2016

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Treasury Limits Foreign Tax Credit Availability

In thewake of the European Commission's state aid decision regarding Apple, Treasury has issued a notice stating that it intends to issue new regulations thatwill prevent a company that has been the subject of a foreign-initiated adjustment from obtaining foreign tax creditswithout repatriating the associated income.

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Ethiopia issues transfer pricing rules

  • By PwC
Ethiopia, one of Africa's fastest growing economies, issued transfer pricing rules effective October 12, 2015 through the Ethiopian Ministry of Finance and Economic Development (MoFED).
Whereas Ethiopia has always had a provisionwithin its Income Tax Proclamation (ITP) requiring transactions between related persons to be conducted at arm's length, no guidance had been provided by the Ethiopia Tax Authority (ETA) on how this arm's length standardwas to be implemented.

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Political Paralysis Is the Biggest Threat to U.S. Competitiveness

The U.S. political system is America's "single biggest barrier to competitiveness," according to an annual study by Harvard Business School.
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European Commission Begins Vetting Noncooperative Jurisdictions

The European Commission on September 15 took the first steps in creating a common EU list of noncooperative tax jurisdictions among member states, presenting a "pre-assessment" of jurisdictions, using a scoreboard of neutral and objective indicators, that member states can examine for further screening.

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U.K. Treasury Official Reaffirms Corporate Tax Rate Cut to 17 Percent

The U.K. government may be pushing through a corporate tax rate cut to 17 percent by 2020 in its Finance Bill 2016 to show that the U.K. is open for business, but creating a competitive environment for businesses means more than just offering low tax rates, a top HM Treasury official said.
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Australian Taxation Office Warns MNEs Against Tax Avoidance Schemes

The Australian Taxation Office has issued taxpayer alertswarning multinational entities that might be tempted to "push the boundaries" to beware of entering into either of a pair of arrangements intended to shift taxable profits away from Australia and into more favorable tax jurisdictions.

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How FATCA and CRS Affect U.S. Investment

William Ahern of Ahern Lawyers and Josh Maxwell of Hone Maxwell LLP compare the automatic exchange of tax information under the U.S. Foreign Account Tax Compliance Act and the common reporting standard and examine the effects both systems have on international finance centers.

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PROBLEMS UNSOLVED AND A NATION DIVIDED

This report provides an overview of the authors' findings on the evolution of the U.S. economy, the state of U.S. competitiveness in 2016, and priorities for the next President and Congress, drawing on our research and the May–June 2016 surveys of alumni and the general public.

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News Analysis: Is the EU a Country? Creditability of State Aid

by Mindy Herzfeld
Mindy Herzfeld discusses the European Commission's recent decision in the Apple state aid case andwhether the United Stateswill end up covering part of the costs of that decision.
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Questions and Answers on the common EU list of non-cooperative tax jurisdictions

  • By European Commission

The European Commission has released a Fact Sheet providing Questions and Answers on the common EU list of non-cooperative tax jurisdictions.

For the EC release, go here.

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Public comments received on the discussion draft on approaches to address BEPS involving interest in the banking and insurance sectors under Action 4

  • By OECD

On 28 July 2016, interested partieswere invited to provide comments on a discussion draft (French version available here)which dealswith approaches to address BEPS involving interest in the banking and insurance sectors under Action 4 (Interest deductions and other financial payments) of the BEPS Action Plan. The OECD is grateful to the commentators for their input and now publishes the comments received.

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Fair Taxation: Commission launches work to create first common EU list of non-cooperative tax jurisdictions

  • By European Commission

The European Commission is forging aheadwithwork to draw up a first common EU list of non-cooperative tax jurisdictions by presenting a pre-assessment ('scoreboard of indicators') of all third countries according to key indicators.

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GOP senator requests hearing on international tax issues

Sen. Dean Heller (R-Nev.) is asking the Senate Finance Committee to hold a hearing on international tax issues, such as the Treasury Department's proposed rules aimed at curbing offshore tax deals and the European Union's investigations of U.S. companies.
For the Hill story, gohere.
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House Republicans Ask Lew to Slow Debt-Equity Rules

Houseways and Means Committee Republicans asked Treasury Secretary Jacob J. Lew to slow down finalization of earnings-stripping regulations that have generated consternation among multinational corporations and some on Capitol Hill.

