Int'l Tax News

George Osborne, UK Chancellor of the Exchequer, presents his final Autumn Statement nextweek, before the general election on May 7 2015. The tax focuswill be on maintaining UK competitiveness through policy that creates a business-friendly environment.
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Though base erosion and profit shifting (BEPS) took the front seat during meetings between global leaders on November 15 and 16 at the G20 forum, country leaders also expressed concern over the taxation of intellectual property (IP). Patent box regimes in particularwere mentioned as a method used by large corporations to exploit tax incentives.
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Piet Battiau, head of consumption taxes at the OECD's Centre for Tax Policy and Administration, believes the OECD isworking effectivelywith other multilateral organisations and that common ground is being found on key indirect tax issues.
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With Republicans taking control of the Senate there has been talk of tax reform as a potential areawhere the Obama ddministration and the Republican controlled Congress can agree. There is awidespread view that the Internal Revenue Code is in need of reform. Previous efforts at tax reform by Congress, however, have created a complex, inefficient and inequitable federal tax system.
While past tax acts often are repletewith reference to "tax reform" or nomenclature like "jobs creation," they generally serve neither to truly reform the tax system or create many American jobs. One must therefore bewary of tax reform thatwould continue this pattern. Imagine, however, if the next round of tax reformwere crafted by thosewho embody the ideals of Senator Jefferson Smith, portrayed by Jimmy Stewart, in the 1939 movie classic directed by Frank Capra, "Mr. Smith Goes towashington."

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Modest global economic forecasts, continuing high unemployment, and downshifts in potential output should spur governmentswith a greater sense of urgency to fully employ monetary, fiscal and structural policy levers to support growth, notably in Europe, according to theEconomic Outlook.

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The U.S. corporate tax system is broken. The current method of taxing the profits of large, publicly traded corporationswas designed for an economy inwhich international investmentwas relatively unimportant and most corporate profitswere produced by tangible assets, such as machinery and buildings. It doesn'tworkwell in today's economy,which features increasing globalization and a rising share of profits coming from patents, brand reputation, and other intangible property.

For the blog post, go here.

Paying taxes has become easier over the past year for medium-sized companies around theworld, a new report from theworld Bank Group and PwC has found.
The average time it takes a company to complywith its tax obligations dropped by four hours last year, according to the study. The average number of payments required from companies also fell to 25.9 each year, and 264 hourswere required to achieve tax compliance.
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The Treasury Department is undertaking a broad review of U.S. tax treaties to consider their role in facilitating the growing use of corporate inversions, a department official said.
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Public comments are invited on a discussion draftwhich dealswith follow-upwork mandated by the Report on Action 6 ("Prevent the granting of treaty benefits in inappropriate circumstances") of the BEPS Action Plan.

For the OECD release, go here.

Bermuda, the richest of the UK's overseas territories, has snubbed David Cameron's call to rip away the "cloak of secrecy" by creating a public register of the ultimate owners of its companies.

Bob Richards, finance minister, said: "Ifwe agree to a public registerwhile our competitors around theworld do not,wewill put ourselves at a distinct disadvantage, severely damaging our economy."

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The OECD on November 21 released a discussion draft inviting comments on additionalwork to be done on anti-treaty-abuse measures developed as part of its base erosion and profit-shifting project.
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Without acquiescing to changing the anti-skinny-down rules in the IRS's recent anti-inversions notice, Robert Stack, Treasury deputy assistant secretary (international tax affairs), acknowledged November 21 that implementing the current bright-line rules may produce unexpected results.
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Theworld Bank and PricewaterhouseCoopers have announced their joint publication of Paying Taxes 2015, a global study of medium-sized companies that found the average time required to meet tax obligations and average amount paid in taxes have decreased over the last 10 years.
For the report, go here.

The OECD's base erosion and profit-shifting project should avoid increasing companies' compliance burdens by creating solutions that are the most administrable and the least prone to dispute, according to Robert Stack, Treasury deputy assistant secretary (international tax affairs).
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Large corporations are avoiding their fair share of taxes and Congress should address this by reducing the use of tax havens, eliminating "wasteful" corporate subsidies, and closing tax "loopholes" that encourage excessive executive compensation, the Center for Effective Government and the Institute for Policy Studies said in a November report.

For the report, go here.

The so-called 36-month rule in the excess distribution test could pullwhat otherwisewould have been normal business deals into the expanding section 7874 anti-inversion regime, making it more likely that Treasurywould characterize non-abusive cross-border merger and acquisition transactions as inversions, a practitioner said November 18.
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• US fiscal health is currently robust enough to support a package of $300 billion in tax rate cuts,which could help get the nation's economy back on track.

• Lower marginal income tax rates for households and businesseswould incentivize greaterwork and investmentwhile reducing distortions in the tax system.

• The recent midterm elections signal a need for Congress and the president to cooperate on enhancing economic growth, and these tax cutswould be an effective step toward this goal.

