2017

India's tax authority traveled towashington at the end of October to meetwith IRS officials and concluded a number of transfer pricing agreements between the two countries. Advance pricing agreements help avoid tax disputes by enabling a company and one or more taxing authorities to agree on a transfer pricing method and application for a period of time.

Australia started a multi-jurisdictional tax authority projectÔøΩcalled "E6"ÔøΩto target the e-commerce industry, the tax authority revealed, but it declined to name the other governments involved. The Australian Tax Office initiated E6 in June 2013 to bring together six jurisdictions to focus on tax risks and multinationals operating in the digital economy.

Four years after the action plan on base erosion and profit shifting called for updated guidance on the profit-split method, an OECD consultation on transfer pricing demonstrated that stark differences remain on how andwhen to apply it.

The leak of the "Paradise Papers," a trove of 13.4 million documents claiming to show how "the rich get richer through offshore manoeuvres," quickly inflamed both politicians and campaigners. Some tax experts say that the conclusions to be drawn from the documents are not as clear as the politicians suggest.

U.S. multinationals including Apple and General Electric are suddenly looking at as many as three new taxesÔøΩestimated to raise $454.1 billion over a decadeÔøΩunder the House tax bill released Nov. 2.

Stakeholders from government, business, academia, and nongovernmental organizations across the globe gathered for the OECD's public consultation on the tax challenges of the digital economy. The November 1 consultation at the University of California, Berkeley, follows up the OECD's request for input,whichwill feed into an interim report to G-20 finance ministers due out in April 2018.

Glencore Plc, the mining conglomerate andworld's largest commodities trader, has failed in its bid for a judge to review a 21.3 million-pound ($28 million) U.K. "Google tax."Glencore's failure to obtain a judicial review comes as other multinational companies dealwith the diverted profits tax (DPT), nicknamed the "Google tax,"which the U.K. introduced two years agoamid concern that global tech companieswere engaging in aggressive tax planning to shift profits to offshore havens.

A House-proposed 20 percent excise tax on foreign imports from subsidiaries has been called "BAT-lite" and already faces opposition from U.S. multinationals and treaty partners.The provisionwould affect any multinational group inwhich foreign affiliates provided more than $100 million annually in goods, services, intellectual property, and other items to U.S. corporations.

The Tax Cuts and Jobs Act of 2017 (H.R. 1), introduced by Houseways and Means Committee Chair Kevin Brady, R-Texas, seeks to eliminate the lockout effect by establishing a 100 percent dividend exemption for foreign-source dividends paid by foreign corporations to U.S. corporate shareholders owning at least 10 percent of the foreign entity. Foreign tax credits and deductionswould be disallowed, and expenses allocated to the dividendwould not be deductible. The provisionswould take effect starting in 2018.

U.S. drug and technology giantswith overseas operations could pay more under House Republicans' sweeping international tax overhaul plan, according to practitioners. As a base erosion prevention measure, the billwould impose a U.S. tax on 50 percent of "foreign high returns." The tax is 20 percent, so that total taxwould be 10 percent on those returns. The tax could affect companies that aren't capital-intensive, practitioners saidÔøΩcompanies that don't have a lot of physical property and do a hefty amount of business centered on intangibles.

The Republican tax planwould impose a 20 percent "excise tax" on payments between affiliates of the same company, payments that are commonly made as international divisions trade materials, services, and royalties for intellectual property. This anti-avoidance provision may hurt foreign-owned multinationalswith American affiliates and U.S. companies that used inversion deals to move their headquarters overseas.

The macroeconomic effects of tax reform are a subject of significant discussion and controversy. In 2015, the House of Representatives adopted a new "dynamic scoring" rule requiring a point estimatewithin the budgetwindow of the deficit effect due to the macroeconomic response to certain proposed tax legislation. The revenue estimates provided by the staff of the Joint Committee on Taxation (JCT) for major tax bills often play a critical role in Congressional deliberations and public discussion of those bills. The JCT has long had macroeconomic analytic capability, and in recent years, responding to Congress' interest in macrodynamic estimates for purposes of scoring legislation, outside think tank groups ÔøΩ notably the Tax Policy Center and the Tax Foundation ÔøΩ have also developed macrodynamic estimation models. The May 2017 National Tax Association (NTA) Spring Symposium brought together the JCTwith the Tax Foundation and the Tax Policy Center for a panel discussion regarding their respective macrodynamic estimating approaches. This paper reports on that discussion. Below each organization provides a general description of their macrodynamic modeling methodology and answers five questions posed by the convening authors.

