Int'l Tax News

While many practitionerswelcomed the U.K. Supreme Court's recent decision that a U.K. investor in a Delaware limited liability company is entitled to double tax relief, they say the decision has created some uncertainty about the U.K. tax treatment of LLCs.

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

The European Union's tax haven blacklist,which has been subject to objections from some listed nations aswell as the Organization for Economic Cooperation and Development,was based on requirements distinct from those used for an OECD list, an EU spokesman said.

Published June 17 as part of a consultation to force multinationals to declare how much tax they pay andwhere, the listwas criticized by the OECD for including jurisdictions that the organization had found to be "fully or largely compliant" based on its Global Forum on Tax Transparency standards.

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

The IRS is not concernedwithwhether the structure of an intercompany financing arrangement is at arm's length, only that the pricing of the transaction is, Bao Ho, senior economist in the advance pricing and mutual agreement program, said July 23.

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The international project to combat base erosion and profit shifting has been a "huge game changer" for Eaton Corp., nearly tripling transfer pricing auditswithin a year and leading to more controversy around the globe, a tax officialwith the company said.

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Mindy Herzfeld discusses the international push to set a uniform price for carbon, reviews the reasons for conservative economists' support of a market-based solution to human-induced climate change, and explainswhy the U.S. should steer the discussion in favor of a carbon tax.
For the TNI article, go here. (subscription required)

In economic analysis, Martin A. Sullivan discusses a recent EU study that says that patent boxes do not encourage additional research activity or employment in the jurisdictions that adopt them.
For the Tax Notes article, go here. (subscription required)

In news analysis, Ajay Gupta examines the Senate Finance Committee's international tax reformworking group proposal for a patent box in light of ongoing efforts to expand and make permanent the research credit.
For the Tax Notes article, go here. (subscription required)

The Senate Finance Committee recently released a series of bipartisanworking group reports on tax reform. One of the papers, The International Tax Bipartisan Taxworking Group Report, reflected thework of a group of Senate Finance Committee memberswhose co-chairs are Sens. Rob Portman (R-Ohio) and Charles Schumer (D-N.Y.).
For the Hill story, go here.

In a speech on the Senate floor, Finance Committee Chairman Orrin Hatch (R-Utah) outlined ongoing concerns regarding the Base Erosion and Profit Shifting project that is being developed by the Organization for Economic Cooperation and Development and called on the Obama Administration toworkwith Congress to ensure proposals considered under the project keep America competitive and benefit Americanworkers and job creators.
For the Utahpolicy.com story, go here.

On 22 May 2015,interested partieswereinvited to commenton arevised discussion draftwhich includes proposals on how to dealwith the follow-upwork on Action 6 (Prevent treaty abuse) of theBEPSAction Plan. The OECDis grateful to the commentators for their input andnow publishes the comments received.
For the comments, go here.

The IRS has released three new international practice units dealingwith Subpart F issues, developed by the agency's Large Business & International Division and intended to serve as job aids and training materials for examiners dealingwith cross-border transactions.
One unit, DPL/9412.01_01, addresses a scenario inwhich a controlled foreign corporation buys tangible personal property from its U.S. parent and resells it to various parties, looking atwhether the salewill qualify for the same-country sales and use exception from foreign base company sales income. One key issue for examiners, the document says, iswhether the personal property being sold for use is consumed in the country of the CFC.
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Ramon Tomazela analyzes the potential impact of the OECD's base erosion and profit-shifting project on a harmonized international tax regime in order to help identify the project's key challenges.
For the TNI article, go here. (subscription required)

Michael Cragg, Jehan deFonseka, Ryan Tholanikunnel, and Evan Cohen discuss several valuation considerations that arisewhen tax authorities examine corporate inversions, including book values versus market values, merger valuation, the value of hook stock, intercompany debt, and guarantees.
For the TNI special report, go here. (subscription required)

The head of an international tax project to combat profit shifting is looking ahead to the daywhen implementation begins andwork shifts to individual countries and European Commission regulators.
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The OECD is holding three tax events on the side-lines of the 3rd International Conference on Financing for Development in Addis Ababa, Ethiopia.
Togetherwith the UNDP, the OECD today launched the Tax Inspectorswithout Borders initiative to help the tax administrations of developing countries benefit from the expertise of skilled tax inspectors from developed and emerging economies. The initiative is a concrete deliverable for the Conference.

For the OECD release, go here.

Over the past 15 years, a number of proposals have been advanced to encourage the repatriation of foreign earnings by providing a temporary tax preference. In 2004, Congress enacted the
Homeland Investment Act (HIA) as part of the American Job Creation Act, providing an 85 percent deduction on repatriated earnings for one year. This study examines the lessons learned from that experiment
and applies them to a new plan advanced by Senators Rand Paul and Barbara Boxer (Paul-Boxer).

For the paper, go here.

The Highway Trust Fundwill be insolvent by the firstweek of September and faces a $169 billion budget shortfall in the next ten years, but Congress has been slow to find a long-term fix. In the last twoweeks, Congress finally came to a consensus that a repatriation tax holiday may be the onlyway to raise the necessary revenue for a highway bill.
For the Economics21.org story, go here.

