Int'l Tax News

The Treasury Department is preparing to release guidance thisweek in an effort to curb "inversions," a practice allowing U.S. firms to reduce their taxes by basing their operations overseas.
For The Hill story, go here.

The proposed new limitation on benefits article in the U.S. model tax treaty goes too far in reducing access to these tax pacts, and the government should narrow those restrictions, the New York State Bar Association Tax Section said.
For the DTR story, go here. (subscription required)

The European Commission's proposal for mandatory country-by-country tax reporting by companies and legislationÔøΩcoming in MarchÔøΩwill go beyond the OECD's base erosion and profit shifting plan and require that the details of taxes paid by companies in individual countries be public, a commission official said.
For the DTR story, go here. (subscription required)

Some of the most profitable technology firms in the U.S. have formed a coalition to push for a U.S. international tax overhaul in thewake of the OECD's completion of its action plan on base erosion and profit shifting.
For the DTR story, go here. (subscription required)

The OECD's base erosion and profit shifting (BEPS) reforms do not go far enough in changing the international corporate tax system, G20 leaders have been told.
In a letter to leaders at the G20 summit in Antayla, Turkey, Nobel Prize-winning economist Joseph Stiglitz and others from the Independent Commission for the Reform of International Corporate Taxation (ICRICT) said that,while a good start, reforms need to go much deeper to ensure multinational corporations pay their fair share.
For the Public Finance International story, go here.

Appearing before a special European Parliament tax rulings committee, representatives of multinational enterprises expressed support for the OECD'swork in crafting guidelines to combat base erosion and profit shiftingwhile defending their operations and voicing concernswith the public disclosure of information.
For thewWTDS story, go here. (subscription required)

In this report, Stone examines proposals by Treasury,whichwere releasedwithout a technical explanation, to modify the U.S. model treaty provisions that affect the limitation on benefits article.
Stone believes that given the rules-based nature of the LOB article, new rules are needed as taxpayers findways around the old ones and as the nature ofwhat Treasury believes to be treaty abusive -- such as low resident state tax treatment of income -- evolves. Stone discusses the provisions,with examples, and tries to make sense of them. In the end, he finds that the size and complexity of the LOB proposals suggest that a principal purpose test approach isworth considering.
For the Tax Notes special report, go here. (subscription required)

Google Inc. and Facebook Inc.were among U.S. companies facing questions from European Union lawmakers about their tax-reducing techniques, a month after regional antitrust regulators raised the stakes by ordering Starbucks Corp. and a Fiat Chrysler Automobiles NV unit to repay millions of euros in back taxes.

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

Leaders from the Group of 20 nations endorsed the final results of the Organization for Cooperation and Economic Development's effort to combat corporate tax avoidance during their annual summit in Antalya, Turkey.
The G-20 members said the OECD's final base erosion and profit shifting action planwill help reach a "globally fair and modern international tax system," according to their Nov. 16 communique.
For the DTR story, go here. (subscription required)

Digital companies continue to get a rough ride from the EU. Hot on the heels of a European Commission decision to open an investigation into Google for allegedly breaching antitrust rules, EU lawmakers Monday targeted 11 companies ÔøΩ including Google, Facebook and Amazon ÔøΩ for their tax policies in Europe.
For the Politico story, go here.

MEPs grilled eleven multinational companies on their corporate tax practices in a five-hour debatewith the Special Committee on Tax Rulings on Monday. These companies had declined the committee's first invitation to appear before it, but later changed their minds and accepted its last chance invitation. Of the 13 original invitees, only Fiat Chrysler andwalmart declined the final invitation. The meeting startedwith a minute of silence for the victims of the Paris terrorist attacks.
For the European Parliament release, go here.

At their Summit in Antalya, Turkey, the G20 leaders committed to the implementation of theBase Erosion and Profit Shiftingproject (BEPS)which closes gaps that allow corporate profits to "disappear" or to be artificially shifted to low or no tax environments. They called on the OECD to monitor progress and to develop, by early next year, an inclusive framework including the participation of developing economies on equal footing.
For the OECD release, go here.

Jean-Claude Juncker, president of the European Commission, told the tax rulings committee that something needed to be done. "The current system of corporate tax rules is unfit for purpose and unjust. Some companies are losing out,whereas otherswin by hiding behind a variety of national rules," he said at the committee's September meeting. Juncker stressed that the fight against tax fraud and tax evasionwas one of the Commission's priorities.
For the European Parliament release, go here.