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The Swiss Federal Council has announced the entry into force dates for new rules on the automatic exchange of country-by-country (CbC) reports.
Under the current rules, multinationals can voluntarily submit a CbC report for the 2016 and 2017 fiscal years. Any such reportswould then be transferred to Switzerland's partner states from 2018. The Convention on Mutual Administrative Assistance in Tax Matterswill apply for the 2016 and 2017 fiscal years, butwill be restricted to the exchange of voluntarily submitted CbC reports.

Piergiorgio Valente

A Directive on Tax Dispute Resolutionwas adopted by European Member States early in October 2017. It had been proposed by the European Commission 1 year ago as part of the Corporate Tax Reform Package, alongwith the Common Consolidated Corporate Tax Base (CCCTB) and the amendment of the Anti-Tax Avoidance Directive (ATAD) regarding hybrid mismatcheswith third countries. Underlying purpose of the new Directive is to enhance the attractiveness of the Single Market to investment and business and boost growth. Specifically, it seeks to ease taxpayers' burden resulting from inadequate coordination of Member States' interpretations of bilateral tax treaties and the EU Arbitration Convention. It establishes effective tax dispute resolution, building on the existing system – as per in the Arbitration Convention – but releasing it from certain flaws and updating it to comprise other forms of alternative dispute resolution. The new system,which must be adopted in Member States by 30 June 2019, is also considered key to promoting fair taxation in the EU.

The most anticipated tax reform vehicle in decades, released by the House November 2, envisions far-reaching changes to international provisions of the U.S. tax code and represents the latest and possibly strongest attempt yet to move toward a territorial system.

The Tax Foundation on October 31 released its annual ITCI,which ranks OECD countries' tax codes. The U.S. rose from No. 32 in 2016 to No. 30 in 2017 as a result of Chile and Poland enacting tax provisions that hurt their overall competitiveness. The ITCI considers more than 40 tax policy variables that take into account the tax rates aswell as theway the taxes are structured. The ITCI examines corporate taxes, individual income taxes, consumption taxes, property taxes, and the treatment of profits earned overseas.

In this fifth part in a series of reports on state aid, Ruth Mason explains that tax reductions violate EU lawwhen they are selective rather than generally available to all taxpayers. Although the selectivity doctrine is in flux, Mason describes the status quo and attempts to classify types of selectivity that the European Commission and EU courts have identified in prior cases.

Argentina plans to cut corporate income taxes to 25 percent by 2021 for companies that reinvest profits, it said on Tuesday, part of awide-reaching tax reform bill intended to accelerate investment in Latin America's no.3 economy.

Free Trade Zones in the U.K. may be a possibility after the U.K. leaves the EU. In addition to freedom from import duties, they could also offer additional benefits such as tax and regulatory incentives, both to retain U.K. businesses and to attract additional investment.

Politicians and advocacy groupsworldwide are pushing tax reform plans, promising that changes in tax lawwill cure all manner of ills. In the United States, the Trump administration and Republican congressional leaders promise that tax cutswill help the middle class and bring back jobs that migrated overseas. In Europe, politicians are pushing for additional taxes on U.S. tech giants supposedlywielding monopolistic power. Finally, international and nongovernmental organizations, claiming to speak for developing countries, tout tighter base erosion and profit-shifting rules as a solution for those countries' many societal problems.

The Baltic nation ÔøΩwhich has the fourth-smallest population in the European Union after Malta, Luxembourg, and Cyprus ÔøΩ has seized the opportunity offered by its turn at the EU presidency to set an extremely challenging, digitally focused agenda for the regular EU meetups.Estonia is introducing to the EU the range of services and savings availablewith digital government. It is a countrywhose citizens can vote, review their medical records and pensions, and pay their taxes online.

Whilewalls,wire fences and border checks proliferate around theworld, the EU is looking to liberalise VAT rules to break down barriers to tradewithin its borders. Joe Stanley-Smith explores the EU's proposals for a new definitive VAT regimewith Maria Teresa Fabregas Fernandez, director for indirect taxation and tax administration at the European Commission.

The European Commission launched a public consultation October 26 seeking input on how the EU should address the taxation of the digital economy.The consultationwill help the commission develop policy proposals regarding changes to tax policy affecting the digital economy, according to the commission's consultation notice.

