Int'l Tax News

A new report released on Monday says "innovation boxes,"which allow corporations to deduct profits from patents and research activity from their taxeswould allow the US to maintain its global economic footing. But such boxes can be controversial.
For the Christian Science Monitor story, go here.

Long before Pfizer conceived of mergingwith Allergan in a $150 billion deal to rid itself ofwhat its chief executive called an "an uncompetitive tax rate" in the United States, the companywas deploying various tax avoidance strategies dating back to at least 1976.
For the New York Times story, go here.

Pfizer's recent decision to mergewith Irish drugmaker Allergan generated headlines as the latest, and biggest, example of an inversion. Sometimes, the U.S. firmwill moveoperations abroad, but often itwill not. Congress could slow these tax-motivated departures, and preserve our tax base, by imposing an exit tax on U.S. companieswith deferred earnings.

For the Tax Policy Center article, gohere.

The EU Commission is asked to table measures to improve corporate tax transparency, coordination and EU-wide policy convergence in legislative recommendations voted by the Economic and Monetary Affairs Committee on Tuesday. These recommendations build on thework of Parliament's Special Committee on Tax Rulings, set up in thewake of the "Luxleaks" revelations,whose recommendationswere approved at the 26 November plenary session.
For the release, go here.

Houseways and Means Tax Policy Subcommittee Chairman Charles Boustany (R-LA) delivered the following opening statement during a December 1 hearing on the final recommendations recently issued by the OECD on their Base Erosion and Profit Shifting (BEPS) project.
For the statement, go here.

The government of the Netherlands said Friday itwould appeal last month's decision by the European Union that its tax rulingwith Starbucks Corp. amounts to illegal state aid.

In a letter to Dutch parliament, Finance Minister Jeroen Dijsselbloem said he isn't convinced by the European Commission's arguments andwants to provide clarity on the government's practice of tax rulings for international corporations.

For thewall Street Journal story, go here.

The Subcommittee on Tax Policy of the Houseways and Means Committee has scheduled a public hearing for December 1, 2015, on the Base Erosion and Profit Shifting Project conducted by the Organization for Economic Cooperation and Development at the request of the Group of Twenty ("OECD/G20 BEPS Project"). The Senate Committee on Finance has scheduled a public hearing on December 1, 2015, titled "International Tax: OECD BEPS and EU State Aid." This document, prepared by the staff of the Joint Committee on Taxation, provides background on the OECD/G20 BEPS Project, an overview of its findings and recommendations, and a discussion of its potential implications for U.S. tax policy.
For the report, go here.

While the U.S. is plagued by inertiawhen it comes to tax policy, the rest of theworld hasn't been standing still. The biggest change of late has been the completion of the Organization for Economic Cooperation and Development's (OECD) Base Erosion and Profit Shifting Project, or BEPS, a multiyear endeavorwith the express goal of deterring multinational corporations from shifting their profits across countries to exploit tax rate differentials.

For The Hill story, go here.

It is important that lawmakers add an innovation box to U.S. corporate tax law. Otherwise, the United Stateswill continue to lose global economic competitiveness, especially in innovation-based
industries.
For the ITIF release, go here.

Again, A U.S.-based multinational corporation is mergingwith a foreign counterpart,with the intent to pay taxes at the other country's lower rate. By joining forceswith Ireland-based Allergan, pharmaceutical-maker Pfizer may reduce its effective tax rate from26percentto 17percent. And once again, U.S. politicians are denouncing the deal as a demonstration of corporate America's allegiance to profits above its responsibility to help pay for the government that enforces patent rights, among other beneficial services. Last year, Congress's Joint Committee on Taxation projected that all such tax-driven mergers, known as "inversions,"would erode federal revenue to the tune of$33.6billion over the next decade.
For thewashington Post editorial, go here.

