Int'l Tax News

Ajay Gupta previews the outcome of the Paris climate conference, examining the push forwidespread implementation of national carbon taxes in developed countries, aswell as developing countries' demands for greater financial assistance.
For thewWTD article, go here. (subscription required)

A push by the European Union to get 11 nations to agree on a set of financial transactions taxeswasn't any closer to completion after a gathering of the nations' finance ministers in Brussels endedwithout resolution.
For the DTR story, go here. (subscription required)

An IRS officialwarned practitioners that even though historically the government might give a little on the effective date before regulations are set in stone, it does not expect to provide that reliefwhen it finalizes its tightened outbound transfer rules.
For the TNT story, go here. (subscription required)

The recent actions of the US Treasury to rein in corporate tax inversions leave their rationale largely intact. This column discusses new evidence suggesting that the potential tax benefits of inversions are still huge. The recent Treasury measures raised legal obstacles, but the heart of the problem remains unaddressed. At some point a new technique is likely to be found to circumvent the new measures – just as happenedwith earlier measures. This is aworldwide problem.
For the VOX story, go here.

Big controversies often arise from big numbers, and on the surface the cost in U.S. tax revenue from the corporate tax avoidance scheme known as "inversion" looks like a big number: potentially $20 billion over 10 years, according to a congressional estimate last year.
But since the corporate income tax is projected to bring in some $4.5 trillion over the same period, inversions might cost less than half a percent of corporate tax receipts.
That suggests that the real issue for U.S. lawmakers shouldn't be the particular method corporations use to avoid U.S. taxes, butwhy theywould go to such great lengths to do so. The problem, tax experts say, is the enormous hoard of foreign earnings that American corporations don'twant to bring home.
For the Los Angeles Times article, go here.

Read how enhancements to China's restructuring tax relief rules, new indirect offshore disposal rules in SAT Announcement 7, developments in financial instrument tax classification and the revamped tax treaty relief procedures are impacting M&A tax considerations in China.
For the ITR story, go here.

Robert B. Stack, Treasury deputy assistant secretary (international tax affairs), received the Distinguished Service Award on November 19, 2015, at the Tax Foundation's 78th Annual Dinner. In his remarks accepting the award, he discussed hiswork on the OECD's base erosion and profit-shifting project and Tax Freedom Day.
For the text of the speech, go here. (subscription required)

IRS official Daniel McCallwas in the unenviable position of being the first government speaker to respond to questions on the new anti-inversion notice from a room full of tax lawyers following the notice's November 19 release.
For the TNT story, go here. (subscription required)

The recently announced merger between U.S. pharmaceutical company Pfizer Inc. and Irish drug company Allergan PLC has sparked calls for Congress and Treasury to do more to stop inversions. Before they embark on yet another round of rule tightening, however, it isworthwhile to consider the effect of a decade of congressional action and Treasury rulemaking in this area. The history of the U.S. government's attempts to curtail inversions suggests that the "do more" approach may have backfired. Rather than preventing inversions, the government's repeated attempts to curtail the practice have led to the largest inversion transaction ever.
For the Tax Notes viewpoint, go here. (subscription required)

Nathan Boidman and Michael Kandev discuss the OECD/G-20's final reports on base erosion and profit shifting, examining from an overall and a Canadian perspectivewhether the BEPS initiative has turned out to be a spent force or if, instead, itwill spawn radical change.
For the TNI viewpoint, go here. (subscription required)

James Fuller comments on U.S. tax developmentswith international implications, focusing this month on the recent cases and issues regarding foreign tax credits, the IRS's final F reorganization regulations, theStarr Internationaldecision regarding tax treaty benefits, and other important topics.
For the TNI article, go here. (subscription required)

Doubts continued to mount about the fate of a proposed European financial transactions tax as finance ministers from 11 countries find that divisions on some issues have recentlywidened.

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

The IRS is "very far along" in drafting the regulations implementing Notices 2014-52 and 2015-79,which are designed to dampen the incentive for U.S. companies to move to lower-tax countries through mergers, an IRS official said.

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

It iswell passed time for Congress to take a more assertive role in the ongoing efforts to rewrite global tax rules. The Base Erosion and Profit Shifting (BEPS) proposals drafted by the Organization for Economic Cooperation and Development's (OECD) and approved by the G20 contain numerous provisions,which threaten the competitiveness of U.S.-based companies and the overall American economy. Hearings being held thisweek in both the House and Senate exploring these serious concerns are a good start, but must be followedwith swift action.
For The Hill story, go here.

Leaders from the Group of 20 largest economies (G20) met in Turkey last month to put their final stamp of approval on a major overhaul of the international rules governing corporate taxes. The votewas the icing on a cake that the Organization for Economic Cooperation and Development (OECD)has been baking for many yearswith the goal of clamping down on tax avoidance among multinational corporations.
For the Forbes article, go here.

The United States could limit corporate inversions and "restore its international competitiveness" by reducing corporate tax rates to less than the OECD average and implementing a territorial system of taxation, Jason J. Fichtner, Courtney S. Michaluk, and Adam N. Michel of George Mason University's Mercatus Center said in a December report.
For the report, go here.

