Int'l Tax News

The European Union's probe of tax deals expanded as the competition regulator asked all EU countries to give it information about financial agreementswith multinational corporations.
For the story, go here.

European Union regulators said theywouldwiden a high-profile probe into alleged sweetheart tax deals, stepping up an investigation that already has ensnared four multinational companies including Apple Inc. and Amazon.com Inc.
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The United States Council for International Business (USCIB) condemned proposed UK rules to impose a new tax on so-called "diverted profits," saying the measurewould, if implemented, have a major impact on U.S.-based multinational companies.

For the USCIB release, go here.

The Obama administration's efforts to recoup more tax revenue from cross-border financial arrangements may be hard to coordinatewith other countries, the congressional Joint Committee on Taxation said.

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by Zachary R. Mider(Bloomberg)

The only operetta everwritten about Subpart F of the Internal Revenue Code made its debut on a rainy Sunday evening in May 1990, in a Fifth Avenue apartment overlooking Central Park. In bow ties and spring blazers, partners of the law firm of Davis Polk &wardwell dined on lobster prepared by a Milanese chef. Then everyone gathered around a piano, and a pair of professional opera singers, joined by the few Davis Polk menwho could carry a tune, performedwhat sounded like a collaboration of Gilbert & Sullivan and Ernst & Young.

For the story, go here.

Public comments are invited on this discussion draftwhich dealswithwork in relation to Action 10 ("Assure that transfer pricing outcomes are in linewith value creation" in relation to "other high risk transactions") of theAction Plan on Base Erosion and Profit Shifting(BEPS).

For the OECD release, go here.

Public comments are invited on this discussion draftwhich dealswithwork in relation to Action 10 of the OECDAction Plan on Base Erosion and Profit Shifting(BEPS).

For the OECD release, go here.

Around theworld, countries are desperately seekingways to stop multinational companies from earning profitswithin their borderswithout paying taxes on them,while stashing trillions in tax havens like the Cayman Islands. The British government, after a search, says it knows how to tax the profits Google earns in the United Kingdom. Its solution is simple and elegant, and it probablywon't change a damn thing.

The proposal has come because Britain and many other countries are tired of getting just the table scraps after companies enjoywhat tax lawyers call Dutch Sandwicheswashed downwith a Double Irish. Those are popular names for tax strategies that let companies earn profits in countrieswith high taxes, but report profitswhere little or no tax is paid, such as Ireland.

For the story, go here.

The Council of the European Union has approved an amendment to the EU Parent-Subsidiary Directive in a clampdown on aggressive corporate tax avoidance.
For the story, go here.

While the OECD considers special measures to address perceived improprieties in risk-based income allocation, stakeholders continue to disagree on fundamental issues such as the appropriate return on investment for intangibles.
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The OECD on December 16 released two discussion drafts under action 10 of its base erosion and profit-shifting project on potential guidance on the use of transactional profit-split methods and the pricing of commodity transactions.
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Daniel N. Shaviro explores the relationship between taxing corporate income at the entity level and the difficulties in evaluatingwhether a corporate rate cutwould be desirablewithout significant structural changes.
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While the media has been feasting onLux Leaksand other stories of "multinational tax dodging", academic accountants have determined that U.S. multinational corporations (MNCs) have no particular tax advantage over U.S. domestic firms.
In fact, anew studyfinds the average effective tax rate for U.S. MNCs is slightly higher than that of U.S. domestic firms: 28 percent versus 24 percent. The study calls into question policymakers' emphasis on international "profit shifting," including the elaborate efforts by theOECDand rich-country governments to crack down on MNCs exclusively.
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Is it possible that today's acronym-laden, conceptually dense tax reform proposalwill become one of the biggest business stories of 2015? It's already happening.
The proposal in question is the Organization for Economic Cooperation and Development's (OECD) Action Plan on Base Erosion and Profit Shifting. This mouthful of a plan – known in tax circles as BEPS – is a tough topic for most business people towrap their arms around. But soon they'll have little choice but to become BEPS experts.
For the story, go here.

