2019

The OECD is currently in the midst of a project intended to tackle the tax challenges arising from the digitalization of the economy. As laid out in Pillar 1 of its program, the goal seemed, broadly, to develop consensus on a new taxing right and to allow countries to tax multinationals even in the absence of traditional physical presence.Part I of the authors' article beginswith a brief survey of some of the main factors that prompted the OECD to turn its attention to this topic. They continue on to Part II inwhich they consider the origins and development of nexus in the international tax regime and showwhy this concept is amenable to broad expansion. In Part III, the authors then examine the range of reforms currently under consideration; they argue that the framing on digitalization misses a necessary connection to other pressing international policy programs that are also under development, specifically, a global commitment to building institutions that support sustainable economic development. Finally, they concludewith a prediction that on its current trajectory, the program ofwork on digitalization is likely to produce a new global tax deal that looks much like the old global tax dealwith a relatively modest redistribution of taxing rights among a few key states.

A growing empirical literature has documented significant profit shifting activities by multinationals. This paper looks at the impact of such profit shifting on real activity and tax competition. Real activity can be affected as profit shifting changesÔøΩand theoretically most likely reducesÔøΩthe cost of capital. Tax competition, even over real capital, is affected, because a permissive attitude toward profit shifting can be seen as a selective tax reduction for multinationals. Tightening profit shifting rules, in turn, can affect tax competition through the main rate. This paper discusses these issues theoretically andwith the help of a simulation to assess the impact of profit-shifting on investment, revenues, and government behavior. Using the theoretical framework, it also provides a brief overview of the related empirical literature.

The authorsanalyze the impact of the exchange of information in tax matters in reducing international taxevasion between 1995 and 2018. Based on bilateral deposit data for 39 reporting countries andmore than 200 counterparty jurisdictions,theyfind that recent automatic exchange of information frameworks reduced foreign-owned deposits in offshore jurisdictions by an average of 25 percent. This effect is statistically significant and, as expected, much larger than the effect of information exchange upon request,which is not significant.To test the sensitivity oftheirfindings,theyestimatedcountries' offshore status and the impact of information exchange simultaneously using a finite mixture model. The results confirmedthat automatic (and not upon request) exchange of information impacts cross-border deposits in offshore jurisdictions,which are characterized by low-income tax rates and strong financial secrecy.

The United Stateswants an OECD global tax overhaul proposal to apply to "scalewithout mass" digital companies and torestrict the number of countries that can collect taxes paid on those companies' residual profits.

After a 15-month OECD review of Brazil's unorthodox transfer pricing system identified significant double taxation andbase erosion risks, Brazilian officials have announced plans to gradually align the country's regime fullywith OECD standards.

As much as 40% of international corporate investments are actually going into shell companieswith no real connection to local economies, according to a newworking paper released by the International Monetary Fund.

The Mexican government has set out to reform the tax system to include the OECD's recommended limits on interest deductibility in accordancewith BEPS Action 4. Mexican tax reformwill define 2020.

The OECD's global anti-base erosion (GloBE) proposal under pillar two is broader than taxpayers expected. It risks over-complicating international tax before the impact of the BEPS project settles in.

Anglo-Dutch corporate group Unilever has called for the OECD to link its digital tax proposals to the UN's sustainable development goals.

The OECD has embarked upon an ambitious project to redistribute taxing rights around theworld in a bid to avoid more unilateral action. Here Pascal Saint-Amans makes the case for the unified approach to pillar one.

The Conservative Party haswon the 2019 general election. Paul Falvey, of BDO U.K., discusseswhat this means for U.K. taxes. How boldwill the new government be?

Brazil needs to do more to stop multinational companies from shifting profits offshore and to align its tax systemwith the rest of theworld, the OECD and the country's tax authority said.

European Union lawmakerswant member countries to adopt a united position ahead of Organization for Economic Cooperation and Development talks to reform the international tax system for multinational companies.

Suranjali Tandon of the National Institute of Public Finance and Policy, New Delhi, looks at the OECD Secretariat's "unified approach,"with a focus on the stancewhich has been taken by India so far, and the potential elements of the approachwhich may not be acceptable to India.

The U.S.wants the OECD's plan to revamp global tax rules to apply to more companies, but limit the countries that can tax them, a Treasury official said.

The IRSwants to know how it can help companies that are looking to unwind pre-tax law transactions to bring intangible property back to the U.S., according to a top agency official.

Corporations have brought back more than $1 trillion of overseas profits to the U.S. since Congress overhauled the international tax system and prodded companies to repatriate offshore funds, a report showed Thursday.

By Jennifer Blouin and Leslie A. Robinson

Putting an end to the base erosion and profit shifting (BEPS) activity of multinational enterprises (MNEs) is on the national agenda of nearly every country in theworld.while many influential papers suggest that the scope and magnitude of the BEPS problem is quite large,we show that these magnitudes are likely overstated due to the accounting treatment of indirectly-owned foreign affiliates in the BEA's U.S. international economic accounts data.we explain how this accounting treatment leads to double counting of foreign income and to misallocations to the incorrect jurisdiction.we demonstrate an appropriate correction, and show that the correction significantly reduces the magnitude of the BEPS estimates. For instance, our correction reduces an estimate of the U.S. fiscal effects of BEPS from 30-45% to 4-15% of corporate tax revenues lost to BEPS activity of MNEs (Clausing 2016). Ourwork has far-reaching implications, as the U.S.' national statistics have a unique accounting convention that can make comparisons of the U.S. national statistics to those of other countries difficult to interpret.

By David Elkins

Neutrality plays a central role in the literature on international taxation. In its most prevalent form, the concept of neutrality posits that in order to maximize aggregate globalwelfare, capital needs to flow towhere itwould produce the highest pretax return. The thesis of this Article is that neutrality is ordinarily inapplicable in the field of international taxation.