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Large Companies Claimed Most U.K. Patent Box Benefits in Fiscal 2014

More than 95 percent of the nearly £343 million in tax benefits claimed during the first year of the U.K.'s patent box schemewent to large companies, according to a report by HM Revenue & Customs.

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Tax Policy Rising to Prominence in R&D Incentives, OECD Says

Tax policy is becoming increasingly important among incentives meant to encourage research and development and innovative growth in countries, but governments must be careful in designing such policies to ensure they do not have any unintended harmful consequences, such as the creation of arbitrage opportunities, according to a new OECD report.

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MEPs Underwhelmed by Tax Reform Content of State of EU Speech

Tax reform didn't receive enough attention in European Commission President Jean-Claude Juncker's State of the Union Address 2016wTD 179-17: News Releases delivered September 14, according to members of the European Parliament (MEPs) from various political groups.

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Apple Ruling Is EU Power Grab, U.K. and Irish MEPs Argue

Although the European Commission's recent Apple decision received strong support overall, several members of the European Parliament (MEPs) reiterated claims that it undermines Ireland's tax sovereignty during a September 14 debate.

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U.S. Entities Concerned About Data Protection

U.S. banks and their clients areworried about protecting datawhen more than 100 nations begin exchanging financial information to complywith the OECD's common reporting standard.

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House Republicans Ask Lew to Slow Debt-Equity Rules (1)

Houseways and Means Committee Republicans asked Treasury Secretary Jacob J. Lew to slow down finalization of earnings-stripping regulations that have generated consternation among multinational corporations and some on Capitol Hill.
For the DTR story, gohere. (subscription required)
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Ikea on EU Tax Radar as Vestager Looks Beyond Apple, U.S.

European Union regulatorswho slapped Apple Inc.with a 13 billion-euro ($14.6 billion) tax bill are examining allegations that Ikea dodged at least 1 billion euros in taxes over the past six years.
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News Analysis: BEPS Failure and Multilateral Initiatives

In a September 13 speech in Toronto titled "Making Globalizationwork for All," IMF Managing Director Christine Lagarde urgedwestern governments to take better care of their citizenswhile denouncing "tax systems that allow multinational companies andwealthy individuals not to paywhat manywould consider a fair share." But as the populist rebellion against globalization, the European Union, and multinational greed is finally sinking inwith the European elite, their American counterparts demonstrated that they are only just beginning to get it.

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Without A Deft Touch, Treasury Risks Writing Inversion Rules That Benefit Wall Street

by Carter Dougherty (Inside Sources)
In the murky and arcaneworld of tax law, unintended consequences are not hard to come by. In the case of the Treasury Department's years-long battle to fight international tax avoidance, the newest one may be that rules aimed at industrial corporations end up benefiting large banks onwall Street and elsewhere in theworld.
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London Business School Review

Forbes

by Catherine Magelssen and Ioannis Ioannou
The issue of corporate tax avoidance is often discussed in relative isolation,without really considering the efficiency and effectiveness those funds are used by governments or by the tax avoiding corporates.what "fair taxation" is, of course, maywell be a philosophical discussion. Yet the recent EU decision about Apple's tax ruling raises a number of questions that, in our view, have ramificationswell beyond the domain of tax avoidance and competitiveness.
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An unabashed EU cash grab

by Alexander Hendrie (Thewashington Post)
Despite the protests of both country and company, the European Commission has declared Apple's Irish tax rates constitute "illegal state aid," and are telling the company they must pay the Irish government 13 billion euros (about $14.5 billion) plus interest. EU bureaucrats do not allege that Apple dodged taxes, but rather they did not pay enough, a decision that upends the established international tax system by opening the door to retroactive taxation based on subjective accusations of "fairness."
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The Apple ruling aims at the wrong problem

  • By Live Mint

In 2014, Apple's effective corporate tax ratewas allegedly 0.005%. That is one of the eye-catching figures European Union competition commissioner Margrethe Vestager ledwith lastweekwhile declaring the findings of a three-year inquiry into Apple's tax arrangements in Ireland. Here's another: the European Commission (EC) has charged Irelandwith recovering $14.5 billion from the tech giant. Together, they sum up the problemswith the rulingÔøΩa blinkered view of a situation fraughtwith ambiguities and an approach that could prove counterproductive in tackling a legitimate problem.