The U.S. economy is changing, and how the government measures it is starting to catch up. In its 2013 revision of the national income and product accounts, the Commerce Department's Bureau of Economic Analysis (BEA) expanded its measurement of intangible investment. Previously the only spending on intangible assets that the BEA countedwas on computer software (and a relatively minor amount of spending on mineral exploration). The revised official accounts now include spending on research and development and on artistic originals -- mostly motion picture and sound recordings.
For the Tax Notes article, go here. (subscription required)

A push to close international corporate-taxloopholes is expected to spur competition for lower rates overseas and increase pressure inwashington for a bipartisan deal to revamp the corporate-taxcode.
Leaders from theGroup of 20largest economies, meeting in Turkey on Sunday and Monday, are set to give their final stamp of approval to a major overhaul of the international rules governing corporate taxes.
For thewall Street Journal story, go here.

Give Pfizer, the giant drug maker, points for boldness and persistence: The company has bravely put ''taxinversions'' back in the headlines.
Pfizer,which already holds roughly $140 billion overseas and is quite skillful at minimizing its taxes, is considering a deal that could move its legaltaxheadquarters from New York to Dublin,where it could save bundles more.
This has drawn plenty of criticism, naturally.
For the New York Times story, go here.

As lord mayor of this quiet seaside city in southern Ireland, Chris O'Leary seems to have a situation most other local politicians can only dream about.
Blue-chip international companies like Apple,DellandIBMhave all set up shop in and around this city, filling newly built office blocks near the city's port and sprawling office parks in the suburbs. The companies set up shop here for the cheapworkers, business-friendly lawmakers and -- above all -- Ireland's low corporatetaxrate. Since the height of the financial crisis in 2011, the region's unemployment rate has fallen by more than four percentage points, to 9.9 percent, or roughly the national average, according to government statistics.
For the New York Times story, go here.

The OECD has held an Asia-Pacific technical meeting on BEPS inwhich tax policy and administration experts discussed outcomes of the base erosion and profit-shifting project and challenges of implementing BEPS measures in the region, according to a November 13 release.
For the release, go here.

Mindy Herzfeld reviews the conclusions reached in the final report on BEPS action 11 and discusses the shortcomings in the OECD's attempts to quantify the extent of the problem, aswell as the potential for governments to recoup additional tax revenues as a result of the recommendations and the potential consequences to economies around theworld.
For the TNI story, go here. (subscription required)

Nongovernmental organizations campaigning for tax fairness and an end to profit shifting by multinational corporations have called on the Group of 20 finance ministers to make "deeper reforms" than those announced in the Organization for Economic Cooperation and Development's base erosion and profit shifting action plan.
The "Still Broken" report, released jointly by the Global Alliance for Tax Justice, Tax Justice Network, Oxfam and Public Services International on Nov. 10, examined the tax affairs of U.S. multinationals and showed that the gap betweenwhere companies pay tax andwhere they really do their business is huge,with G-20 countries losing out the most.
For the DTR story, go here. (subscription required)

A legislative push by the European Parliament to impose mandatory country-by-country tax reporting for all European Union listed companies as away to enhance shareholder rights has stalled and turned into a tax legislation power strugglewith EU member states, according to EU officials.

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

The Organization for Economic Cooperation and Development should try to introduce a formal system to monitor any cases of double taxation that may emerge from its base erosion and profit shifting project, according to the global tax chief of a multinational consumer goods company.

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

The OECD, on 5 October, 2015, issued its Final Report on Action 6: 'Preventing the Granting of Treaty Benefits in Inappropriate Cases' (the Report) as part of the complete package covering all fifteen BEPS Action Plans.

The Report broadly recommends a minimum standard for treaties, comprising a Limitation on Benefits (LOB) clause plus anti-conduit rules, a principle purpose test (PPT) or an LOB in combinationwith a PPT. It also proposes a number of additional targeted rules dealingwith specific circumstances.

For the PwC Tax Policy Bulletin, gohere.

The chief executive of Allergan, in talks about selling itself to Pfizer to form theworld's largest drugmaker, has cautioned that any attempt by the Obama administration to block a deal aimed at cutting a company's tax billwould be a "short-sighted intervention".