A proposed European financial-transactions tax is foundering as 11 participating nations try to meet a December deadline to decide how to charge levies on an array of financial products.
For the DTR story, go here. (subscription required)

The U.S. government should addresswhether multinationals can claim foreign tax credits for taxes paid to countries asserting jurisdiction beyond the "conventional limits" as digital commerce becomes more prevalent, the New York State Bar Association Tax Section said.
For the DTR story, go here. (subscription required)

A European Parliament recommendation for more regulation and greater transparency of special corporate tax arrangements in the European Unionwould limit the policy tools available to governments in smaller EU nations, a Maltese member of the assembly said.
For the DTR story, go here. (subscription required)

The president of Poland signed a bill on October 27, 2015, that amends the Corporate Income Tax (CIT) and Personal Income Tax Acts. The changes include introduction of an anti-abuse rule designed to prevent unlawful tax practices used to obtain tax benefits through the participation exemption for dividends and through other profit-sharing payments to residents of European Union (EU) Member States.

For the PwC Insight, gohere.

Over the past few years, politicians in both parties have expressed enthusiasm for lowering federal tax rates. This makes sense: many economists have found that high tax rates hurt economic growth and international competitiveness. Meanwhile, the U.S. levies some of the highest rates in theworld on corporations, capital gains, and dividends.
For the Tax Foundation article, go here.

Youwon't find many issues that Donald Trump and Hilary Clintonwill agree on this election cycle, but they do concur on the idea that corporate inversions–like the $155 billion merger between Pfizer and Allergan that has the pharma giant reincorporating in Ireland–are bad for America.
For the Fortune story, go here.

Thewhite House declined to comment on Pfizer's acquisition of Allergan, the biggest-ever tax inversion deal, but said Congress should take legislative action to prevent dealswhere companies lower their taxes by reincorporating overseas.
White House spokesman Josh Earnest on Monday told reporters the Treasury Department has tried to discourage tax inversionswith a series of administrative actions and said the pace of deals has slowed because of those actions.
For the Reuters story, go here.

An ageing industrial estate in theworking-class Dublin suburb of Clonshaugh is an unexpected place to find evidence of the global corporate tax avoidancewar. Yet the site, testament to Ireland's central role in the biggest shake-up in the global pharmaceuticals industry for a generation, is a crucial link in the controversial phenomenon of tax inversions.
For the Financial Times story, go here.

Italy has updated its rules governing transactionswith parties located in tax havens.
For the ITR story, go here.

A deal to resolve the political debate over Northern Ireland's corporate tax autonomy has been announced,whichwill lead to a 12.5% Northern Irish corporate tax rate from April 2018.

For the ITR story, go here.

Following the questioning of Anheuser-Busch InBev, Coca-Cola, Disney, IKEA, Amazon, Google, HSBC, Barclays, Facebook, Philip Morris International and McDonald's, the mandate of the European Commission's (EC's) TAXE Committee has been extended.
For the ITR story, go here.

George Osborne, UK Chancellor of the Exchequer, has delivered his Autumn Statement, hitting employerswith a new 0.5% charge on employers' payrolls and pledging to bring in an extra £5 billion a year through tax avoidance action.

For the ITR story, go here.

The European Parliament on November 25 voted 508 to 108,with 85 abstaining, to approve the final report of its investigative committee on tax rulings that facilitated aggressive tax avoidance by multinational enterprises in Luxembourg and other low-tax member states.
For thewWTD story, go here. (subscription required)

Jack Bernstein examines the impact that the OECD's final base erosion and profit-shifting report on action 2 may have on the use of hybrid instruments in Canada-U.S. tax planning and financing structures.
For the TNI article, go here. (subscription required)

Mindy Herzfeld highlights recent efforts by the United Kingdom to implement the OECD's BEPS reports, and contrasts the U.K.'s positive approach to implementationwith the views of some in the U.S. that the projectwill be bad for U.S. business and the U.S. fisc.
For the TNI article, go here. (subscription required)

