Int'l Tax News

The Australian government in its 2015-16 budget announced itwill implement the Organization for Economic Cooperation and Development's guidance on documentation and country-by-country reporting under its action plan on base erosion and profit shifting.
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Australia's federal budget, released May 12, provided generous tax breaks for relatively small companies,while singling out large global businesseswith double-strength penalties.
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The Australian 2015-2016 federal budget contains a number of new measures designed to enhance the integrity of the Australian tax system. The measureswould counter tax avoidance by multinationals and introduce a goods and services tax (GST) on the importation of digital products and services into Australia.

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The Organization for Economic Cooperation and Development's proposed indicators for judging the effectiveness of measures designed to combat base erosion and profit shiftingwill be ineffective in estimating the scale of BEPS, according to an Oxford University professor.

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A proposal under the international action plan on base erosion and profit shifting to strengthen controlled foreign corporation rules by treating most intellectual property income as passive fails to reflect how some business sectors use IP, practitioners said.

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On 16 April 2015, interested partieswere invitedto comment on the discussion draft on Action 11 (Data Analysis) of the BEPS Action Plan. The OECD is grateful to the commentators for their input and is now publishing the comments received.
For the comments, go here.

The European Commission's ambitious plans to improve the digital single market include changes to the VAT treatment of the cross-border supply of goods and services.
For the International Tax Review story, go here.

Australia's treasury department released draft legislation proposing to extend the country's goods and services tax (GST) to digital products and services supplied from offshore entities.
"[I]t is unfair that overseas based businesses selling services into Australia may not charge GSTwhen local businesses have to charge GST," Treasurer Joe Hockey told parliamentwhile delivering the government's annual budget proposals.
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Countries need more time towrite consensus rules on controlled foreign corporations, member of the OECD's Business and Industry Advisory Committee said.
William Morris, chairman of the advisory committee's tax group and director of global tax policy for General Electric, said May 12 that it is clear from the OECD's recent discussion draft on strengthening CFC rules "that there is not a level of consensus,whichwill not enable you to put out meaningful recommendations in any period of time."
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The corporate community is increasingly sounding thewarning to Congress: Europe is coming after us on taxes.

With tax reform talks stumbling inwashington, the fear for corporate titans is that other countries are already implementing a global set of recommendations meant to crack down on offshore tax avoidance.

For the Hill story, go here.

Ken Brewer argues that language in the Court of Federal Claims' Intersport opinion supports awidely held misconception that reg. section 1.482-1(a)(3) prohibits taxpayers from filing any late or amended returns to claim reductions in taxable income resulting from related-party transactions.
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Gabe B. Gartner argues that until the treatment of tax basis in outbound transfers of intangible property is clarified by regulations or other guidance, taxpayers shouldn't assume that their tax basis is irrecoverable.
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Tax reform should ensure competitive rates for all businesses, extend full business expensing, end double taxation by combining the corporate and individual systems, allow deferral of taxes on all saved income, and shift to a territorial system, the Tax Foundation said in an April 15 letter to the Senate Finance Committee's businessworking group.
For the letter, go here.

During a May 11 public consultation on action 12 of the OECD's base erosion and profit-shifting project regarding the design of mandatory disclosure regimes, business representativeswarned that imposing excessive tax compliance obligations on multinationalswill negate the benefits of enhanced transparency.
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An OECD analysis of 79 multinational companies regarding their ratio of net interest expense to earnings before interest, taxes, depreciation and amortization (EBITDA) is persuasive, a Treasury Department official said.

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Business delegates told an Organization for Economic Cooperation and Development consultation that, in many cases, itwould be impracticable for subsidiaries to complywith the organization's recent discussion draft on mandatory disclosure rules, if countries choose to adopt such rules.

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Indonesiawill gradually cut its corporate tax rate to discourage companies from booking profits in lower-tax countries such as Singapore, President Jokowidodo's top aide said.

