multinational and its controlled foreign corporations) falls below 15%, the U.S. Corporationwill be required to close the gap and pay the Internal Revenue Service up to the 15% minimum tax on its global profits as an interim liability.
For the paper, go here.

As more American companies look to flee an uncompetitive tax code, there's fairlywidespread agreement among the political class that something must be done. Somewant complicated new rules to prevent companies from leaving, but most seem to realize that addressing tax code fundamentals is the preferable approach. Lowering rates, closing loopholes, and moving to a territorial system are all rightly on the table. Yet if reformers truly hope to prepare the tax code for modern challenges, they must also include strong protections against the overreach of international tax collectors.
For the Inside Sources article, go here.

Lastweek, criticism of the patent box came from both Europe and the United States.
For the Tax Foundation blog post, go here.

Monique van Herksen, Paul Mulvihill, Justin Liebenberg and Vikita Shah look at how BEPS recommendations affect tax controversy and dispute resolution.

For the ITR story, go here.

European lawmakerson Tuesdaygrilled multinationals, includingAlphabet Inc.'sGoogle,Apple Inc. andMcDonald's Corp., on theirtaxstructures in Europe, raising political pressure on the firms as governments across the bloc attempt towring out more corporatetaxrevenue.
For the Irish Examiner story, go here.

The OECDwill issue standards in 2017 forwhen and how to apply profit-split methods for transfer pricing valuation, and in the meantime, tax authorities shouldn't treat the 2014 discussion draft on profit splits as authoritative guidance, according to Melinda Brown, OECD transfer pricing adviser.
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Some criticisms of the OECD's new guidance on risk and intangibles in transfer pricing fail to consider the big picture, according to Michael McDonald, financial economist (business and international taxation)with Treasury's Office of Tax Analysis.
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Houseways and Means Committee Chair Kevin Brady, R-Texas, said March 15 that his committee has been taking a "deeper dive" into pieces of a corporate integration draft that Senate Finance Committee Chair Orrin G. Hatch, R-Utah, has sharedwith him and his staff.
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The OECD's new transfer pricing guidance should be interpreted holistically given its rich, interrelated "tapestry," a U.S. Treasury official said.
The guidance is "really a good faith effort by the OECD and G-20 countries to address" erosion of the tax base "within the arm's-length principle," Michael McDonald, a financial economistwith Treasury's Office of Tax Analysis, said March 15.
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House Speaker Paul Ryan says that Republicans subscribe "to the same school of thought that Ireland does,which iswe believe in the tax competition school of thought,which iswe need to make our tax code more competitive and more hospitable to capital".
For the Irish Times story, go here.

The notion of creating a new tax preference for income derived from intellectual property has received a lot of attention in the tax policy community.
For the Treasury release, go here.

Increasing the research credit is a betterway to encourage innovation than taxing income from intellectual property at a preferential rate, according to Jason Furman, chair of the Council of Economic Advisers.
For the TNT story, go here. (subscription required)

James Tobin of Ernst & Young looks at the OECD recommendations in its final base erosion and profit shifting report on hybrid mismatch arrangements.
For the BNA Insight, go here. (subscription required)

Ireland is already applying the OECD's final recommendations on aligning transfer pricing outcomeswith value creationÔøΩcontained in the final reports under Actions 8, 9 and 10 of its Action Plan on Base Erosion and Profit ShiftingÔøΩto international transactions, an Irish Tax and Customs official said.

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The Australian Taxation Office is examining 300 multinational companies to see if they are subject to the nation's new multinational anti-avoidance law (MAAL), a Treasury official said.

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The U.S. shouldn't cut taxes on intellectual property income through a "patent box," or innovation box, according to a topwhite House officialÔøΩbut a number of academics disagree.

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Democratic senators have offered two bills thisweek designed to crack down on companies moving their headquarters overseas to lower their taxes.
For The Hill story, go here.

EY Mexico analyse income tax considerations related to the foreign exchange effect of the Mexican Peso versus the US Dollar, looking at non-monetary assets, deferred taxes and the impact in the effective tax rate under US-GAAP, IFRS or Mexican Financial Reporting Standards.
For the ITR story, go here.

If a partner that the United States shares country-by-country reporting datawith decides to make those CbC reports public, the U.S.would have the right to stop its exchangeswith that partner, Robert Stack, U.S. Treasury deputy assistant secretary (international tax affairs), said.
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Although many countries have implemented a patent box or provide special tax treatment for research and development and intellectual property income, the ideal policy for the United States is less clear, Republican staff of the Joint Economic Committee said in a March 10 release.
For the release, go here.

While the base erosion and profit-shifting projectwas a difficult process thatwill have an "enormous impact" globally, tax policymakers must be careful not to let politics take policy in destabilizing directions as countries move into the post-BEPS implementation phase, Robert Stack, Treasury deputy assistant secretary (international tax affairs), said March 10.
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