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2019

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A New Global Tax Deal for the Digital Age

  • By Allison Christians and Tarcisio Diniz Magalhaes

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.

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The Impact of Profit Shifting on Economic Activity and Tax Competition

  • By Alexander Klemm and Li Liu

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.

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Hidden Treasures: The Impact of Automatic Exchange of Information on Cross-Border Tax Evasion


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.

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U.S. Calls for Broader Scope, Narrower Nexus for Global Tax Deal

  • By Stephanie Soong Johnston

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.

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Brazil to Gradually Align Transfer Pricing Rules with OECD

  • By Ryan Finley

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.

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40% Of Global Investment Goes To Shell Cos., IMF Paper Says

  • By Alex M. Parker

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.

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Mexico implements BEPS Action 4 to limit interest deductibility

  • By Carlos Naime & Manuel Baron

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.

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The US supports GloBE, but global taxpayers are hesitant

  • By Danish Mehboob

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.

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Unilever turns to UN standards for global digital tax proposals

  • By Josh White

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

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The unified approach

  • By Pascal Saint Amans

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.

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INSIGHT: What the Election Result Means for U.K. Taxes

  • By Paul Falvey

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?

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Brazil's Tax Rules Need Upgrade Before Nation Can Join OECD (1)

  • By Sony Kassam

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.

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EU Lawmaker Majority Wants United Position for OECD Tax Talks (1)

  • By Joe Kirwin

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.

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INSIGHT: The OECD Unified Approach√¢$an Indian Perspective

  • By Suranjali Tandon

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.

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U.S. Weighs Limits on Taxable Presence in Global Tax Rewrite

  • By Isabel Gottlieb

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.

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IRS Wants to Help Companies Bring Intangible Assets Back to U.S.

  • By Allyson Versprille

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.

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U.S. Companies" Repatriated Cash Hits $1 Trillion Under Tax Law

  • By Reade Pickert

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.

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Double Counting Accounting: How Much Profit of Multinational Enterprises Is Really in Tax Havens?

  • By Jennifer Blouin and Leslie A. Robinson

Logo SSRNBy 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.

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A Critical Reassessment of the Role of Neutrality in International Taxation

  • By David Elkins

Logo SSRNBy 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.

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Corporations paid 11.3 percent tax rate last year, in steep drop under Trump's law

  • By Jeff Stein and Christopher Ingraham

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

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Final Regs Narrow Two Sets of Subpart F Relatedness Rules

  • By Carrie Brandon Elliot

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.

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OECD Aims to Publish Global Tax Reform Analysis in Early 2020

  • By Stephanie Soong Johnston

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.

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Is the OECD's Project Salvageable?

  • By Mindy Herzfeld

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

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U.S. Proposal for Pillar 1 Safe Harbor Sparks Concern

  • By Kiarra Strocko

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

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OECD Global Tax Pact Likely To Win Out Over Chaos

  • By Todd Buell

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.

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Nations Remain Committed To Tax Reform, OECD Official Says

  • By Matt Thompson

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.

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10 EU Countries Nearing Deal On Financial Transaction Tax

  • By Todd Buell

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.

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UK political parties clash over DSTs

  • By Patrick Wiseman

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.

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Brazil reveals 2020 tax reform proposals

  • By Mattias Cruz Cano

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

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U.S. Tax Cuts Drive Revenue Dropoff in OECD Countries: Report

  • By Siri Bulusu

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:

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France to Seek Europe Tech Tax Deal If No U.S. Pact: Minister

  • By Ben Livesey and Vivek Shankar

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.

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INSIGHT: Taxing Multinationals√¢$The GloBE Proposal for a Global Minimum Tax

  • By Lorraine Eden

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.

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EU Trade Chief Hogan, Lighthizer to Discuss French Tariff Threat

  • By Peter Flanagan

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.

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INSIGHT: Who is Afraid of the Digital Services Tax?

  • By Wei Cui

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.

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Spare High-Tax Business From OECD Global Tax Math: Rio Tinto

  • By Hamza Ali

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.

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Biden to Target Tax-Avoiding Companies Like Amazon with Minimum Federal Levy


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.

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Italy's Drive on Corporate Back Taxes Reaps $2.6 Billion

  • By Dan Liefgreen

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.

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Biden's Tax Plan Is Better Than It Looks

  • By Karl W Smith

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

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France's Le Maire Calls on U.S. to Back Global Digital Tax Plan

  • By Helene Fouquet

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

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States Should Conform To GILTI, Part 3

  • By Darien Shanske and David Gamage

Logo SSRNBy 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.

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INSIGHT: Fiat State Aid Case - Impact on Luxembourg

  • By Oliver R. Hoor and Keith O'Donnell

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.

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U.S. Sanctions Over Digital Tax Would Make No Sense: Le Maire

  • By William Horobin and James Regan

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.

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U.S. Minimum Tax Should Be OK in Global Plan, Businesses Say

  • By Isabel Gottlieb

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

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Treasury Aims Tax Fix to Keep $40 Billion R&D Spending in U.S.

  • By Siri Bulusu

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

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Mexico May Speed Up Tax Overhaul If 2020 Revenue Disappoints

  • By Eric Martin and Andrea Navarro

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.

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EU to Push for Tech Tax If Global Effort Fails, Vestager Says

  • By Natalia Drozdiak and Maria Tadeo

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.

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Japan's Retail Sales Plunge After Sales Tax Hike, Typhoon

  • By Yoshiaki Nohara

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.

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Ireland Dangerously Reliant on Company Taxes, Watchdog Says

  • By Peter Flanagan

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

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U.S. Proposes Duties on $2.4 Billion of French Goods Over Tech Tax

  • By William Horobin

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

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How 'Digital Tax' Plans in Europe Hit U.S. Tech: QuickTake

  • By William Horobin and Aoife White

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.

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