2018

This paper shows that eliminating firms' access to tax havens has unintended consequences for economic growth. The authors analyze a policy change that limited profit shifting for US multinationals, and show that the reform raised the effective cost of investing in the US. Exposed firms respond by reducing global investment and shifting investment abroad -which lowered their domestic investment by 38% - and by reducing domestic employment by 1.0 million jobs. The authors then show that the costs of eliminating tax havens are persistent and geographically concentrated, as more exposed local labor markets experience declines in employment and income growth for over 15 years. This paper discusses the implications of these results for other efforts to limit profit shifting, including new taxes on intangible income in the Tax Cuts and Jobs Act of 2017.

This IMFworking Paper describes and tentatively quantifies likely tax spillovers from the U.S. 2017 corporate income tax reform. It calculates effective tax rates under various assumptions, and tentatively estimates that under constant policies elsewhere, the rate cutwill reduce tax revenue from multinationals in other countries by on average 1.6 to 5.2 percent. If other countries react in linewith historical reaction functions, the revenue loss from multinationals rises to an average of 4.5 to 13.5 percent. The paper also discusses profit-shifting, real location, and policy reactions from the more complex features of the reform.

Taxpayers may find it harder to mount successful challenges to old IRS regulations on procedural grounds in thewake of a Ninth Circuit opinion reversingAlteraCorp. v. Commissioner.

G-20 finance ministers and central bank governors meeting in Buenos Aires July 21-22 registered their support for implementation ofthe inclusive framework on base erosion and profit shifting, according to a communiqué issued by the G-20's Argentinian presidency.

The OECD has joined the growing contingent of stakeholders urging Canada to assess the competitiveness of its corporate tax regime following the passage of the U.S. Tax Cuts and Jobs Act.

Jurisdictionswould need to demonstratethat they are activelyworking to implement OECD tax transparency standards to avoid being labeled noncooperative under a proposal agreed on by the OECD and G-20.

Despite their theoretical appeal to some, destination-based cash flow taxes may face an insurmountable political hurdle in the global debate concerning taxation of the digital economy, according to one OECD official.

The Tax Cuts and Jobs Act contains provisions thatwill acutely affect oil and gas investments, given the industry's capital-intensive nature, high leverage, practice of reinvesting earnings, and long project lead times. Future tax planningwill take into account the industry's loss-generating downturn over the past few years, and that industry participants often owed alternative minimum tax.

With the tax community focused on how to extract revenue from the profits of tech companies, other major developments in the digital space are getting less attention. Rapid growth is being made in artificial intelligence, and in a presentation at the Oxford Academic Symposium in late June, Benjamin Alarie of the University of Toronto presented a tool he and two colleagues are developing to apply AI to tax analysis.

European Union member nations are still split over key details underpinning its proposed tax on large internet companies like Alphabet Inc.'s Google and Facebook Inc. EU presidency holder Austria had hoped to smooth some disagreements in a July 18 meeting, laying out specific topics to be discussed such as the rate and scope of the tax and definitions needed to administer it. But even after eight hours of technical discussions, members remained divided over several elements.

It's time to question the use of "risk" as away to allocate profit among corporate entities for transfer pricing purposes, said Roberto Schatan, a senior economist at the IMF in the tax policy division.

Dutch tax advisers and leading business lobbyists are calling on the government to consider alternatives to their plan to abolish the country's dividendwithholding tax.

Spain's Socialist Prime Minister Pedro Sanchez has laid out a tax policy July 17 that cracks down on corporations' use of deductionswhich allow them to enjoy lower tax rates.

The IRS and tax authorities around theworld are grapplingwith how to use and analyze multinational companies' global tax reports, especially thosewith imperfections in their data, an IRS official said.

Beyond the direct effects on intangible valuation mandated by the Tax Cuts and Jobs Act, the new law may affect how projected cash flows and discount rates should be determinedwhen valuing intangible transfers.

Despite practitionerwarnings, the OECD's base erosion and profit-shifting project has not spurred a flood of mutual agreement procedure cases, according to an IRS official.

Although some countrieswill inevitably apply the OECD's final profit-split method guidance more aggressively than intended, the actual language adopted byworking Party 6 reflects a successful U.S. effort to limit the method's scope.

In this article, the author discusses measures in Italy's 2018 Budget Law that could result in a higher capital gains tax burden on foreign companies disposing of shares in Italian entities and that may, in practice, conflictwith EU law. He offers suggestions to companies affected by the change, noting issues they should take into considerationwhen planning for and calculating Italian taxes.

In this article, the author discusses the background, significance, and potential implications of the International Compliance Assurance Programme, a pilot initiative recently launched under the auspices of the OECD.

The digitalization of the economy may create challenges in applying traditional transfer pricing methods, but the arm's-length standard is still a better approach than formulary apportionment, according to an IRS official.

The U.K. has targeted more global businesses that risk facing its "Google tax," signaling the possible impact of the government increasing its resources to enforce the controversial measure.

A unique corporate tax cutting scheme proposed by the German state of Bavaria could make the country more attractive to international business in light of a global race to alleviate the tax burden on corporations.

European lawmakers' threats to challenge the new U.S. tax law at theworld Trade Organization are still pending as they determinewhether the U.S. Treasury Departmentwill address their concerns.

