2016

A senior Treasury Department official questioned the "basic fairness" of European Union investigations into tax deals struck by American companies, including Apple Inc. and McDonald's Corp., on the continent.
Robert Stack, Treasury's deputy assistant secretary for international tax affairs, said following meetingswith EU regulators that he is concerned that EU Competition Commissioner Margrethe Vestager is making unreasonable demands of U.S. companies in her sprawling probe.
For the DTR story, go here. (subscription required)

After receiving a large number of comments regarding special tax regimes and other issues, Treasury is "very close" to publishing its final version of the updated U.S. model tax treaty, Elena Virgadamo, attorney-adviser, Treasury Office of International Tax Counsel, said January 29.
For the TNT story, go here. (subscription required)

James Fuller comments on U.S. tax developmentswith international implications, focusing this month on limitation on benefits, treaty, and state aid issues; country-by-country reporting; various IRS rulings; and foreign partner transfer rules.
For the TNI report, go here. (subscription required)

To combat tax avoidance, governments can either improve current tax rules through multilateral initiatives such as the OECD's base erosion and profit-shifting project orwork on creating an entirely new corporate tax system, the Institute for Fiscal Studies said in a January 29 release.
For the release, go here.

The IRSwill issue guidance under tax code Section 704(b) on partnership creditable foreign tax expenditures in the very near term, a government official said.
The guidancewill address abusive fact patterns and clarify ambiguities in how partnerships address CFTEs, Ossie Borosh, an attorney-adviser in the Treasury Department's Office of Tax Legislative Counsel, said Jan. 29 at the American Bar Association Section of Taxation midyear conference.
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Corporate tax avoidance costs EU countries ÔøΩ50-70 billion in lost revenue a year, according to the European Commission. On 2 February itwill discusswith MEPs how it plans to make corporate taxation fairer and more efficient. The Lux Leaks scandal showed that EU countries sometimes court multinationalswith advantageous tax schemes. Parliament has set up two special committees to investigate and called on the Commission to introduce legislation to restrain these practices.
For the release, go here.

George Osborne is backing an initiative to force multinational companies to open up their tax arrangements to public scrutiny, in an effort to bring transparency to a system thatwas heavily criticised in the light of Google's £130m British tax settlement.

For the Financial Times story, go here.

Earlier thisweek, Johnson Controls announced itwould combinewith Tyco in a dealwhere the Milwaukee-based manufacturer is expected to relocate its headquarters to Ireland,where corporate taxes are lower than in the United States. Multinational corporations often argue that corporate inversions are a necessary response to the "competitiveness" problems associatedwith America's current tax code. Yetwhile most agree that the U.S. corporate tax system is in desperate need of reform, this diagnosis is based on myths that are divorced from the reality on the ground.
For the Fortune article, go here.

Thisweek,wisconsin-based Johnson Controls and Tyco InternationalÔøΩbased in IrelandÔøΩannounced a plan to merge,with the new company to be headquartered on the Emerald Isle.
It's the latest attempt at a corporate inversion, a controversial move that prompts a U.S. company to mergewith an international brand, and set up shop in that entity's home country to save money on taxes. Nearly 50 U.S. companies have used inversions to reincorporate overseas during the past ten years, more in the previous two decades combined. However, is it good business or greed?
For the CNBC article, go here.

Robert Stack, Treasury deputy assistant secretary (international tax affairs), metwith EU officials in Brussels January 29 to personally deliver the message that recent European Commission state aid decisions unfairly target American companies such as Apple, Amazon, Starbucks, and McDonald's, a Treasury official confirmed to Tax Analysts.
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Practitioners upset over the broad scope and immediate effectiveness of a notice and planned regulations implementing a statute that's been ineffective for 18 years urged the IRS and Treasury Department to use restraint as they develop guidance on cross-border partnership transfers.
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The European Commission has proposed a package of measures to clamp down on corporate tax avoiders thatwould close a loophole companies have used to shift profits to low-tax countries.
The EU's executive body said the Anti-Tax Avoidance Packagewould open up "a new chapter in its campaign for fair, efficient, and growth-friendly taxation" by, among other things, changing accounting rules and boosting reporting requirements so that companies pay tax in the countries inwhich they ostensibly earn their profits.
For the CFO.com story, go here.