Lee A. Sheppard outlines Treasury's plans once the OECD's base erosion and profit-shiftingworkwraps up.
For the Tax Notes article, go here. (subscription required)

Guidelines due in September from the Organization for Economic Cooperation and Development's two-year project on base erosion and profit shiftingwill call for tax administrations to respect taxpayer contracts and risk allocationswhen evaluating potential cash-box entities, a Treasury Department official said.
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The U.S. is planning strict limits on the information that can be shared under the country-by-country reporting being considered in the OECD's base erosion and profit shifting project, an IRS official said.
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Washington is close to a major bipartisan breakthrough, a long-term infrastructure bill using revenues from international tax reform. On the cusp of this massive opportunity, Rep. John Delaney, D-MD, is concerned that confusion over the policy details – and scoring numbers - could derail a good deal. Not all tax reform proposals are the same and there are major differences betweenwhat's known as "deemed repatriation" – a framework forwhich he has built a broad, bipartisan coalition of support – and a misguided "repatriation tax holiday."
For the Hill op-ed from Rep. Delaney, go here.

Today, U.S. Senator Rob Portman (R-Ohio), a member of the Senate Finance Committee, called for permanent tax policy to create a more stable environment for economic growth. During a Senate Finance Committee markup of the tax extenders legislation, Portman highlightedwhy temporary tax policy isn'tworking and called for a permanent policy for American families and businesses.
For the Portman release, go here.

Top lawmakers and thewhite House are in the early stages of discussing an ambitious overhaul of how the U.S. taxes its multinational firms, according to officials involved in the effort.
For thewall Street Journal story, go here.

The Treasury Department shouldn't require taxpayers to apply all items of a tax treaty as it crafts a new U.S. model tax convention, the New York State Bar Association Tax Section said.
A taxpayer's "duty of consistency" in applying treaties should be limited to preventing inappropriate efforts to get treaty benefits, the group told the government in July 14 comments.
For the BNA DTR story, go here. (subscription required)

More than 30 developed and developing countries and regional and international organizations have signed on to the Addis Tax Initiative, a project to improve tax administration and facilitate tax reform, particularly in developing countries.
For thewWTD story, go here. (Subscription required)

The final outcome document for the U.N.'s Third International Conference on Financing for Development includes the rejection of a proposal to create an intergovernmental U.N. tax body but calls for enhanced support for the U.N.'s existing tax committee and stresses "the importance of inclusive cooperation" among tax authorities.
For thewWTD story, go here. (subscription required)

Australian Treasurer Joe Hockey on July 15 said -- almost -- that the United States is muscling in on other countries' tax bases as it expands itsworldwide tax enforcement efforts.
For the TNT story, go here. (subscription required)

While the OECD has said it is moving away from some of the more controversial aspects of the risk and recharacterization draft under its base erosion and profit-shifting project, the changes and their adoption and implementation by tax administrations may be complicated, said Philippe Penelle of Deloitte Tax LLP.
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In news analysis, Lee A. Sheppard reports on July 11 remarks at a New York State Bar Association Tax Section meeting of Danielle Rolfes, Treasury international tax counsel, on Treasury's new model treaty provisions.
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U.S. Treasury Secretary Jacob J. Lew pushed back against an initiative by nonprofits and some developing nations to create a new global tax body, claiming it could slow the progress of competing anti-base erosion efforts.
"There's a danger that if you have competing centers of responsibility andwork that you make slower progress and not faster progress," Lew told reporters July 14 during a United Nations Financing for Development conference in Addis Ababa, Ethiopia.
For the BNA DTR story, go here. (subscription required)

Cooperative compliance between governments and multinational enterprises could be critical to efforts to minimise illicit financial flows from Africa, argue Jeffrey Owens and Alicja Majdanska of the Vienna University of Business and Economics.
For the ITR story, go here.

The Senate Finance Committee's international tax reformworking group, chaired by Senators Rob Portman and Chuck Schumer, has released its five-pillar framework for reforming the US tax code, concentrating on frequently-debated topics including a move to a territorial tax system, but therewere also surprises – for example in the strength of recommendation for a US patent box.
For the ITR story, go here.

For the small-business lobby, the idea of revamping America's international tax structure isn't evenworth a comment yet.
But make no mistake: That's a victory for Houseways and Means Committee Chairman Paul Ryan (R-Wis.), Sen. Charles Schumer (D-N.Y.) and thosewhowant to chase an international deal thatwould help fund a long-term highway bill.
For the Hill story, go here.

Congress "must play a significant role" in negotiations over the OECD's base erosion and profit-shifting project, and most if not all the proposals under considerationwill need congressional approval to take effect, the top Senate taxwriter said July 16.
For the TNT story, go here. (subscription required)

The Luxembourg government has proposed a series of tax legislation changes, including a measure thatwould implement European Union revisions to the bloc's parent-subsidiary legislation designed to crack down on intragroup tax avoidance schemes, including hybrid loan mismatches.