U.S. companies are expected to pay billions in federal taxes to bring back cash they've built up overseas over the last three decades. But investors might not know it by reading their financial statements. Analysts told Bloomberg Tax that the ambiguity startswithwhere in their annual or quarterly reports companies are reporting the repatriation tax.

U.K. lawmakers are planning to assess the impact of the new U.S. tax law on British companies, further underlining thewide-reaching effects of the country's sweeping reforms on global businesses.

A proposal in Ireland to creating a panel to examine how companies abuse tax rules is unnecessary and could cause uncertainty for businesses, practitioners told Bloomberg Tax. Instead, the government should focus on furthering its commitments to the OECD's base erosion and profit shifting project, they said.

Austria is stepping up plans for an EU-wide digital tax on big tech companies such as Apple and Google, despite opposition fromwithin the bloc.

Corporations taking advantage of new, lower tax rates reduced their payments to the federal government last month. The Treasury Department on Thursday said government receipts fell 7% in June comparedwith the same month a year earlier, including a 33% drop in gross corporate taxes.

Wells Fargo & Co. said Friday itwas hit in the second quarterwith a $481 million tax expense related to a legal decision.whatwas behind that? Turns out itwas the recent U.S. Supreme Court ruling affecting online retailers,which is also reaching out to hit non-retailers aswell.

The OECD has invited final comments on a revised draft toolkit designed to assist developing countrieswith the tax treatment of offshore indirect transfers of assets; submissions are due September 24.

In this article, the authors discuss recent U.S. international tax developments, including guidance on late-filing penalties and the OECD's voluntary International Compliance Assurance Programme.

The Tax Cuts and Jobs Act's steep corporate rate reduction may lower the stakes of future U.S. transfer pricing disputes, but itwon't affect the growing international trend toward aggressive transfer pricing enforcement.

Governments are keeping their plans regarding the use of country-by-country reports close to the vestwhile they experimentwith the data, according to an IRS official.

In this article the author analyses the Supreme Court's landmark decision inwayfair, and its implications for foreign businesses that sell goods to U.S. consumers.

Spain's Council of Ministers on July 13 approved the OECD Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI), according to information published by the Spanish government.

The U.S. corporate tax cutwill reduce tax revenue from multinationals by modest percentages under existing global policies, the IMF says, but if countries respondwith policy changes, the loss could be much greater.

The United States must do more to ensure that the availability of beneficial ownership information fully conforms to new international standards, the OECD's transparency body said in a recent report.

One day after an official denied that the Office of Management and Budget received for review guidance implementing the Tax Cuts and Jobs Act from Treasury, OMB is acknowledging receipt of transition tax regs.

For the first time since 1913, and as part of the 2017 tax reform, Congress adopted a tax regime that exempted from U.S. taxation dividends from foreign subsidiaries. By doing so, Congress abandoned the general principle that U.S. residents should be subject to tax on all income "fromwhatever source derived." This shift marked a good occasion for considering the reasons the United States taxed such dividends in the first place. In 1962, Congress enacted a new law, also known as 'Subpart-F',which subjected certain earnings of foreign subsidiaries of American parent corporations tocurrent-base taxation. Thiswas a deviation from the general tax principle of tax deferral, underwhich earnings of foreign subsidiaries are taxed only upon repatriation of these earnings (by a dividend, for example). The new legislationwas the result of a political compromise.while Treasury supported awide-scale elimination of tax deferral, Congress eventually adopted a much narrower law, eliminating tax deferral only in caseswhere itwas abused by using it to avoid otherwise owed U.S. taxes.

President Trump and Prime Minister Theresa May have agreed to pursue a free trade agreement, hours after the U.K. government defended its Brexit plans following comments Trump made in a newspaper interview.

The Hong Kong government has published the adopted version of a bill implementing OECD base erosion and profit-shifting standards, including an amended treasury center regime and new transfer pricing, profit attribution, and country-by-country reporting rules.

Over the years, tax stakeholders have repeatedly told the OECD that the transactional profit-split transfer pricing method should be used only in cases inwhich it is clearly appropriate, and should not be treated as a default.

Although discussions about how best to tax the digital economy are often so polarized that it sometimes seems difficult to imagine reasonable and consensus-based solutions, signs of progress are beginning to emerge.

In this article, the author discusses the situation of the guidance and regulations required to apply the provisions on TCJA.

An obscure taxprovisionfrom the 1960s thatwas left untouched by President Donald Trump's overhaul could letwealthy individual investors seize for themselves the largest corporate tax cut in U.S. history.

There is some support in the United States for increased tax transparency but little appetite for multilateral initiatives, according to a U.K. House of Commons Public Accounts Committee (PAC) report.

The European Economic and Social Committee (EESC) approved an opinion criticizing the European Commission's digital taxation proposals for threatening smaller EU countries' tax bases and undermining consensus reached during the base erosion and profit-shifting project.

European finance ministers meeting in Brussels July 13 are expected to once again talk about ÔøΩ but not agree on ÔøΩ the VAT reverse-charge mechanism.

The Tax Cuts and Jobs Act (TRA17) signed into law by President Trump on 22 December 2017 contains multiple provisions that incorporate the principles of the OECD/G20 Base Erosion and Profit Shifting (BEPS) into domestic US tax law. Togetherwith the changes in the 2016 US Model Tax Treaty, these provisions mean that the United States is following the European Union in implementing BEPS.This represents a triumph for the G20/OECD and is incongruentwith the generally held view that the United Stateswill never adopt BEPS.