Europe has launched an assault on tax avoidance by multinational companies, pledging on Thursday to close regulatory loopholes revealed by the LuxLeaks scandal and to give EU countries more powers to claw back profits that businesses seek to shift abroad.

For the Financial Times story, go here.

Brussels is set to examine the UK's £130m tax dealwith Google, after the Scottish National party called on the EU's competition chief to probewhether the agreement's generous terms constituted illegal state aid.

Stewart Hosie MP, deputy leader of the SNP, onwednesdaywrote to Margrethe Vestager, the EU's antitrust commissioner, urging her to address "growing concerns" aboutwhat he called an "opaque" deal, according to a copy of the letter seen by the Financial Times.

For the Financial Times story, go here.

European Union competition chief Margrethe Vestager said Thursday morning she's ready to investigate Google parent Alphabet Inc.'s 130 million-pound ($185.5 million) tax dealwith the U.K. if there are complaints. It didn't take long for the first to surface.

For the Bloomberg story, go here.

Google has not agreed settlements in its tax disputes across Europe and is not close to doing so, according to a person familiarwith the negotiations.

There has been speculation the technology group has agreed dealswith France and Italy following lastweek's announcement of a £130m settlement in Britain.

For the Financial Times story, go here.

For some European nations, big American corporations like Google are seen primarily as employers and technological innovatorswhose presence can helpwith their global competitiveness.

But for others, the multinational giants are seen as having used complex accounting to sidestep corporate taxes. That, some argue, makes them prime targets at a timewhen governments are grasping for revenue to fill budget deficits and trying to address populist concerns about inequality.

For the New York Times story, go here.

The battle between theworld's leading multinationals and national governments looking for tax revenue has heated up over the pastweek following the row surrounding Google (NASDAQ: GOOGL)'s bill in the U.K. and a pan-European push to combat corporate tax avoidance.
For the CNBC story, go here.

Google Inc. is under investigation in Italy for allegedly avoiding taxes totaling about 250 million euros ($273 million) between 2009 and 2013,while the European Union is considering a probe of the U.K.'s 130 million pound ($185.5 million) tax dealwith the company's parent, Alphabet Inc.
The EU inquirywas requested by Stewart Hosie, deputy leader of the Scottish National Party,who said he'dwritten to ask for it just hours after EU competition chief Margrethe Vestager announced Jan. 28 she's ready to investigate the tax settlement if there are complaints.
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EY's Kenneth Christman and Rodica Gilles examine the recent string of European Commission state aid investigations involving member state transfer pricing agreements and tax rulings, aswell as the implications for U.S. multinationals. "Uncertainty about the value of EU tax rulings may be particularly significant for U.S. multinationals," the authorswrite, as they "seem to be disproportionately targeted in these investigations."
For the BNA Insight, go here. (subscription required)

AEuropean Commission reportconcludes that the tax rules and practices of EU member states,which permit deductions for intra-group interest costs, expose member states to aggressive tax planning by multinational companies.
The study, released Jan. 28, concludes that all 28 member states exhibit aggressive tax planning indicators that fall "under the interest cost theme. This suggests that base erosion by means of financing costs can occur."
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Unanimous approval of the European Commission'sAnti-Tax Avoidance Directivemay take longer than the mid-year target deadline, given member states' unwillingness to cede tax policy to Brussels.
EU member state and independent tax experts identified two elements of the proposal as likely to trigger intense debate: the switch-over clause, designed to ensure taxation of dividends and capital gains for companies in low-tax jurisdictions, and an exit tax, designed to stop companies from relocating their tax residence or assets to gain a tax advantage.
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EU Tax Commissioner Pierre Moscovici presented an eagerly awaited package of measures, including a new anti-tax-avoidance directive and a revised administrative cooperation directive to allow the automatic exchange of country-by-country reports,which he saidwill ensure a "fairer and more stable environment for businesses.
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Responding to the European Commission's decision to move forwardwith the OECD's base erosion and profit-shifting project, Houseways and Means Tax Policy Subcommittee Chair Charlesw. Boustany Jr., R-La., said in a January 28 release that hewouldwork for international tax reform thatwould be fair to U.S. companies.
For the release, go here.