The announcement by the UK government that it is introducing a 25 per cent so-called Google tax on "contrived arrangements"within multinationalswas one of the issues raisedwith the OECD during awebcast yesterday.
The Paris-based organisation's Pascal Saint-Amans said the UK movewas "extremely interesting" as it served to illustrate the level of political concern that exists about the practice of tax avoidance by multinationals.
For the story, go here.

The OECD on Monday provided an update via awebcast of its BEPS (Base Erosion & Profit Shifting) corporate tax reform proposals.
The leading tax officials at the Paris-based Organisation for Economic Co-operation and Development, Pascal Saint-Amans , director, Centre for Tax Policy and Administration; Raffaele Russo, head of BEPS Project (left); Marlies de Ruiter, head of Tax Treaty, Transfer Pricing and Financial Transactions and Achim Pross, head of International Cooperation and Tax Administration Division, spoke of developments in the project that is due to be completed next year.
For the story, go here.

The OECD expects to release as early as December 16 discussion drafts dealingwith transfer pricing, dispute resolution, and interest deductibility as part of the base erosion and profit-shifting project.
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The European Union is braced for a legal battlewith governments embroiled in its probe of sweetheart tax deals for multinationals from Apple Inc. (AAPL) to Amazon.com Inc. (AMZN), the group of nations' new antitrust chief Margrethe Vestager said.

For the story, go here.

There's big news from across the pond. The U.K. government'sAutumn Statement(formerly known as the pre-Budget report), released December 3, promises to change how multinational corporationswill be taxed – and offers a cautionary tale forwould-be U.S. tax reformers.

Britainwill introduce a "diverted profits" tax, targeting corporations that use "artificial arrangements" to shift profits overseas. The rate of tax on diverted profits, 25 percent,will exceed the basic U.K. statutory rate,which falls to 20 percent in April 2015.

For the story, go here.

The fourth-quarter issue of PwC;s Tax & Investment in the US covers:
• Mike Danilack joins PwC
• Paying Taxes 2015: Key aspects of the US tax system
• Captive insurance: Recent favorable US Tax Court decision
• Share-based compensation: understanding the tax accounting.

For the PwC Quarterly, go here.

As the Treasury Department considers further guidance to limit inversion transactions that are contrary to the purposes of section 7874, itwill examine the appropriateness of applying a zerowithholding tax rate under a U.S. tax treaty to interest payments made to foreign members of an inverted group, a Treasury official said December 12.
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The IRS is considering raising the de minimis threshold under its anti-inversion temporary regs (T.D. 9654), an IRS official said December 12.
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The Internal Revenue Service must remain focused on U.S. tax laws and regulations even as other countries begin adopting provisions to limit the credibility of foreign taxes similar to those being examined under the Organization for Economic Cooperation and Development's base erosion and profit shifting project, an IRS official said.

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A Treasury Department official cited significant support among the countries participating in the international project on base erosion and profit shifting to require only some, rather than all, multinational companies to file the forthcoming country-by-country reporting template.

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Business groupswarned Britain's government onwednesday that it risked undermining international efforts to rewrite tax rules after officials published plans to target multinational companies, including Google, that use complex strategies to cut their British tax bills.

Details of a new measure,which has become known as the ''Googletax,''were released onwednesday, aweek after George Osborne, the chancellor of the Exchequer, promised a crackdown on tax-avoidance strategies.

For the story, go here.

Congress likelywill need to act to truly put the brakes on corporate inversions even as the IRS and Treasury Department takewhat actions they can to combat the deals, Internal Revenue Service Commissioner John Koskinen told Bloomberg BNA.
Although the issue is still being looked at "carefully and closely"within the administration and policy decisions restwith Treasury, "I think it has been clear from the start that there are limits as towhat the Treasury and IRS regulatory process can accomplish," Koskinen said in a Dec. 9 discussionwith reporters.