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Aswashington prepares for the 114th Congress, the most talked about, not to mention feasible,way to stimulate the economy and expand investment is through comprehensive tax reform.2015 and the new Congress represent the best chance tax reform has had in years. In a recent poll by Public Opinion Strategies, 95 percent of voters agreed that Republicans and Democrats need towork together to update America's tax code.what's more, business leaders arewilling to come to the table in support of a fairer code.with cooperation between the parties, tax reform can put the economy on the right track for decades to come.
With such strong bipartisan support and the backing of key stakeholders, elected leaders of both parties should have the resources and capability to make needed progressÔøΩto simplify our code and reduce the corporate rate to an internationally competitive level.
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After the Republican-controlled Congress sorts out its new hierarchy, and after it gets done battling President Barack Obama over immigration, thenwill come the time to get some actualwork done.
Atop the priority list, at least from a market perspective,will be meaningful tax reform to address some of the thornier issues of concern to corporate America.
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Leaders of the G20 (group of twenty),which comprises the 19 leading developed and emerging economies of theworld, confirmed in a communiqué at the end of a summit in Brisbane, Australia at theweekend, that they support unmasking the beneficial owners of shell companies and automatically exchangingtax informationwith each other at the end of 2018 at the latest.

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The G20 Communique is good news on the international tax reform front. As part of the G20 commitment to boost economic resilience the Communique commits G20 nations to taking action to ensure fairness in the international tax system. This means they are looking atways to ensure profits are taxedwhere economic activities deriving the profits are performed andwhere value is created.
The most positive statement is the endorsement of the global Common Reporting Standard for the automatic exchange of information between revenue authorities. The G20 also provides strong support for the recommendations coming out of the OECD project on Base Erosion and Profit Shifting (BEPS). And so it should.
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G-20 leaders discussedways to prevent the abuse of anonymous shell companies to facilitate illicit financial flows and agreed to complete an implementation plan to combat corporate tax avoidance by the end of 2015, thewhite House said in a November 16 release about the G-20 Brisbane Summit.
For the fact sheet, go here.

Ireland-based drug company Actavis on Monday announced a $66 billion agreement to buy California's Allergan, maker of the Botox anti-wrinkle treatment. News of the cash-and-stock transaction triggered a rally that made the shares of both companies look prettier. But the deal highlights how desperately U.S. tax policy needs a makeover.
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At their November 15-16 summit in Brisbane, Australia, G-20 leaders committed to complete by 2015 the joint action planwith the OECD to address base erosion and profit shifting and unveiled a strategy to increase transparency on beneficial ownership.
In a communiqué issued at the conclusion of the summit, the groupwelcomedwhat it called "significant progress" on the BEPS action plan and promised to complete the remaining action items, including "transparency of taxpayer-specific rulings found to constitute harmful tax practices." The focus on tax rulings follows the November 5 leak of documents exposing the details of preferential advance tax rulings between Luxembourg and more than 300 taxpayers.
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President Obama in November 16 remarks at a G-20 press conference in Brisbane, Australia, praised the G-20 countries for taking new steps towards closing tax "loopholes" for multinational companies and preventing offshore tax evasion and answered questions regarding healthcare tax subsidies and the possibility of another government shutdown.
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On 21 November 2014, the OECD released a Public Discussion Draft on 'Follow Upwork on BEPS Action 6: Preventing Treaty Abuse'. The OECD's 16 September 2014 Report on Action 6, noted that furtherworkwas neededwith respect to the precise contents of the OECD's Model Convention provisions and related Commentary, particularly in regard to the Report's draft of a Limitation on Benefits article as an alternative means of addressing treaty shopping.

For the PwC Insight, go here.

Berlin has taken a swipe at the new head of the European Commission by questioning the fairness of hundreds of controversial tax deals struckwhile Jean-Claude Junckerwas still Luxembourg's prime minister.

The criticism fromwolfgang Schäuble, Germany's powerful finance minister, came as Mr Juncker –who served as Luxembourg's prime minister for 18 years until 2013 – took his first public steps to stem a rising furore that is overshadowing his early days as commission president.

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European Commission President Jean-Claude Juncker sought to blunt an early challenge to his leadership by rebutting allegations that he presided over sweetheart corporate tax deals during almost 19 years as prime minister of Luxembourg.

Juncker said hewon't interferewith a European Union probe of his country's potentially unlawful tax breaks. The investigation may bewidened after lastweek's disclosures by a journalists' group that Luxembourg helped more than 340 companies shave tax bills.

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MEPs have called for an investigation into tax evasion in the EU, threatening greater scrutiny of the new European Commission president, Jean-Claude Juncker, and his long tenure as Luxembourg's prime minister.

Alde, the liberals' grouping in the European parliament, requested a temporary committee to investigate tax havens after the recent disclosure of hundreds of special tax deals between Luxembourg and many of theworld's largest companies.