Pfizer is in negotiationswith Dublin-based Allergan about buying the group inwhatwould be the biggest ever "tax inversion" ÔøΩ allowing the company to report much lower tax costs by moving its domicile to Ireland. The movewould create a companywith a value of more than $330bn.

Tax experts said an inversionwould improve the presentation of Pfizer's earnings, aswell as helping it escape potential future US tax bills on more than $128bn of profits it had earned overseas.

For the Financial Times story, go here.

Countries around theworld have focused on driving increased investment, growth and job creation by lowering their corporate tax rates and modernizing international tax rules. The United States stands as an exception to thisworldwide trend at a timewhen U.S. businesses face unprecedented global competition.
America is in urgent need of tax reform to increase growth and provide greater economic opportunity for all Americans.
For the Business Roundtable Report, go here.

Proposed regulations changing the definition of property that qualifies for the active trade or business exception mark a "dramatic change" but one designed to uphold Congress' original intent, an Internal Revenue Service official said.
The proposed regulations under Section 367would limit the active trade or business exception to an enumerated list of property, including tangible property, interests in oil and gas property, and some financial assets, Robert B.williams Jr., senior counsel in Branch 4 of the IRS Office of the Associate Chief Counsel (International), said Nov. 10.
For the DTR story, go here. (subscription required)

The transfer pricing practice (TPP)within the IRS Large Business and International Divisionwill generally be the transfer pricing "final issue owner" following the LB&I reorganization, according to David Varley, acting director of transfer pricing operations.
For the TNT story, go here. (subscription required)

The forthcoming reorganization of the Large Business and International Division of the IRSwill expand the scope and staffing of the Transfer Pricing Practice, an agency official said.
David Varley, acting director of Transfer Pricing Operationswith the Internal Revenue Service, said that under the reorganizationÔøΩexpected to "stand up" in FebruaryÔøΩa number of examiners and all the economists inwhat is now the International Business Compliance unitwill be shifted to the TPP.
For the DTR story, go here. (subscription required)

At the November 11 International Tax Institute lunch in New York, Robert Cassanos of Fried, Frank, Harris, Shriver & Jacobson LLP discussed the OECD BEPS hybrid instrument recommendations and concluded that awithholding tax might be a simpler approach for governments that are offended by deduction/non-inclusion results.
For the Tax Notes article, go here. (subscription required)

This article provides an overview of foreign base company sales income (FBCSI), the branch rule and the tax rate disparity test under the regulations, explains and evaluates the guidance provided by IRS AM 2015-002, and addresses certain issues that the AM leaves unanswered (some ofwhich are pre-existing issues left open in the regulations).
For the International Tax Journal article, go here.

Eleven European Union member states made "substantial progress" in moving toward a final agreement, set for December, on a financial transactions tax, according to Austrian Finance Minister Hans Jorg Schelling.
However, demands by some countries for exemptions, including for some derivatives aswell as foreign company shares and bond trades, are unresolved, he said.
For the DTR story, go here. (subscription required)

Sen. Rob Portman (R-Ohio) said key lawmakers agree on the basics of revamping international provisions in the U.S. tax code and that he hasn't given up on passing changes in Congress this year.
"We have remarkable consensus," Portman said Nov. 10 in a speech at the Bipartisan Policy Center, a think tank that promotes collaboration between Democrats and Republicans.
For the DTR story, go here. (subscription required)

Issuing final regulations thatwould restrict taxpayers from importing losses into the U.S. is a priority, a senior Treasury Department attorney told tax practitioners.
Krishna Vallabhaneni, Treasury deputy tax legislative counsel, said Nov. 10 that his staff isworking hard to finalize regulations under tax code Sections 334(b)(1)(B) and 362(e)(1), the "anti-loss provisions" of the tax code. The provisionswere enacted under the American Jobs Creation Act of 2004.
For the DTR story, go here. (subscription required)

Despite plans to invert to Ireland to reduce its taxes, Pfizer Inc. "appears to be dramatically overstating its corporate tax rate," has not been handicapped by the U.S. tax system, and has significant offshore profits that are not taxed, according to a November report by Americans for Tax Fairness.
For the report, go here.