The U.S. plans to implement country-by-country reporting through bilateral agreements rather than signing a multilateral agreement, U.S. Deputy Assistant Treasury Secretary for International Tax Affairs Robert Stack told Bloomberg BNA.
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More than 30 countries have signed the OECD's multilateral competent authority agreement for the automatic exchange of country-by-country reports -- excluding the United States,which has opted to sign bilateral agreements instead, Tax Analysts has learned.
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Some aspects of the anti-tax-avoidance package thatwill be presented to the European Parliament January 28 extend beyond the OECD recommendations, said European Commission Vice President Valdis Dombrovskis.
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A financial transactiontax-- a per-trade charge on the buying and selling of stocks, bonds and derivatives -- is an ideawhose time has finally come. It has begun percolating in the Democratic presidential campaign,with all three candidates offering proposals.
For the New York Times story, go here.

Political leaderswill take ownership of and pursue specific tax reform ideas in the coming year as they seek a potential international-only reform, members of PwC'swashington tax policy team said January 27.
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Treasury can and should deny the tax benefits resulting from planned inversions by Johnson Controls and Pfizer Inc. by modifying a rule from 2014 that requires payment of taxes on offshore profits if the inverted U.S. corporation's foreign affiliate gives it a "hopscotch loan," Americans for Tax Fairness said in a January 27 release.
For the release, go here.

When UK chancellor George Osborne took to the stage at theworld Economic Forum in Davos to announce that revenue authority HMRC had agreed a dealwith Google to claim unpaid tax from the last decade, he probably expected plaudits – or, at least, some recognition of HMRC'swork.
For the ITR story, go here.

The Commission's proposals aim for a coordinated EUwide response to corporate tax avoidance, following global standards developed by the OECD. New rules are needed to align the tax laws in all EU countries in order to fight aggressive tax practices by large companies.
For the EC release, go here.

The Israeli Parliament on January 4, 2016, amended the Income Tax Ordinance to reduce the corporate income tax rate from 26.5% to 25%, effective January 1, 2016.

For the PwC Insight, gohere.

You may have heard that a fair number of American corporations aren't so keen on being American anymore.
Just thisweek, Milwaukee-based Johnson Controls announced itwould merge Tyco,which is based in Ireland, allowing it to take advantage of the country's lower corporate tax rate. It's a gambit called a "tax inversion." Basically, a bigger American company mergeswith a smaller company located elsewhere so that, on paper, it's "based" in the lower tax country. This generally changes little-to-nothing of the company's operations.
For Theweek article, go here.

During the lunch break at a tax conference in Lisbon last January, Iwas fortunate to be seated next to a brilliant tax professor from the U.K., Rita de la Feria. Shortly afterwe exchanged the usual pleasantries, she asked me a pointed question. Although it required little thought to answer, the question itself raised issues that have colored how I view recent events – including developments in international taxation – in Europe.
For the Forbes article, go here.

Last September, at a law firm overlooking San Francisco Bay, Andrew Penney, a managing director at Rothschild & Co., gave a talk on how theworld'swealthy elite can avoid paying taxes.
His messagewas clear: You can help your clients move their fortunes to the United States, free of taxes and hidden from their governments.
For the Bloomberg story, go here.

New rules are needed to align the tax laws in all 28 EU countries in order to fight aggressive tax practices by large companies efficiently and effectively.
The European Commission has today opened up a new chapter in its campaign for fair, efficient and growth-friendly taxation in the EUwith new proposals to tackle corporate tax avoidance. The Anti Tax Avoidance Package calls on Member States to take a stronger and more coordinated stance against companies that seek to avoid paying their fair share of tax and to implement the international standards against base erosion and profit shifting.
For the related documents, go here.

Today, the European Commission issued proposed directives related to the Organisation for Economic Co-operation and Development's (OECD) final recommendations on its base erosion and profit shifting (BEPS) project.ways and Means Chairman Kevin Brady (R-TX) explained how the documents prove once again thatwashington must move forward on international tax reform.
For the release, go here.

During the lunch break at a tax conference in Lisbon last January, Iwas fortunate to be seated next to a brilliant tax professor from the U.K., Rita de la Feria. Shortly afterwe exchanged the usual pleasantries, she asked me a pointed question. Although it required little thought to answer, the question itself raised issues that have colored how I view recent events – including developments in international taxation – in Europe.
For the Forbes article, go here.