Although tax revenues across the OECD have recovered since the global financial crisis and even increased over pre-crisis levels, the corporate tax take is shrinking, leaving most of the tax burden on individuals and households.
For the TNT story, go here. (subscription required)

Montenegro – as a young countrywith a small but open economy - is steadily adopting various business incentives,with the objective of attracting reputable foreign investors, particularly in selected industries.
For the ITR story, go here.

Brussels' attacks on corporate tax deals risks undermining business certainty in Europe, according to one of the states accused of handing out illegal tax benefits.

Pierre Gramegna, finance minister of Luxembourg, said the European Commission's decision to use the state aid rules to challenge corporate tax agreements "raises so many issues about predictability and certainty".

For the Financial Times story, go here.

The envisaged ideals of 'tax transparency' are being proposed, and legislated, by tax administrationsworldwide. This month's Brockman brief focuses on the fact that mutual and reciprocal tax transparencywith multinational entities (MNEs) remains somewhat elusive. It is now time to briefly assess some of these initiatives to fairly gauge the mutuality of such initiatives.
For the ITR story, go here.

Individualworkers and consumers have shouldered an increasing share of the tax burden in industrialised countries as governments have been forced to become less reliant on taxing corporate profits, according to a report from the OECD.
For the Guardian story, go here.

Whoeverwins thewhite House next yearwill have to dealwith an issue of almost-impenetrable complexity and contentiousness: How to tax multinational companies? On the one hand, large global firms ÔøΩwhich have never been shy about minimizing their taxes through deft accounting maneuvers ÔøΩ are becoming more aggressive. On the other, so are governments, increasingly desperate to raise tax revenue to pay for aging societies and cover persistent budget deficits.
For thewashington Post story, go here.

When James Callaghan introduced corporation tax to Britain in 1965, the Labour chancellor proudly described it as "a new landmark in our fiscal history".

Fifty years on, enthusiasm for the tax is in short supply. It has been complicated by reams of legislation, cut back by governmentswanting to appeal to investors and tarnished by repeated scandals over avoidance.
For the Financial Times story, go here.

After the cost-sharing regulations put a crimp in expatriation of valuable intangibles, taxpayers used partnerships to get around them. They contributed intellectual property to a partnership and allocated the associated income or gain to related foreign partners thatweren't subject to U.S. taxation. They used accepted section 704(c) methods for allocation of built-in gain, but avoided the remedial allocation method.

So Treasury recently announced that itwill issue section 721(c) regulations underwhich section 721 nonrecognition treatmentwill not be permitted unless partnership allocations are made using the remedial allocation method as augmented by the new rules.
For the TNT story, go here. (subscription required)

McDonald's Corp.will become the fourth U.S. multinational to be targeted byEuropean Unionregulators as part of awidening investigation into alleged illegaltaxdeals, two people familiarwith the matter saidWednesday.
TheEuropean Commission, theEU's top antitrust regulator, is expected to announce as soon asThursdaythat it has opened an in-depth probe to establishwhether the fast-food chain'staxarrangements in Luxembourg violateEUlaw, the people said.
For thewall Street Journal story, go here.

Spurred by Pfizer Inc.'s plan to mergewith Ireland-based Allergan Plc, New Jersey lawmakerswant to cut off state contracts or incentives to U.S. companies that move their addresses to countrieswith lower taxes.
Allergan, the maker of Botox, is based in Dublinwith operating headquarters in Parsippany, N.J. Its record $160 billion mergerwith New York-based Pfizer, the maker of Viagra,would result in the largest so-called corporate inversion, inwhich U.S. companies use a merger to take a foreign address and cut their income-tax rates.
For the DTR story, go here. (subscription required)

Regulations issued by the Treasury Department in 2014 to discourage inversions appears to have slowed them down, but since then, companies have created deals that slipped under the rules' threshold, according to a report from the Congressional Research Service.
For the DTR story, go here. (subscription required)

David Ernick of PwC looks at how proposed changes to the U.S. model income tax treaty, substantive changes to tax code Section 482 regulations and other recent actions by Treasury and the IRS indicate that the impact of OECD's BEPS project may be coming to the U.S. sooner than expected.
For the BNA Insight, go here. (subscription required)

The House and Senate held hearings Tuesday on the Organization for Economic Cooperation and Development's Base Erosion and Profit Shifting action plan, also known as OECD BEPS, for combating tax avoidance by multinational corporations.
For the Accounting Today story, go here.

The U.S. Senate Finance Committee and the U.S. Houseways and Means Committee's subcommittee on tax policyheld hearingson Tuesdayto examine the Organization for Economic Cooperation and Development's new proposals on tax base erosion and profit shifting, or BEPS.
For thewall Street Journal story, go here.

