Int'l Tax News

In this paper, the authors analyze the profit shifting behavior of U.S. multinational firms using a unique panel data set of U.S. tax returns over the period 2002-2012. Prior research has found significant effects of tax rates in affiliate and parent countries on the profit shifting behavior of multinational entities,with semi-elasticities ranging from close to zero towell above one. They build on this priorwork by allowing more heterogeneity in response across the distribution of tax rates and by including affiliates located in tax havens around theworld. Their findings suggest that elasticities based on a log-linear specification may severely understate the sensitivity of profits to tax in low-tax jurisdictionswhile simultaneously overstating this elasticity in high-tax jurisdictions.
For the paper, go here.

Integrating the U.S. corporate tax code so there is no longer taxation of both the corporation and the shareholders could not only discourage inversions but also bring deferred income home and help lower the effective U.S. corporate tax rate, a policy adviser for the Senate Finance Committee said.

For the DTR story, go here. (subscription required)

Austrian Finance Minister Hans Joerg Schelling said European efforts to agree on a common financial transactions tax may fall apart if too few nations arewilling to move forward by March.
For the DTR story, go here. (subscription required)

European Union finance ministerswill meet Feb. 12 to discuss establishing terms for minimum effective taxation on royalty and interest paymentswith a possible floor of 10 percent to counter profit shifting by multinational corporations.

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A European Union spokesman rejected Treasury Secretary Jacob Lew's claims that the European Commission's state aid investigations have been biased against U.S. multinational corporations, noting that the majority of the European Commission's state aid rulings have ordered member states to recover unpaid taxes from European companies.
For the TNT story, go here. (subscription required)

Houseways and Means Committee Chair Kevin Brady, R-Texas, again called for international tax reform at a February 11 hearingwith Treasury Secretary Jacob Lew, but taxwriters continue to debate over how the reform efforts should address corporate inversions.
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Squire Patton Boggs has provided an overview of the implementation process for the OECD's country-by-country reporting recommendations in several jurisdictions, concluding that tax authorities have reached a consensus that all participating countries in the base erosion and profit-shifting projectwill implement new rules.
For thewWTD article, go here. (subscription required)

TheU.S. stepped upaspatwithEuropean officialsovertheir investigationsofU.S. companies'tax practices,warningin aletterfrom theTreasury secretarythattheyarecreatinga "disturbing"precedent.
For thewall Street Journal story, go here.

Conflict over trans-Atlantic tax practices escalated after Treasury Secretary Jacob J. Lew told European Commission President Jean-Claude Juncker that U.S. companies are unfair targets of state aid investigations.

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If Congress and the administration can't arrive at an agreement on rewriting the business tax code this year, they must still reach a deal to stop corporate inversions, Treasury Secretary Jacob J. Lew told lawmakers during a hearing.

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Advocates for revising U.S. tax laws on international income this year continue to get pushback from Senate Finance Committee Chairman Orrin G. Hatch (R-Utah).
Congress doesn't have enough time to finish such an ambitious task, he said during a hearing on President Barack Obama's budget proposal for fiscal year 2017. As an alternative to slowing the pace of tax-driven corporate relocations, called inversions, Hatch pitched his own plan to end double taxation on corporations, known as "corporate integration."
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At a timewhen the administration is voicing growing concern about the untaxed earnings of U.S. companies overseas, the IRS is instructing its agents to put businesses under the microscopewhen they claim tax breaks for dividends and interest transferred between related controlled foreign corporations.

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Senate taxwriters seemed to have more questions than answerswhen discussing the best possibleway to stop corporate inversionswith Treasury Secretary Jacob Lew at a February 10 hearing on President Obama's fiscal 2017 budget proposal.
For the TNT story, go here. (subscription required)

Foreign businesses, like Amazon.com Inc. and Netflix Inc.,would be required to collect and pay goods and services taxes on digital products and services they sell online to Australian customers from July 1, 2017, according to a government proposal.
For the DTR story, go here. (subscription required)

Australia's landmark transfer pricing ruling against Chevron Corp.will embolden governments to contest more intragroup finance arrangements, analysts predicted at the International Bar Association's annual tax conference in London.