Ninety-one of America's biggest firms paid no federal taxes, the report found.

Carrie Elliot describes how final regulations narrow the Subpart F-related definition of related persons and the applicationof active rents exception for CFCs payments to property owners.

The OECD continuesworking on economic analysis and impact assessments of the pillar 1 and pillar 2 proposals thatcountries are considering and hopes to start publishing some findings in early 2020.

Mindy Herzfeld examines alternatives to the OECD's pillar 1 proposal following a stepping back from the process by the United States

A pillar 1 safe harbor regime is not a path the OECD is actively pursuing, but it isn't precluding the option of a safe harborregime, according toan OECD official

While muchwork remains on the Organization for Economic Cooperation and Development's new global taxing approach, a deal on reallocation of taxing rights and a minimum tax is likely because failure to agreewould cause chaos, an OECD official told Law360.

All members of the Organization for Economic Cooperation and Development inclusive framework on tax reform remain committed to the process, an OECD official told stakeholders attending a public consultation held Monday near Paris.

A group of 10 European Union countries is approaching an agreement on a financial transaction tax, Germany's finance minister, Olaf Scholz, has said in a letter to fellow ministers.

The UK's political parties have taken different stances onwhether and how to introduce a digital services tax (DST) despite the threat of US retaliation.

The Brazilian government has announced that itwill start presenting proposals to congress to overhaul the country's complex tax system starting in 2020.

Tax revenue as a percentage of GDP in OECD countries remained unchanged from 2017 to 2018, the first time in recent years that the ratio didn't increase, according to a report. Link:

If the U.S. cannot agree to a global deal on digital taxes, Francewill try for an agreementwith Europe, the French minister for digital affairs says on Bloomberg Television.

The 135 member countries in the OECD/G20 Inclusive Framework on BEPS are considering the adoption of a global minimum corporate income tax for taxing multinationals as part of the Pillar Two (GloBE) proposals for taxing the digital economy. Lorraine Eden of Texas A&M University provides a detailed analysis of the global minimum tax proposal, discussed its benefits and costs, and provides policy recommendations.

The European Union's chief trade negotiator Phil Hoganwill sit downwith U.S. Trade Representative Robert Lighthizer next month to discuss an American threat to hit Francewith tariffs on $2.4 billion of its exports.

Professorwei Cui of the University of British Columbia looks at the attempts to introduce a new international tax framework, and considers how effective current proposalswill be in addressing the challenges posed by the digital economy.

There is no point forcing all companies to do complex calculations proving they are outside the scope of proposed OECD minimum-tax rules, Rio Tinto's global head of tax said.

Democratic presidential candidate Joe Biden plans to pay for $3.2 trillion in policy proposalswith new and higher taxes on thewealthy and corporations, including a measure targeting companies like Amazon.com Inc. and Netflix Inc. that have reported paying no federal income taxes in recent years.

Italy's claim that Fiat Chrysler Automobiles NV underestimated the value of its U.S. business is just the latest installment in the country's campaign to reap billions of euros in unpaid taxes from multinational corporations.

It is realistic and makes an honest effort to limit any negative impact on economic growth.

French Finance Minister Bruno Le Maire urged the U.S. to support a global overhaul of how the digital economy is taxed.

By Darien Shanske and David Gamage

This essay argues that the states should conform to the post-2017 federal tax law's provision for Global Intangible Low-Taxed Income (or "GILTI"). This essay is directed at state legislators and their staffs and presents the argument as succinctly as possible. The authors' argument can be summarized in three sentences. First, states should conform to GILTI because there is significant evidence that profit shifting is substantially eroding their corporate tax bases. Second, GILTI is a tool for identifying shifted profits. Third, there are many legally and analytically soundways to apportion GILTI income to a state. The authors also ÔøΩ briefly ÔøΩ counter the standard objections to state conformitywith GILTI.

The General Court of the EU has upheld the decision of the European Commission in the Fiat case, confirming that a tax ruling by the Luxembourg tax authorities conferred an advantagewhich constituted illegal state aid. Oliver R. Hoor and Keith O'Donnell of ATOZ Tax Advisers (Taxand Luxembourg) discuss the Court's decision andwhat itwill mean for Luxembourg going forward.

French Finance Minister Bruno Le Maire says itwould be "incomprehensible" for the U.S. to sanction France for the introduction of a tax on digital revenue.

Companies are making the case they shouldn't face new rules and standards to complywith a global minimum tax plan.

The Treasury Department offered some relief to companies that lost foreign tax credits after investing in research and development operations in the U.S.

Mexican President Andres Manuel Lopez Obrador's administration may speed up plans for a tax overhaul to generate more revenue if 2020 budget assumptions turn out to be overly optimistic, a top official said.

The European Unionwill still pursue a digital tax even if a global push at the OECD fails, the EU's new digital czar told Bloomberg TV.

Japanese retail sales plunged in October after a sales tax hike and a super-typhoon kept shoppers at home, a factor the government is likely to consider as it mulls the size of a spending package to support growth.

Ireland is too reliant on corporation tax from a small number of international operations to fund spending, the state's fiscalwatchdogwarned.

The U.S. proposed tariffs on roughly $2.4 billion in French products, in response to a tax on digital revenues that hits large American tech companies including Google, Apple Inc., Facebook Inc. and Amazon.com Inc

Big internet companies have long been the target of complaints that they don't pay enough in taxes. Fed up, France imposed a 3% levy on the digital revenue of companies that make their sales primarily in cyberspace, such as Facebook Inc. and Alphabet Inc.'s Google. Other countries also are targeting companies, most ofwhich are American, that have multinational earnings that often escape the taxman's grip. The U.S. isn't taking this sitting down.