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Democrats didn't succeed in their attempt to stop the U.S. government from awarding contracts to companies that complete inversion transactionswhere they move their tax address outside the country.
The $1.1 trillion spending plan currently being debated in Congress retains a limit that a top House Republican said is already "watered down" and adds an anti-inversion rule that applies only to a few agencies and may not affect any companies.

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The British government detailed planswednesday for a new 25% tax on profits of multinational technology and other companies it says are avoiding paying taxÔøΩa move that has prompted complaints from business groups andwarnings from tax specialists that it could conflictwith international tax treaties.

For the story, go here.

The U.K. government published draft legislation to stop multinational companies from avoiding paying tax on profits generated in Britain.

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A cache of secret tax documents released Tuesday shed further light on how Luxembourg has helped multinational companies to lower their tax bills, in a second major leak that could intensify pressure on the Grand Duchy to alter its tax practices.

For the story, go here.

Luxembourg vowed to rein in sweetheart tax deals for multinational companies after its reputation took another blow from a newwave of leaks revealing fiscal accords.

The nation's Finance Ministry is pushing to set up oversight of so-called tax rulings next month as Prime Minister Xavier Bettel promised that Luxembourg is doing all it can to clean up its "damaged image."

For the story, go here.

Walt Disney Co. and Microsoft Corp.'s Skype unit are among hundreds of companies that benefited from lower taxes arranged in "secret" dealswith Luxembourg, according to a new report by a group of investigative journalists.

Confidential documents released by the group show that Hong Kong-based Hutchisonwhampoa Ltd. and private equity firmwarburg Pincus LLC also are among the international companies that have benefited from arrangements in the country allowing them to cut their tax bills. The International Consortium of Investigative Journalists posted the documents on itswebsite late Tuesday.

For the story, go here.

On December 10, 2014 HM Revenue & Customs (HMRC) released the diverted profits tax (DPT) provisionswithin its draft Finance Bill 2015. Upon initial review, the new rules could affect many more companies than one might have anticipated.

The DPT is a new tax,with a 25% rate on profits that are considered to be artificially diverted from the United Kingdom. The legislationwill apply to profits arising after April 1, 2015. Furthermore, if taxpayers potentially arewithin the scope of the tax, they must notify HMRCwithin three months of the end of the relevant accounting period.

For the PwC Insight, go here.

On 10-11 December, officials from fourteen developing countries discussedways to maximise benefits from their recent commitment to enhanced engagement in the BEPS Project.

For the release, go here.

The surge in U.S. companies avoiding taxes by taking a foreign address has been condemned by President Barack Obama and stirred a policy debate in Congress.what's often overlooked is that these "inversions" are typically a final step in a hopscotch of multinational tax dodging.

For the story, go here.

Taxation rose to the highest level in six years,with the governments of Denmark and France extracting the most from their economies, a report by the Organization for Economic Cooperation and Development showed.

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European Union finance ministers have backed plans requiring EU member states to begin revising their patent box tax regimes in 2015 and approved changes to EU parent-subsidiary and administrative cooperation legislation.

"The agreement today means that virtually every EU member statewith a patent box tax regimewill have to change their legislation to comply," an EU diplomat told Bloomberg BNA on Dec. 9 at the conclusion of the Council of Economic and Financial Affairs. "Those changes should begin in 2015 and be completed by 2021," the diplomat said, speaking on the condition of anonymity.

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by Thomas Jaworski

Many U.S. public companies are not providing sufficient information regarding their foreign earnings in corporate financial filings, and improved disclosures about the tax effects of those earnings is required to facilitate informed investor decision-making, SEC officials said December 9.

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For much of the year,wall Street adviserswere scrambling to engineer the cross-border transactions known as inversions. The resultwas billions of dollars in mergers and acquisitions, adding fuel to a banner year for deal-making.