Although government rulemakers have heard anecdotally that some planned inversions "haven't happened" as a result of restrictions in IRS guidance, "wewon't know for awhile how effective the guidance has been," an agency official said.

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At the New York State Bar Association Tax Section annual meeting, members of Treasury and the tax bar discussed the newwave of corporate inversions, including Johnson Controls-Tyco, aswell as current and future anti-inversion guidance to address those inversions.
For the TNT story, go here. (subscription required)

The muted cheers that greeted the announcement of Google's British tax deal at the end of lastweek have rapidly turned into a chorus of boos from all sides of the political arena.

The British public can be forgiven for raising a sceptical eyebrow at this settlement. True, HM Revenue & Customs has squeezed more corporation tax from the US technology group's groaning coffers. Under the agreement, Googlewill pay roughly £30m a year rather than the £20m it coughed up before.
For the Financial Times story, go here.

In the early 21st century most cross-border income is untaxed. In the case of multinationals, this is because the source jurisdiction either lacks the authority to tax because in the age of electronic commerce it is easy to avoid the required physical presence in the source country; or because source jurisdictions grant tax holidays to multinationals. Residence jurisdictions do not tax active income currently for fear that multinationalswill establish their headquarters elsewhere, as the current US inversion saga confirms. In the case of individuals, exchange of information has not proven effective in deterring tax evasion via offshore secrecy jurisdictions, and nowithholding taxes are levied by source jurisdictions.

The problemwith this state of affairs is that in the absence of taxation of cross-border flows, the progressive income tax cannot be maintained, because it is easier for thewealthy to earn cross-border income. The result has been aworld-wide shift to taxing consumption rather than income. But consumption taxes are regressive, and cannot by definition reach the unconsumed income of the rich. Andwithout progressive taxation, itwill not be possible to maintain the public's commitment to social insurance that is globalization's main defense against growing inequality.

While both the MAATM and the BEPS projects are helpful, neither is likely to solve the underlying issues described above. In both cases the problem is that too many countries need to cooperate for the regime to be effective. In the case of MAATM, every tax haven has to sign on because otherwise all the funds can be routed through the non-cooperating haven.we are far from there, and the US has not implemented MAATM (it has implemented FATCA, but that applies only for US residents and can be avoided by using financial institutionswith no US presence.)

For the paper, go here.

The European Commission's anti-tax avoidance package is expected to contain provisions aimed at preventing unfair competition from countries outside the European Union, including sanctions against companies that use tax havens, according to documents obtained by Bloomberg BNA.
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A hotly anticipated anti-tax-avoidance package scheduled to be released by the European Commission January 28 contains a proposed antiavoidance directive that includes a limit on interest deductibility and an exit tax but omits provisions for a permanent establishment standard, according to a copy of the proposals obtained by Tax Analysts.
For thewWTD story, go here. (subscription required)

In the fall of 2008,withGeneral MotorsandChrysleron the precipice of bankruptcy, executives at the car parts supplierJohnson Controlsflew towashington. The company's president testified before a Senate panel and implored lawmakers to bail out the auto industry.
''Speaking for our company, and, I am sure for all auto parts suppliers,we respectfully urge the members of this committee, and the Congress as awhole, to provide the financial support the automakers need at this critical time,'' Keithwandell, then the president of Johnson Controls, said,warning that the failure of even one automobile companywould ''implode'' the supply chain and lead to broad job losses
For the New York Times story, go here.

In this report, Clausing summarizes her recent research estimating the effect of profit shifting on corporate tax base erosion in the United States. She also extends her analysis for a speculative estimate of base erosion consequences for other countries and discusses the policy implications of the steadily increasing base erosion and profit-shifting problem.
For the report, go here.

After being in effect for 15 years, Ghana's Internal Revenue Act, 2000 (IRA) has been replaced by Income Tax Act, 2015.

The new Act,whichwas published in the Official Gazette on September 1, 2105, and took effect January 1, 2016, differs significantly from the IRA in many areas, such as taxation of resident persons on aworldwide basis, special tax rules for specified industries, presumptive taxes for individuals, indirect transfers, thin capitalization, transfer pricing, employment taxes,withholding taxes, and transitional tax administration provisions.

For the PwC Insight, gohere.