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A Liberal government in Canada may need to "adjust" its corporate tax rate if the U.S. reduces levies on companies, the party's leader said.
Liberal Leader Justin Trudeau,whose party polls show is the biggest threat to Prime Minister Stephen Harper's Conservatives heading into this year's election,was asked in a television interview May 11 if hewould rule out any increase to Canada's corporate tax rate.
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Australiawill introduce legislation targeting 30 multinationals suspected of diverting billions in profits out of the country, Treasurer Joe Hockey said.
In a May 11 news release announcing the proposed legislation, Hockey also said the scope of Australia's goods and services tax (GST) regimewould be extended to apply to offshore suppliers of digital goods and services.
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Australian Treasurer Joe Hockey has said the governmentwill introduce a new tax crackdown against 30 multinational corporations.

Without identifying the targets, Mr Hockey said the big corporationswere "diverting profits earned in Australia away from Australia to no-tax or low-tax jurisdictions".

For the BBC story, go here.

Just five US companies are hoarding nearly half a trillion dollars as the country's tax code and a tepid global economy deter businesses from spending their overseas cash piles.
For the Financial Times story, go here.

The government plans to soon issue eagerly awaited rules on loans to foreign partnerships by controlled foreign corporations under tax code Section 956, Treasury Department attorney-adviser Brian Jenn said.
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Implementing a patent box has become an "almost primary" topic of the tax debates on Capitol HillÔøΩa shift in focus that happened almost overnight, according to the chief tax counsel of the U.S. Houseways and Means Committee.
"It seemed to me that in January or February of 2015, a substantial portion of the business communitywoke up one morning, and despite the goals" of a 25 percent corporate tax rate and an exemption system, "decided that a patent box or an innovation boxwas one of their top priorities," said George Callas, aways and Means stafferwhoworked under former Chairman Dave Camp (R-Mich.) to craft a tax reform proposal, and remainedwith the committee after Rep. Paul D. Ryan (R-Wis.) took over the chair earlier this year.
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Theworldwide growth of intangible income and potential for base erosion has made guidance on intangibles one of the government's highest priorities, two senior officialswith the IRS and Treasury Department said.
Another key focus is guidance on cloud computing as that, too, increases across awide swath of companies, they said, and comments from taxpayers are essential as that process goes forward.
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Quyen Huynh, Treasury associate international tax counsel, said May 8 that the next U.S. model tax treatywill include a mandatory arbitration provision.
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An expanded use of profit splits at the conclusion of the OECD's base erosion and profit-shifting project could put pressure on dispute resolution mechanisms, according to J. David Varley, acting transfer pricing director, IRS Large Business and International Division.
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Businesses' recent focus on the introduction of a patent (or innovation) box in the United States may be due to concerns about assertions of taxing jurisdiction over previously low-taxed income and an interest in access to U.S. competent authority assistance, said George Callas, majority chief tax counsel on the Houseways and Means Committee.
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A U.S. Treasury official sharply criticized the U.K.'s diverted profits tax, saying it undercuts the process of having nationswork together on the Organization for Economic Cooperation and Development's base erosion and profit shifting project.
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As the Organization for Economic Cooperation and Development's project to combat base erosion kicks into high gear, sowill taxpayer demand for assistance from the IRS, an agency official said.

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The international project to fight base erosion and profit shifting is unlikely to produce an agreement on controlled foreign corporation rules or specific measures to address the digital economy, a top U.S. tax official told Bloomberg BNA.

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India's biggest indirect tax reform since 1947 looks like it has finally arrived – the Goods and Service Tax.

For the Scroll report, go here.

Parthasarathi Shomewill become the first chairman of the International Tax Research and Analysis Foundation. The organisation,whichwill be based in Bangalore,will bring together professionals from thewhole of the tax market in India to produce commentary about the Indian tax system.
For the International Tax Review story, go here.