The countdown is on for the release of the full U.S. model treaty,which is expected by year-end, but if the draft provisions regarding special tax regimes and subsequent changes in law are any indication, the final modelwill not be a sweeping revision of U.S. policy.
For the TNT story, go here. (subscription required)

In economic analysis, Martin A. Sullivan argues that raising rates on capital gains and dividendswill redistribute the tax burden among millennials and baby boomers fairly.
For the Tax Notes article, go here. (subscription required)

Pfizer's blockbuster $160 billion mergerwith Irish pharmaceutical maker Allergan is stoking the partisan debate on corporations that move their headquarters overseas to lessen their U.S. tax bills ÔøΩwith Democrats like Hillary Clinton quickly condemning the dealwhile Republicans called it a symptom of a broken tax code.

The deal "will leave U.S. taxpayers holding the bag," Clinton said in a statement Monday, calling on Congress to limit corporations' ability to use the tax-limiting maneuver known as an inversion.


For the Politico story, go here.

A planned merger between pharmaceutical giants Pfizer and Allergan is prompting fresh calls for congressional action to prevent companies from shielding themselves from U.S. taxes by reincorporating overseas.

But an agreement on legislation curbing so-called inversionswill be no easy feat in the midst of an increasingly contentious election cycle.

For The Hill story, go here.

Pfizer's proposed mergerwith Allergan is a blockbuster deal in the pharmaceutical industry. History may remember the deal instead for finally killing off the United States' outdated approach to taxing multinational corporations.

Our tax system is premised on taxing United States-based multinational corporations on 35 percent ofworldwide income,with a credit for foreign taxes paid. This "worldwide" approach is often identified as anachronistic; most of our global trading partners have adopted some form of a "territorial" approach.

In theory, there's not anythingwrongwith taxing American corporations on theirworldwide income. The most vexing problem of international tax ÔøΩ trying to figure out the source of incomewithin a multinational operation ÔøΩwould only be exacerbated by a territorial approach.

In practice, our approach has been a failure. One problem is thatwe allow the deferral of foreign-source income: the profits of foreign subsidiaries are not generally subject to United States tax until "repatriated" in the form of a dividend.
For the New York Times article, go here.

New Zealand's November Taxation Bill has introduced a draft lawwhichwill impose GST on digital goods and services from October 1 2016.
For the ITR story, go here.

Just in time for Thanksgiving, Pfizer Inc. has given us a transaction that's a total turkey for our country: a $160 billion deal thatwill make it the biggest U.S. corporate deserter in history.


For thewashington Post story, go here.

A $160 billion megamerger announced Mondaywould turn U.S. pharmaceutical behemoth Pfizer Inc. into an Irish drug company, using a controversial tactic that allows companies to dodge billions of dollars in corporate taxes by renouncing their U.S. citizenship.

Pfizer's dealwith Botox-maker Allergan,whichwould create theworld's largest drugmaker, immediately sparked criticism from Democrats and Republicans in Congresswho agree that such deals are problematic but have so far not taken legislative action against them.
For thewashington Post story, go here.

Pfizer Inc.'s decision to escape the U.S. tax system by putting its legal headquarters in Ireland has stoked another round of calls inwashington to revamp tax rules and protect the corporate tax base.

But even Pfizer's mergerwith Allergan PLC, the largest inversion deal ever, doesn't look likely to dislodge the obstacles preventing action.

For thewall Street Journal story, go here.

Despite growing pressure inwashington to curb a tax-saving strategy used by American companies, recent proposals by the Treasury Departmentwould not have affected the Pfizer-Allergan merger.

At issue is a merger tactic known as an inversion, inwhich a United States company acquires a foreign company locatedwhere taxes are lower and moves the headquarters of the combined company abroad to take advantage of lower tax rates.

For the New York Times story, go here.