But an abrupt change to tax rules in September left the future of inversions in limbo. Andwhile many expect the deals to continue in some form, they are unlikely to take placewith the same frequency, or at the same size, as they did earlier this year.

For the story, go here.

Devon Bodoh, Greg Featherman, and Stephen M. Massed analyze Notice 2014-52 and argue that unlike previous guidance, the notice not only tightens the application of section 7874 but also includes provisions intended to prevent inverted companies from benefiting from several types of post-inversion restructuring transactions.

For the report, go here.

by Joe Kirwin

European Union finance ministers are poised to approve changes to the bloc's parent-subsidiary directive that introduces an anti-abuse clause to reduce tax avoidance by corporate groups.

At the same time, the European Council Dec. 9will give final approval to legislation that extends EU laws regarding information exchange for financial income such as dividends.

For the story, gohere. (subscription required)

by Ari Shapiro

U.S. and European officials are angry about Irish rules that let some firms pay just 2 percent in corporate taxes. Ireland announced some tax code changes, but few think theywill change things much.

To listen to the story, go here.

Now that the election season is behind us and voters have made clear theywant policymakers to break the gridlock and move our country forward, let's hopewashington can finally replace campaign promiseswith political courage.with voters crying out for action on job creation and economic growth, reforming our country's broken international tax system is a great place to start. Indeed, pre-election polling showed that 9 in 10 Americans agreed "the next Congress needs to update the tax code so that itworks better for today's families and businesses.

But two things stand in theway.

For the story, gohere.

The Joint Committee on Taxation has increased, from USD19.5bn to more than USD33.5bn, its estimate of tax revenue that could be saved over a ten-year period from legislation to restrict corporate inversions introduced by Democrat lawmakers in the United States House of Representatives in May this year.

For the story, go here.

A plan by 11 European Union member states to reach an agreement on a financial transactions tax by the end of 2015 is set to fall by thewayside as disagreements over scope of the levy andwho should pay it continue to block a deal, according to a report EU finance ministerswill consider Dec. 8-9.

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by David Jarczyk

David Jarczyk of ktMINE challenges the perception that the Organization for Economic Cooperation and Development'swork on base erosion and profit shifting represents a move away from the arm's-length standard and a surrender to the notion that insufficient market data exists for conducting comparability analyses. In fact, he says, the OECD's latest draft on the transfer pricing of intangibles, far from lamenting the lack of available comparable data, suggests a deeper analysis of independent transactions and behavior by expanding the use of data from public sources.

For the BNA Insight, go here. (subscription required)

Luxembourg's government is on alert for a newwave of tax revelations that Prime Minister Xavier Bettel expects to hit the country this month.

Pierre Gramegna, the nation's finance minister, received a new batch of questions from a group of investigative reporters that indicate more documents revealing alleged sweetheart tax dealswith multinational companieswill be published shortly, Bettel told journalists on Dec. 5 in Luxembourg.

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by Aaron E. Lorenzo

U.S. companies might increase spending overseas under a pair of proposals to change taxes on their foreign income, according to a report issued by the Congressional Research Service.

The proposals,which include draft legislation from retiring Houseways and Means Committee Chairman Dave Camp (R-Mich.) and a bill introduced by Sen. Michael B. Enzi (R-Wyo.), a Senate Finance Committee member,would shift to a permanent exemption of taxes on foreign income from deferral under current law.

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The government might bewilling to adopt a de minimis exception to provide some relief from the anti-skinny-down rule in the IRS's recent section 7874 anti-inversion notice (Notice 2014-52, 2014-42 IRB 712), said John Merrick, special counsel to the IRS associate chief counsel (international), December 4.

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In news analysis, Lee A. Sheppard discusses the controversy over aspects of Luxembourg's tax and ruling policies in thewake of the release of tax documents that show the nation as an enabler of aggressive tax planning.

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