The IRS Chief Counsel's Office issued CCA 201516064 on April 17, 2015, addressing the application of Notice 88-108where a controlled foreign corporation made loans back to its US parent over two quarter-ends, both ofwhichwere repaidwithin 30 days, but also made a third loanwhich caused the CFC to be a creditor of the US Parent for more than 59 days during the year.

For the PwC Insight, go here.

As the ABA Tax Section celebrates its 75th anniversary, the authorwas asked to reflect on the Section's contribution in the international tax arena and on how the
Section's international community has grown.
For the ABA Tax Lawyer article, go here.

Former Houseways and Means Committee Chair Dave Camp said May 7 that Congress should notwait until 2017 to completework on comprehensive tax reform lest the growing trend of corporate inversions boost the number of U.S. companies moving abroad.
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A draft legislative decreewas approved by the Italian Government on 21 April 2015which includes a large number of tax changes, many ofwhich are particularly relevant for companieswith international operations.
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Why doesn't Europe have its own Google or Facebook?
Many European policy makers say the region's homegrown Internet companies haven't made the big leagues at least in part because of a patchwork of tax, copyright and e-commerce rules that have stunted their growth.
For thewall Street Journal story, go here.

Popular opinion and high-profile domestic targets aside, it's not clear that Notice 2014-52, 2014-42 IRB 712 is responsible for increased foreign takeovers or even that foreign takeovers have increased.
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Michael Durst, former director of the IRS Advance Pricing Agreement Program, examineswhether a new transfer pricing method, suggested recently for use by developing countries, might be developed further to serve as an administratively streamlined transfer pricing method for countries of all levels of economic development.
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Poland has referred a case to the European Court of Justice (ECJ)which could dramatically impact insurance outsourcing activity across Europe.
For the International Tax Review story, go here.

The Peruvian tax authorities have changed the periodwithinwhich settlement must take place for income derived from financial derivatives to be considered sourced in Peru.
For the International Tax Review story, go here.

The IRS needs to address the complex foreign tax credit issues surrounding cloud computing, the American Institute of CPAs said in a range of recommendations for the agency's 2015-2016 Priority Guidance Plan.

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For Nigerian tax purposes recharges can be defined as costs reimbursed by a non-resident company to its Nigerian affiliate in respect of services provided by the affiliate in execution of a joint contract in Nigeria. Generally, this amount includes a profit mark-up for the affiliate, and the non-resident company is allowed the amount as a deduction in its income tax returns.
For the International Tax Review story, go here.

Partho Shome's 30-year career as a tax official and adviser to Indian governments and multilateral organisations may be at an end for now, but hewill still take a keen interest in tax policy, as this exclusive interviewwith International Tax Review reveals.
For the International Tax Review story, go here.

Leading congressional taxwriters in both parties are getting behind a major new tax break for corporate innovation as part of their continuing quest to identifyways to make the U.S. business-friendlier.
For thewall Street Journal story, go here.

The Organization for Economic Cooperation and Development's recent discussion draft on strengthening rules on controlled foreign companies is a missed opportunity to address base erosion and profit shifting, according to an official from the OECD's Business and Industry Advisory Committee.
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On 31 March 2015, interested partieswere invitedto comment on the discussion draft on Action 12 (Mandatory Disclosure Rules) of the BEPS Action Plan. The OECD is grateful to the commentators for their input and now publishes the comments received.
For the comments, go here.

On 3 April 2015, interested partieswere invitedto comment on the discussion draft on Action 3 (Strengthening CFC Rules) of the BEPS Action Plan. The OECD is grateful to the commentators for their input and is now publishing the comments received.
For the comments, go here.

Why did the EU Commission take so long to launch investigations into member states' tax rulings? Is its strategy to go only after small countries, such as Belgium, the Netherlands, Luxembourg and Ireland?will the instruments available to it suffice? And if not,whatwould it take to do awaywith unfair tax competition? These questionswere raised by MEPs in Tuesday's Special Tax Rulings Committee debatewith competition Commissioner Margrethe Vestager.
For the European Parliament news release, go here.