For almost four years, Congress and thewhite House have done little to make their long-promised overhaul of the corporate tax code a reality. Now the blockbuster pharmaceutical merger of Pfizer and Allergan has put new pressure on all sides to act.

Pfizer's takeover of Ireland-based Allergan -- the largest deal to date to avoid American taxes by reincorporating in a lower-tax country -- provoked a leading Republican on Monday to call for at least stemming so-called corporate inversions, if a sweeping rewrite of the tax code remains out of reach.

For the New York Times story, go here.

Nicola Lostumbo, Ryan Decker, Richard Dadzie, and Andrew Dust of PwC U.S. offer away to quantify the split of profits to be allocated to production inputs in a transfer pricing context and document the intangibles' increasing role in accounting for company value and profitability.
For thewWTD article, go here. (subscription required)

The Australian government has requested feedback regarding how andwhen to implement the measures recommended in action 2 (neutralizing the effects of hybrid mismatch arrangements) of the OECD's base erosion and profit-shifting project.
For thewWTD story, go here. (subscription required)

Global pharmaceutical giant Pfizer Inc. announced November 23 that itwill be redomiciling into Ireland in a mergerwith Dublin-based Allergan PLC thatwould dwarf all previous inversion deals.
For the TNT story, go here. (subscription required)

The inability of the U.S. government to stop the $160 billion Pfizer-Allergan deal, the biggest inversion in U.S. history,will create pressure on Congress for further actionÔøΩaction that is unlikely to happen outside of tax overhaul, practitioners said.

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

The European Commission (EC) on November 19, 2015, officially asked the Netherlands to amend the limitation on benefits (LOB) clause in the tax treaty between the Netherlands and Japan.

For the PwC Insight, gohere.

The European Parliament is expected to approve areportcalling for a common consolidated corporate tax base, a tax haven crackdown,whistle-blower protection, public access to mandatory company country-by-country tax reporting, stricter transfer pricing rules and a move to eliminate unanimity voting for EU tax legislation.

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

Theworld's major economies could begin deciding in January on details of a framework to ensure that outcomes from the international plan to fight base erosion and profit shifting are enacted across awide spectrum of countries, not justwealthy and emerging economies, a top OECD tax official said.
For the DTR story, go here. (subscription required)

Lawmakers have lined up two hearings on the Organization for Economic Cooperation and Development's base erosion and profit shifting project report.
For the DTR story, go here. (subscription required)

Pfizer Inc.'s $160 billion megadealwith Allergan Plc,which comeswith the benefit of an overseas tax address, is likely to be envied by competitorswhowon't be able to do much to mimic it.

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

David Sicular of the New York State Bar Association Tax Section has submitted a report recommending that the IRS issue guidance undersections 901and903to addresswhether a foreign tax is creditable in circumstances described by tax section members.
The circumstances includewhen a foreign country imposes tax based on an assertion of taxing jurisdiction that reaches beyond conventional limits orwhen the tax is imposed under a regime that imputes income or denies deductions to a taxpayer that engages in behavior perceived by the taxing country potentially to be designed to shrink the taxpayer's local taxable base.
For the NYSBA report, go here.(subscription required)

In this article, Cummings reviews 63 (and counting) international training practice units that are available on the IRSwebsite (if you knowwhere to look). They don't reveal much about the law, but they demonstrate a great confidence in the ability of nonspecialist agents to conduct audits of international transactions, both of individuals and of large corporations.
For the Tax Notes article, go here. (subscription required)

Pfizer Inc. and Allergan Plc agreed on Monday to combine in a record $160 billion deal, creating a giantwith products ranging from Viagra to Botox and a low-cost tax base on the edge ofwestern Europe.

"The lure of tax advantages from a Dublin head office has been a significant factor in driving this deal," said John Colley, a professor atwarwick Business School, in central England,who studies large-scale mergers. "The threat of succumbing to U.S. tax rates has meant that Pfizer has been desperate for a deal outside the U.S."
For the Bloomberg story, go here.