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The UK government is being urged to open its tax settlementswith multinationals to independent scrutiny, in response to public anger about alleged "sweetheart" deals.

As MPs prepare to question senior staff and HMRC officials about Google's £130m agreement thisweek, tax experts have called for new measures to tackle public concerns over the handling of corporate tax disputes.
For the Financial Times story, go here.

The American Congress is so incompetent that it is arbitrarily handing billions of dollars of U.S. tax revenues to Europe. The issue involves tax manipulation by America's top IT and pharmaceutical companies, including Google, Apple, Amazon, Microsoft, Gilead and others. These companies should be paying U.S. taxes that instead are increasingly being collected by European countries thanks to Congressional (and IRS) gross negligence.

The issue is simple and yet hopelessly muddled in U.S. tax policy.
For the Huffington Post story, go here.

The administrationwill keep pressing Congress in 2017 for provisions to stop corporate inversions and other devices companies use to shift income and operations overseas.
With the offshore income of U.S. companies jumping and more corporations restructuring to cut their U.S. tax bills, thosewill be major priorities for President Barack Obama in the year ahead, a senior Treasury official said in releasing theadministration's 2017 budget planFeb. 9.
For the DTR story, go here. (subscription required)

The international tax provisions in the Obama administration's fiscal 2017 budget proposal, released February 9, are a near carbon copy of those in last year's budget, including provisions to impose a minimum tax on foreign income and to strengthen anti-inversion rules.
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While critics of the anti-inversion guidance's third-country rule say that it fails to account for situationswhen a third-party parent jurisdiction is desirable for nontax reasons, John Merrick, special counsel to the IRS associate chief counsel (international), said in his experience there is always a tax motive for picking a locale like Ireland.
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Erik Cederwall argues that the profit-shifting debate as currently conceived is misguided and does a substantial disservice to the U.S. economy and U.S. taxpayers.
For the Tax Notes viewpoint, go here. (subscription required)

If you thought therewas a problemwith inversions -- deals that allow American companies to relocate their headquarters to lower theirtaxbills --wait until you hear about the real secret to avoiding corporate taxes. It's called earnings stripping, and it is a technique that the Obama administration has so far failed to stop.
For the New York Times story, go here.

We all know about the famous Supreme Court decision that said corporations should be treated like people. It's too bad that this ruling doesn't apply to U.S. companies that give up their citizenship in order to cut their taxeswhile remaining in this country and benefiting from all it has to offer.
For thewashington Post column, go here.

The risk of protectionist tax measures being taken by national governments has abated as a result of the OECD's Base Erosion and Profit Shifting (Beps) project, a key official has told a conference in Dublin.
For the Irish Times story, go here.

Chile on February 8, 2016, enacted significant amendments to the country's 2014 tax reform through Law No. 20.899,which amends Law No. 20.780, enacted on September 29, 2014.

Multinational companieswith Chilean subsidiaries should consider how the newly enacted law could affect their structures, operations, or transactions in Chile.

For the PwC Insight, gohere.

A flat-rate consumption tax collected at the business level, such as the type proposed by some Republican presidential candidates, could lead to European-style high taxation, a top free-market advocate told the Heritage Foundation.
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Differences between the U.S. and the rest of the OECD on how to approach treaty abuse are likely to continue, a U.S. attorney said at the opening session of a two-day international tax conference in London.
The Treasury Department,which isworking on proposed revisions to the U.S. model income tax convention, "does not like, andwould almost certainly never include in any tax treaty" the principal purpose testÔøΩa general anti-abuse rule, said Kimberly S. Blanchard, a partnerwith New York firmweil, Gotshal & Manges LLP.
For the DTR story, go here. (subscription required)

Ajay Gupta reviews the history and impact of U.S. anti-inversion measures andweighs the costs that some new measures -- both announced and proposed -- may impose on investors andworkers.
For the TNI news analysis, go here. (subscription required)

Practitioners on February 8 challenged both the validity and scope of the IRS's proposed rules thatwould eliminate the foreign goodwill exception in the context of recognition of gain upon outbound transfers of intangibles.
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Proposed regulations on outbound transfers of intangibles are in danger of legal challenges because of the Treasury Department's insistence the rules aren't subject to notice and comment requirements of the Administrative Procedure Act, a practitioner said.