The European Parliament's Economic and Monetary Affairs Committee has asked the European Commission to propose legislation to improve tax transparency and EU-wide policy convergence based on thework of the Parliament's special tax rulings committee thatwas approved November 26.
For thewWTD story, go here. (subscription required)

Some members of the Senate Finance Committee and the Houseways and Means Tax Policy Subcommittee are concerned about how U.S. multinationalswill be affected by the OECD's base erosion and profit-shifting project's recommendations and recent Court of Justice of the European Union state aid rulings.
For the TNT story, go here. (subscription required)

Robert Stack, the U.S. deputy assistant treasury secretary for international tax affairs, defended the U.S. role in the OECD's project to combat base erosion and profit shifting, claiming the BEPS proposals could have been more onerous to U.S. multinationals had the government not been involved.
"Across the board, the BEPS deliverables are better than theywould have been had the U.S. Treasury not been heavily involved in their negotiation," Stack testified before the Tax Policy Subcommittee of the Houseways and Means Committee Dec. 1.
For the DTR story, go here. (subscription required)

The European Union's investigations intowhether its member countries have granted illegal state aid to corporations could "call into question" the bilateral relationships between those countries and the U.S., a senior Treasury Department official told Congress.

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

The European Parliament Committee for Economic and Monetary Affairs backed a report calling on the European Commission to propose awide range of corporate tax measures by June 2016.
In an overwhelming vote of 45-3with 10 abstentions, the committee Dec. 1 agreed that the European Commission should advance new legislation to improve corporate tax transparency and establish greater convergence and coordination at the EU level to reduce corporate tax avoidance and aggressive tax planning.
For the DTR story, go here. (subscription required)

Lawmakers from both parties are calling for a tax code overhaul to help stanch recent efforts by companies to move to lower-tax jurisdictions.
There is a "critical and urgent need" to overhaul U.S. taxes to stop companies from moving to lower-tax jurisdictions, the chairman of the House subcommittee that oversees tax policy said.
For the DTR story, go here. (subscription required)

This Article develops a framework for the study of the unique effects of corporate inversions (meaning, a change in corporate residence for tax purposes) in the jurisdictions fromwhich corporations invert ("home jurisdictions"). Currently, empirical literature on corporate inversions overstates its policy implications. It is frequently argued that in response to an uncompetitive tax environment, corporations may relocate their headquarters for tax purposes,which, in turn, may result in the loss of positive economic attributes in the home jurisdiction (such as capital expenditures, research and development activity, and high-quality jobs). The association of tax-residence relocationwith the dislocation of meaningful economic attributes, however, is not empirically supported and is theoretically tenuous. The Article uses case studies to fill this gap.
For the article, go here.

In this article, Cragg and Hutchings propose an economic framework for determining the tested party under the comparable profit method for transfer pricing.
For the Tax Notes article, go here. (subscription required)

The section 482 regulations and the recent final base erosion and profit-shifting report on transfer pricing (actions 8-10) from the OECD claim to be implementing the arm's-length standard. In Altera v. Commissioner, the Tax Court recently held a section 482 regulation to be invalid because it couldn't be justified on that basis. Portions of the BEPS report are also difficult to justify on that basis.
This report discusses the history of the arm's-length standard both domestically and internationally. It then discusses how Altera and the BEPS proposals interpreted the arm's-length standard, some possible consequences of Altera, and significant issues arising under the new BEPS proposals.
For the Tax Notes report, go here. (subscription required)

What's going on in theworld of tax for global companies investing in the USA today? PwC's Tax and Investment in the US examines recent issues and events relevant to your business.

Daniel A.witt of the International Tax and Investment Center comments on the changing nature of globalization and the challenges it poses for emerging economies.
For thewWTD article, go here. (subscription required)

The European Union should implement some of the recommendations from the OECD's 15-point action plan on base erosion and profit shifting via new EU tax legislation aswell as revisions to the EU pending directives on the common consolidated corporate tax base (CCCTB) and interest and royalties, according to conclusions EU finance ministerswill approve on Dec. 8.
For the DTR story, go here. (subscription required)

Global statutory corporate tax rateswere virtually unchanged between 2014 and 2015, according to an annual survey released by KPMG LLP.
The average statutory corporate tax rate in 2015was 23.68 percent, comparedwith 23.64 percent in 2014, according to thesurvey.
For the DTR story, go here. (subscription required)

On the cusp of Dec. 1 congressional hearings on the international base erosion and profit shifting project, the Joint Committee on Taxationwarned that U.S. multinational companies may face increased foreign taxation of their non-U.S. operations.
In the Nov. 30 report (JCX-139-15), the JCT said that in one possible scenario, governmentswill introduce domestic rules and tax treaty provisions that restrict opportunities for shifting profits to low-tax or zero-tax countries.
For the DTR story, go here. (subscription required)

Congress should give corporations a tax break on profits generated through creative activity in the U.S. in order to increase economic competitiveness, according to a report released Monday by the Information Technology and Innovation Foundation.
The group urged Congress to add an "innovation box" to the tax code that corporations could check on their tax forms to receive the lower rate for activities such as research.
For The Hill story, go here.