Large U.K.-based companieswill be able to submit claims to surrender carried forward losses using group relief under new proposals made by the U.K.'s tax office.

Airbnb Inc., Sony Corp., and Spotify Ltd. are among 50 companies thatwarned the OECD about how gross basis taxation could harm the digitalized economy,while also advising against unilateral actions by individual countries.Any industry-specific taxation of the digitalized economywould be counterproductive, they said in comments published by the OECD on October 25th.

BEPS Action 5 – Countering harmful tax practices more effectively by taking into account transparency and substance is one of the four BEPS minimum standards. To date, 102 jurisdictions have committed to its implementation, and 2017 is a decisive year in translating that commitment into action. Achim Pross, Kevin Shoom and Melissa Dejong of the OECD, discuss the first results of thework under BEPS Action 5, and its significance in achieving the goals of the BEPS project

The EU is to launch an investigation into a British government scheme that may help multinational firms pay less tax, the Guardian has learned.

Margrethe Vestager, the EU competition commissioner,will announce on Thursday that she is opening an in-depth investigation into a UK tax scheme that exempts multinationals from anti-tax avoidance measures. Officials think the special exemption for multinationals may break EU competition rules by allowing them to pay less tax than domestic-only rivals.

President Mauricio Macri, buoyed by a sweeping nationwide victory in midterm congressional elections Sunday, vowed to push aheadwith tax cuts and austerity measures aimed at overhauling Argentina's economy.

Today,we function in aworldwhere businesses are rapidly transforming their operations by adopting new technologies and solutions to enter new markets and expand their global business presence. The concept of Permanent Establishment (PE) is also evolving to keep pacewith this changing business environment – to facilitate reasonable and transparent taxation of cross-border transactions in this dynamic business landscape

In this report,we attempt to track the evolution of taxation of PEs in India – the how,when andwhy, and the consequences of establishing the PEs of foreign companies in the country. To do this,we first analyse the concept of PE in Indian tax legislations and India's bilateral tax treaties, and then examine international tax commentaries and landmark Indian judicial precedents, including some recent ones, to gain a clear perspective of how Indian jurisprudence has progressed over the years.we also assess the potential impact of BEPS AP 7 and the MLI on India's bilateral tax treaties and how this may affect companies doing andwanting to do business in the country.

The UnifiedFrameworkreleased byPresident Trump and the Big 6 tax negotiators on September 27, 2017, is intended to serve as a template for the tax-writing committees in Congress as they develop actual tax legislation, but is only a high-level document that leaves muchwork to be done by the committees in order to accomplish this potentially transformative shift from the existingworldwide and deferral tax system to a territorial regime.This article raiseskey issues that must be addressed by legislative drafters to bring about this transformational shift in the U.S. tax system and providesthoughts and observations on how the legislative drafters might address these key issues.

Awave of corporate inversions by U.S. firms over the past two decades has generated substantial debate,which hinges on a few key economic questions: Do U.S. tax laws disadvantage U.S.-domiciled companies relative to their foreign competitors? And, if so, do inversions improve the competitiveness of U.S. multinational firms both abroad and at home? This brief summarizes both old and new research that views these questions through the lens of corporations' global effective tax rates (ETRs), and finds that the stronger case seems to be that U.S.-domiciled corporations are often tax-disadvantaged and that they can improve their competitive position and increase their after-tax cash flow by inverting. Inversions indicate that something is fundamentallywrongwith the tax system. The brief concludes by discussing two feasible paths forward for reform.

Fromwhatwe have seen so far of the Republican tax plan, it appears itwill concentrate tax cuts on corporations and high-income households. Yet at the same time it is being marketed ÔøΩ to use President Trump'swords ÔøΩ as a "middle-class miracle." This seems like the political economy version of squeezing a square peg into a round hole. Butwith seismic political pressure to pass this tax cut, Republicanswill be less reluctant than usual to push the envelope on technical scoring issues. It is critical for Republicans to convince the public thatworkers, not shareholders,will benefit most from corporate tax relief.

Practitioners are trying to figure out how to take advantage of a favorable Tax Court decision preventing the government from using a revenue ruling to impose new rules for the taxation of capital gains of nonresident partners on sales of interests in U.S. trade or business partnerships. The taxpayer, a Greek corporation, had its interest in a U.S. partnership engaged in a U.S. trade or business completely redeemed.The court heldthat none of the gain on the redemptionwas effectively connected income taxable in the United States, refusing to defer to Rev. Rul. 91-32 (Grecian Magnesite, Mining, Industrial and Shipping SA v. Commissioner,149 T.C. No. 3 (July 13, 2017))

After months of negotiations, on October 10, 2017, a new business-minded Dutch government announced its political plans for the upcoming four years. These plans include various corporate tax proposals.