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In its recent state aid rulings, the European Commission (EC) appears to have moved away from the OECD's model treaty and transfer pricing guidelines.
For the ITR story. go here.

US multinationals such as Google, Facebook and Amazonwill be forced to publicly disclose their earnings and tax bills in Europe, under legislation being drafted by the EU executive.

The European commission is to table legislation in early April aimed at making theworld's largest multinational corporations open their tax arrangementswith EU governments to full public scrutiny.

For the Guardian story, go here.

Ritesh Kanodia and Geet Shah of Dhruva Advisors set out the arguments for a dual GST in India, and look at the obstacles that have stalled implementation so far.
For the ITR article, go here.

The Internal Revenue Service released two international practice units to train its agents on common fact patterns related to intercompany transactions under tax code Section 482.

For the DTR story, go here. (subscription required)

Herman Bouma of Buchanan Ingersoll & Rooney reviews the efforts of the OECD's Base Erosion and Profit Shifting project, concluding it has accomplished little and muddied thewaters in transfer pricing. Bouma examines the factors he says led to the project "being such a hugewaste of time for tax authorities, taxpayers and tax advisers."
For the BNA Insight, go here. (subscription required)

The taxation of global capital has become a matter of growing concern among awide variety of businesses from compliance, risk management and planning perspectives. The Tax Council Policy Institute (TCPI), a non-profit, non-partisan organization,will devote its upcoming 17th Annual Tax Policy & Practice Symposium to those concerns,when it presents, "Capital Matters: How Taxes Influence the Global Creation, Deployment, and Mobility of Capital" (February 11-12).
Wolters Kluwer Tax & Accounting sat down recentlywith two principal organizers of this year's TCPI Symposium to preview some of the issues thatwill be discussed.
For the interview, go here.

Rather than eliminate the corporate income tax, lawmakers should address problemswith the tax through major reforms that permit expensing of capital investment, introduce a corporate rate reduction, and transition the United States to a territorial tax system, according to a February analysis from the Tax Foundation.
For the report, go here.

EY's James Tobin looks at proposed and temporary Section 956 regulations (REG-155164-09; T.D. 9733) that expand the instances requiring an income inclusion as a result of a controlled foreign corporation's holding U.S. property. Though critical of an expanded anti-avoidance rule put in place under the temporary rules, Tobinwrites that it "certainly looks goodwhen compared to the more aggressive approach of the proposed regulations."
For the BNA Insight, go here. (subscription required)

If youwant an example of how bizarre U.S.taxlaws can be - and how companies can game the system - look no further than the recently announced deal forJohnson Controls Inc. of Milwaukee to desert our country by combiningwith a previous corporate deserter,Tyco International PLC.
For thewashington Post story, go here.

Chilean President Michelle Bachelet signed into law legislation designed to simplify proposed tax code changes approved in the nation's 2014 tax overhaul.

For the DTR story, go here. (subscription required)

The special rule for preferential allocations of creditable foreign tax expenditures in a partnership applies only to allocations to a partner that are deductible under foreign law, and not to other items that give rise to deductions under foreign law, the IRS said in temporary and proposed rules.
For the DTR story, go here. (subscription required)

Treasury issued a set of temporary and final regulations February 3 that appear to target partnerships that separated creditable foreign tax expenditures (CFTEs) -- in particular, CFTEs related towithholding taxes -- from the related foreign income.
For the TNT story, go here. (subscription required)