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The Real Motivation Behind the EUs Attack on Ireland and Apple

Here's a name to conjurewith: Margrethe Vestager. Ring a bellwith you? An old girlfriend from your backpacking days around Europe maybe? Or Emmanuelle's best friend in the 1970s "sophisticated" series of sex movies perhaps? No? Nothing else come to mind? Okay, I'll give you a clue. She's Danish and she's just told the Apple Corporation to pay the Irish government $13 billion in back taxes that Ireland says Apple doesn't owe.
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Understanding the European Commissions Recent Tax Rulings

On August 30th the EC announced that two of Apple's tax agreementswith Ireland violated the state aid clause in the Treaty on the Functioning of the European Union (TFEU), a clause guarding against states giving an advantage to a particular business or industry. This ruling set off a firestorm of criticism for recent EC rulings that have used the state aid clause to strike down tax agreements and force collection of back taxeswith interest.

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Treasury Secretary Jack Lew on Apple's tax bill and the next financial downturn

It's been eight years since the financial crisis and the U.S. economy is still in recovery mode, though it may be the envy of Europe, China, and other countries around theworld.
Earlier this year, Treasury Secretary Jack Lew spoke to us about America's role in theworld economy and tax inversions.
We caught upwith him again to discuss our country's economic health.

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UK stuns with support for Bill requiring public country-by-country reporting

In a surprising volte face, Britain is considering becoming the first country in theworld to force companies to publicly reveal how much tax they pay andwhere they earn the money. The about-face comes after the UK defeated a similar amendment amidst Brexit fears.

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Congressional Pressure Mounting on U.S. Treasury's Debt-Equity Regs

The U.S. Senate Finance Committee should hold a hearing on Treasury's proposed debt-equity regulations, a Republican committee member told Chair Orrin G. Hatch, R-Utah, in a September 13 letter provided to Tax Analysts.

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IRS Transfer Pricing Enforcement Leads to Litigation-Like Audits

The recent mandate of the IRS Large Business and International Division's transfer pricing practice (TPP) to identify, develop, and litigate additional transfer pricing cases has resulted in taxpayers facing more litigation-like techniques during audits, a practitioner said.

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Treasury Official Slams EU's Tax Demands on Apple

A senior Treasury Department attorney slammed the European Commission's landmark decision requiring Apple Inc. to retroactively pay $14.5 billion in unpaid taxes as "a bad precedent that undermines stability in the global tax system."

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Lobbyists: Not Much Relief Coming From Debt-Equity Revisions

Lobbyists don't expect many positive changes for their clients from the Treasury Department's ongoing review of proposed debt-equity regulations.
Despite months of engagementwith Treasury officials and tens of thousands of comment letters, stakeholders said they have largely accepted that the broad scope of the proposed rules under tax code Section 385will remain intact and that there is little hope that Congress can stop them.
For the DTR story, gohere. (subscription required)
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Apple's Ireland Bill Puts U.S. Treasury in Tax Credit Bind

When Apple Inc.was ordered by European regulators to pay $14.5 billion plus interest in back taxes to Ireland, the technology giant seemed to be facing an expensive headache.
Turns out it is a headache for the U.S. Treasury Department aswell.