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Erik Corwin, IRS deputy chief counsel (technical), and New York State Bar Association Tax Section members recently discussed the merits of aggregate versus entity treatment for partnerships in controlled foreign corporation loans used in inversions and sales of partnership interests in a U.S. trade or business.
For the TNT story, go here. (subscription required)

Senate Finance Committee Chairman Orrin G. Hatch (R-Utah) said he has "serious concerns" about the Organization for Economic Cooperation and Development's base erosion and profit shifting, saying the direction it is taking could hurt not only U.S. companies but Capitol Hill's push for a tax overhaul.
For the BNA DTR story, go here. (subscription required)

Tax justice campaignerswere left disappointed by the UN's third international conference on financing for development thisweek as delegates declined to heed their calls to establish a new global tax body,whichwould take over the roles of the UN and the OECD in setting international tax standards and giving guidance.
For the ITR story, go here.

Corporations in the UKwill soon be guilty of a new offence if they fail to prevent their advisers from committing criminal tax evasion.
For the ITR story, go here.

The Australian government released, on July 14 2015, the terms of reference for the Board of Taxation's (BoT) consultation on implementing the OECD's anti-hybrid rules.

For the PwC Insight, go here.

The U.S. system of taxing multinational corporations' earnings encourages companies to direct more investment abroad, either in reality or on paper. The fact that the earnings of the foreign subsidiaries of U.S. corporations are not taxed until they are officially transferred to the domestic parent company leads to an incentive to "permanently reinvest" funds in low-tax jurisdictions and indefinitely defer paying U.S. taxes. This incentive has resulted in multinationals parking huge sums of profits in tax havens (such as Luxembourg, Bermuda, and the Cayman Islands). This report explains and compares several proposals to address this issue, including a repatriation holiday, deemed repatriation, and ending the deferral of taxes on U.S. multinational corporations' foreign earnings.
For the CTJ report, go here.

The ongoing saga of tax reform is reminiscent of the classic 1957 movie "The Incredible Shrinking Man." After a hapless businessman is exposed to a variety of hazards, he shrinks ever smaller, eventually becoming imperceptible to the naked eye.
The sequel now playing on Capitol Hill is creating great peril for our economy. Earlier this year, therewas great enthusiasm in Congress for comprehensive tax reform. But this "comprehensive" reform quickly shrank to the less daunting goal of "business" reform and then an even less ambitious push for "international" reform. Now there's talk that reform may be limited to just trying to pass a handful of permanent tax extenders.
For The Hill story, go here.

Developing nations and advocacy groups at a United Nations conference in Ethiopia are pushing for a new global body to tackle tax avoidance by companies, a move opposed by richer nations.
For the Bloomberg Business story, go here.

During the July 6-7, 2015 public consultation on BEPS Actions 8 through 10, the OECDworking Party 6 announced planned revisions to its proposed changes to the Transfer Pricing Guidelines, including its December 2015 papers on Risk, Recharacterisation and Special Measures and Use of Profit Split Methods and its 2014 draft on Intangibles. The OECD also received feedback from speakerswho had submittedwritten comments to the drafts on Cost Contribution Arrangements and Hard to Value Intangibles (proposed changes to Chapter VI of the Transfer Pricing Guidelines on Intangibles). In providing the updated status of the various transfer pricingworkstreams, the OECD also confirmed the delivery timetable for the transfer pricingwork.

For the PwC Insight, go here.

The European Commission tried to reduce tensionwith the Organization for Economic Cooperation and Development over a list of 30 countries and independent territories the European Union has designated as tax havens by insisting it is not trying to competewith or impede thework of the Paris-based institution.
For the BNA DTR story, go here. (subscription required)

The IRS is open to expanding the list of troublesome foreign splitter transactions set out in final rules under tax code Section 909, but has no immediate plans to do so, an agency official said.

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Multinational enterpriseswill "always be ahead of the curve" in beating the tax rules in developing countries, so global governance and social responsibility standards should includeways to stigmatize tax avoidance, a U.N. official said July 14.
For thewWTD story, go here. (subscription required)

The OECD'swork on Chapter I of the transfer pricing guidelines is moving in the right direction, but questions remain on the level of substance necessary to recognize a transaction, according to Clark Chandler of KPMG LLP.
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In news analysis, Lee A. Sheppard reports on a July 14 discussion of the final foreign tax credit splitter rules at an International Tax Institute luncheon in New York.
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The Center for Freedom and Prosperity, joined by 20 other business advocacy organizations,warned Congress that thework of the international project to combat base erosion and profit shifting lacks oversight.
In a July 14 letter to both houses of Congress, CF&P President Andrew Quinlan said his organization and the other groupsÔøΩwhich the letter collectively referred to as the Coalition for Tax CompetitionÔøΩare deeply concerned that the BEPS process "will result in onerous new reporting requirements and higher taxes on American businesses."
For the BNA DTR story, go here. (subscription required)