The relevant items for multinational enterprises (MNEs) doing business in the Netherlands are the reduction of the general Dutch corporate income tax (CIT) rate to 21% and elimination of the dividendwithholding tax. The government also is planning to introduce various measures to further counter international tax avoidance that alignwith EU and OECD BEPS recommendations.

Ireland's Department of Finance on October 19 published the Finance Bill 2017,whichwould implement changes announced by Finance Minister Paschal Donohoe in his budget speech aswell as additional antiavoidance measures. The finance bill also includes amendments to begin the process of implementing the OECD's Multilateral Instrument (MLI). The text of the finance billwas released alongwith an explanatory memorandum. A release by the Department of Finance also includes a list of Finance Bill 2017 provisions.

The Estonian presidency of the EU Council said it sees three short-term alternatives to an equalization tax on digital companies' turnover: amending member states' bilateral tax treaties, amending the anti-tax-avoidance directive (ATAD), or adjusting the European Commission's common consolidated corporate tax base (CCCTB) proposal.

The OECDwill likely have the five ratifications required for its multilateral instrument (MLI) to enter into force by early 2018, an OECD official said.Speaking during the OECD's seventh installment of the Tax Talkswebcast series on October 17, Sophie Chatel,whowas appointed the new head of tax treaty unit at the Centre for Tax Policy and Administration (CTPA) in July, said the OECD had received the first MLI ratification from Austria.

Tax measures announced by the new Dutch governmentwill benefit retail and manufacturing companies,while high-tech and leveraged companieswill bear the brunt of the compensatory measures, practitioners say. Although the surprise reduction of the headline rate and the abolition of the 15 percent dividendwithholding tax announced October 10thwere quick to draw praise from business lobbies and companies, practitioners are nowwarning that the government also plans to implement several measures thatwill cost companies money.

Washington is softening its position on European plans to impose taxes on US tech giants such as Apple and Google, officials said thisweek

The evolving attitude in recent dayswould mark a stark shift from American officials' frustration at previous efforts by European authorities to collect taxes from Silicon Valley firms.

Important progress is being made toward the elimination of harmful tax practices pursuant to the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project. The OECD/G20 BEPS Project delivers solutions for governments to close the gaps in existing international rules that allow corporate profits to "disappear" or be artificially shifted to low or no tax environments,where companies have little or no economic activity. Revenue losses from BEPS are conservatively estimated at USD 100-240 billion annually, or the equivalent of 4-10% of global corporate income tax revenues.

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Debates overwhether the right to tax residual profits of multinationals belongs to source or residence countries have traditionally pitted developing countriesagainst developed countries. Developing countries have been arguing for greater source-based taxation for years. Developed countries, meanwhile, have generally resisted big changes to the international tax system, holding firm to historical principles that give residence countries strong claims of tax, including the existing transfer pricing system.

In late 2015 the OECD and G-20 released their final base erosion and profit-shifting proposalswith 15 actions to provide governmentswith tools to combat BEPS. The actions include new or more stringent international standards and are meant to improve the coherence of international tax rules, reinforce focus on economic substance, and increase tax transparency.The German legislature has reactedwith the Anti-BEPS Implementation Actwhich focuses on aligning German transfer pricing documentation legislationwith OECD requirements, and includes a number of other measures.

The Irish government invites businesses and practitioners to provide feedback on its plans to update its international tax strategy, including how Ireland should incorporate the OECD's transfer pricing guidelines into national law and implement the EU's anti-tax avoidance rules. The government announced immediate changes in the budget, including a new limit to the amount of income againstwhich capital allowances for intangible assets businesses can deduct in a tax year, aswell as an increase on stamp duty on commercial transactions. The deadline for comment is the end of January, 2018.

Houseways and Means Committee Republicans agree that a foreign minimum tax on overseas corporate earningswill likely be a necessary part of moving to a territorial tax system. The Tax Reform Framework proposes taxing U.S. multinational companies at a reduced rate and taxing their foreign profits "on a global basis."white House and congressional leaders have been hesitant to call the provision a foreign minimum tax, an idea that many multinational corporations have opposed in previous tax reform bills.