Recent high-profile actions undertaken by the G-20 and OECD countries, such as the base erosion and profit-shifting project, have failed to live up to their promises to end international corporate tax avoidance, and G-20 countries are losing out as a result, according to the Tax Justice Network (TJN) and other nongovernmental organizations.
For the TNT story, go here. (subscription required)

While pulling together the final base erosion and profit-shifting reportswas a big lift, the bigger challenge isworking toward fair, effective, and rule-of-law tax administrationwith high stakes for multinationals if governments get itwrong, according to Robert Stack, Treasury deputy assistant secretary (international tax affairs).
For the TNT story, go here. (subscription required)

The Senate Foreign Relations Committee has approved eight pending tax treaties, allowing them to proceed to the full Senate.
For the TNT story, go here. (subscription required)

Tax-driven "inversion" deals that let companies flee the U.S. tax system by relocating abroad, if only on paper,would be curbed under legislation introduced in Congress, as Pfizer Inc pursues such a dealwith rival Allergan Plc.
Wisconsin Democratic Representative Mark Pocan's bills likely have little chance of advancing in the Republican-run Congress. But they represent renewed concern about the transactions. Awave of them peaked in September 2014when a Treasury Department crackdown slowed, but did not halt them.
For the Reuters story, go here.

The recent merger talks between New York-basedPfizerand Dublin-basedAllerganare the latest signal that America's approach to taxing international profits is luring U.S. companies to relocate abroad, or mergewith foreign companies. Unfortunately, the situation is about to get significantlyworse.
For thewall Street Journal story, go here.

EU Competition Commissioner Margrethe Vestager defended the limited nature of the European Commission's decisions on the Starbucks and Fiat tax rulings November 9, saying itwas important to establish the matter of principle that excessively generous tax rulings are an illegal form of state aid.
For thewWTD story, go here. (subscription required)

India could slash its corporate tax rate sooner than expected, as the government sets out a roadmap for curtailing tax exemptions.
For the ITR story, go here.

The European Union's top antitrust official lauded rulings ordering two companies to repay tens of millions of euros in back taxes, as she considers similar decisions involving Apple Inc. and Amazon.com Inc.

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

The Organization for Economic Cooperation and Development's Base Erosion and Profit Shifting action plan is likely to have a major impact on tax planning at multinational corporations by both tax professionals and corporate treasurers.
Tom Driscoll, U.S. managing partner for international tax, transfer pricing, and indirect tax at Deloitte Tax LLP and Melissa Cameron, a principal in Global Treasury Advisory Services at Deloitte & Touche LLP, believe tax professionalswill be facing a "Global Tax Reset" as a result of the OECD BEPS action plan.
For te Accounting Today story, go here.

In-depth discussions took place thisweek as the international community continues to make progress on the international tax agenda. Officials from more than 100 countries drawing from tax authorities, ministries of finance, development agencies, aswell as regional and international organisations, business and civil society came together in a series of meetings hosted by the OECD. The role of tax in State building and domestic resource mobilisation, enhanced cross-border co-operation and the development of global solutions to international tax challengeswere important topics debatedamongst participants as theyworked together to shape the solutions.
For the OECD release, go here.

At the 3rd OECD Global Forum on Value Added Tax (VAT) and Goods and Services Tax (GST) held in Paris today, BIACwelcomed the endorsement of the completed OECD International VAT/GST
Guidelines and called for their consistent implementation globally to remove VAT/GST obstacles to cross-border trade in services and intangibles.
For the BIAC release, go here.

Governments have taken an important step towards ensuring that consumption taxes on cross-border transactions are effectively paid in the jurisdictionwhere products are consumed,while minimizing the risks that uncoordinated tax rules distort international trade.
For the OECD release, go here.

In the second of a two-part article, James P. Fuller comments on U.S. tax developmentswith international implications, focusing this month on the 13 base erosion and profit-shifting final reports released by the OECD October 5.
For thewWTD article, go here. (subscription required)

The OECD's ad hoc group for the development of a multilateral instrument concluded its first substantive meeting on November 6, capping off aweek of consecutive meetings of various OECD groups on implementation of the OECD's base erosion and profit-shifting measures and other international tax reform issues.
For thewWTD story, go here. (subscription required)

More than 100 jurisdictions on November 6 endorsed the OECD's final international VAT/goods and services tax guidelines as the international indirect tax standard to ensure that consumption taxes levied on cross-border transactions are paid in the placewhere supplies are consumed.
For thewWTD story, go here. (subscription required)