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G-20 Leaders Ask OECD to Report on Transparency

Bloomberg

by Mark Melnicoe and Angela Greiling Keane
G-20 leaders at the group's summit in Hangzhou, China, asked the OECD to report by June 2017 on tax transparency initiatives and by July to prepare a list of jurisdictions "that have not yet sufficiently progressed toward a satisfactory level of implementation of the agreed international standards on tax transparency."
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Destination-Based Taxation in the House Republican Blueprint

bywei Cui (Tax Notes)
In this article, Cui examines the destination-based cash flow tax in the House Republicans' blueprint for tax reform. He addresses the likely impact of the proposed tax and some of the theoretical controversies that it has generated.
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G-20 Leaders Adopt OECD Tax Transparency Listing Criteria, New Tax Pillar

by Stephanie Soong Johnson (Tax Notes)
In their latest communiqué, G-20 leaders approved the OECD's three objective criteria for identifying jurisdictions that fail to cooperatewith internationally adopted tax transparency standards, and approved a new "tax pillar" focused on promoting inclusive growth and tax certainty.
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India's tax plans steaming ahead as GST Council gets approval

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EU states warm to tax avoidance measures

The EU is accelerating towards stronger legislation on corporate tax in thewake of the European Commission's order to Apple to pay a record-breaking ÔøΩ13 billion of tax in Ireland.
At a meeting in Bratislava, finance ministers appeared to achieve broad consensus and endorsed a European Commission proposal to fight tax avoidance.

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Europes Bite Out of Apple Shows the Need for U.S. Tax Reform

In February Iwrote to European Commission President Jean-Claude Juncker and raised concerns about the commission's state-aid investigations involving the tax practices of U.S. multinational companies.
Most important for U.S. taxpayers, the European Commission's actions also threaten to erode America's corporate tax base.

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MEPs to debate EU Commission verdict on Irelands tax deal with Apple

  • By European Parliament

The EU Commission's conclusion that Ireland granted Apple Inc. illegal tax benefits,which enabled it to pay substantially less tax than other businesses over many yearswill be debated in plenary session onwednesday around 16:00.

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Impact of the proposed Section 385 regulations on companies investing in the United States

  • By PwC
The deductibility of interest on related-party debt for US federal income tax purposes is a vital tax issue for foreign businesses investing in the United States (US inbound companies) because it impacts cost of capital and return on investment.

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Temporary Section 482 Regulations: Is All Value' the Same Thing as Arm's-Length Pricing?

by David Ernick
David Ernick of PricewaterhouseCoopersnext considers the meaning of "value" under temporary transfer pricing regulations (T.D. 9738), andwhether the rules signal a departure from traditional arm's-length principles that have been the foundation of U.S. transfer pricing rules.
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Apple May Face Double Tax on Profits If France Adds to Tab

by Rick Mitchell and Ben Stupples

Apple Inc. may face double taxation on some of its profits if the European Commission's Aug. 30 ruling inspires France to slap its own tax adjustment on the company, practitioners said.
Apple could even face "triple taxation" if it repatriates profits from the European Union to the U.S., Laurent Leclercq, a partner at Paris-based law firm Fidal, told Bloomberg BNA.

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EU's Apple Tax Case Prompted by U.S. Senate Tipoff

by Peter Chapman
The European Union's Apple Inc. tax probe evolved after the U.S. Senate "tipped us off" about the company's practices, according to EU Competition Commissioner Margrethe Vestager.
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Moscovici: Apple Ruling Fair, Not Anti-U.S.'

by Jan Stojaspal
European Tax Commissioner Pierre Moscovici defended the European Union's Apple ruling, saying itwas neither "anti-U.S." nor "arbitrary."
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Finalizing April Inversion Regs Isn't Highest Priority

Because the government's international tax lawyers have their hands fullwrapping upwork on a number of high-priority guidance projects -- not the least ofwhich are the final debt-equity regs -- finalizing the newest inversion regs is not at the top of their to-do list.

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OECD Tax Head Warns Against Departing From Arm's-Length Standard

by Stephanie Soong Johnston
The European Commission has not yet published its full decision in the Apple state aid case, but OECD officials say they are hopeful that the EU executive arm is not deviating from the arm's-length standard.
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Final CFC Partnership Loans Regs May Address Multiple Guarantors

Final regulations addressing the treatment of U.S. property held by controlled foreign corporations in transactions involving partnerships could resolve problems some practitioners havewith a provision described in the preamble of the 2015 proposed regulations, an IRS official hinted.

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