The deals allowed companies such as Procter & Gamble and JPMorgan to make use of Luxembourg's law to pay little tax on their earnings. They are now stirring outrage across a continent still reeling from austerity,where many feel the burden of the economic crisis has not been shared equally.

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George Osborne is set to rein in one of his flagship policies after settling a disputewith Germany over a controversial tax break for intellectual property.

The dealwill remove a potential source of tension between David Cameron and Angela Merkel, the German chancellor, at thisweek's G20 summit in Brisbane. Ms Merkel believes the British regime encourages artificial shifting of profits to countrieswith so-called patent boxes.

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The OECD released today its new Strategy for Deepening Developing Country Engagement in the Base Erosion and Profit Shifting (BEPS) Project,whichwill strengthen their involvement in the decision-making processes and bring them to the heart of the technicalwork. The BEPS Project aims to create a coherent set of international tax rules to end the erosion of national tax bases and the artificial shifting of profits to jurisdictions solely to avoid paying tax.
For the release and report, go here.

Although the OECD is moving quickly in developing guidance as part of its base erosion and profit-shifting project, taxpayers are likely to face varied levels of implementation of its recommendations by countries desperate to raise revenue, practitioners said at a tax conference in Philadelphia.
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For Jean-Claude Juncker, the new president of the European Commission, the honeymoon is over and some in Europe alreadywant a divorce.
The prime minister of Luxembourg for the better part of 18 years, Juncker took over the European Union's top job on Nov.1 only to be hit by calls to resign a few days later. The sniping came after a group of investigative journalists issued a report detailing secret deals struck by major corporationswith Luxembourg that allegedly allowed them to shave billions of dollars off their global tax bills.
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Despite Treasury's recent issuance of anti-inversion guidance (Notice 2014-52, 2014-42 IRB 712), it's business as usual for the inversion plans of six U.S. companies and their foreign counterparties.
Medtronic Inc., C&J Energy Services Inc., Mylan Inc., Burger Kingworldwide Inc., Steris Corp., andwright Medical Group Inc. are all poised to complete their planned tax re-domiciles before the second quarter of next year, according to recent quarter-end earnings calls and regulatory filings.
But common among the parties' SEC filings are disclaimers that changes to anti-inversion rules and regulations could adversely affect the tax status of the newly inverted company. Some have developed contingency plans for a possible change in law.
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U.S. corporations face the highest tax rate and most burdensome international tax rules in the developedworld,which stifles the economy and makeswork and investment more expensive, the Tax Foundation said in a November 10 report discussing types of U.S. businesses, problemswith the U.S. corporate tax system, and the benefits of tax reform.

For the report, go here.

European Commission President Jean-Claude Juncker rebuffed calls for his resignation following revelations that Luxembourg made hundreds of secret "sweetheart" tax agreementswith multinational corporations during his two-decade tenure as prime minister and finance minister.
Called before the European Parliament,where some lawmakers have demanded he resign, Juncker insisted that the Luxembourg tax agreementswere legal and that 22 other European Union member states have similar arrangementswith multinational companies.
"There probablywas a certain amount of tax avoidance in Luxembourg, as in other EU countries," Juncker said Nov. 12. "We find this everywhere in Europe because there is insufficient tax harmonization in Europe."
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The Organization for Economic Cooperation and Development announced a new initiative to help developing countries in efforts against tax avoidance and base erosion,whichwill include developing regional tax networks andwill allow several developing nations to participate in meetings of the OECD's Committee on Fiscal Affairs.
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The German and U.K. governments have resolved their dispute overwhether patent boxes, such as the U.K.'s, constitute a harmful tax practice by agreeing that the benefits of such preferential tax regimes should be limited to jurisdictionswhere the taxpayer has undertaken the intellectual property research and development.
Under a joint statement issued Nov. 11, the two governments said theywill propose rules to the Organization for Economic Cooperation and Development thatwould prevent companies from obtaining tax benefitswhen they shift patents and intellectual property developed in one jurisdiction to a different jurisdiction.
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In the October Budget, the Minister for Finance announced the intention to change the Irish tax residency rules. These changeswill apply to Irish incorporated companies resident in non-treaty jurisdictions, butwith a generous six-year grandfathering provision for existing investors.

As originally drafted, the 'grandfathering provisions'would have beenwidely available to all companieswhichwere incorporated in Ireland before January 1, 2015, regardless of ownership or activity. Amendments to this draft legislation have now been proposed in order to limit the ability to access these grandfathering provisions.

For the PwC Insight, go here.

OECD countries collectively raise the most revenue from consumption taxes and social insurance taxes, and the United States relies the most on individual income taxes, the Tax Foundation said in a November 12 release.

For the release, go here.

The leaders of the Group of 20 major economieswill consider the next steps for their financial regulation agenda andwillwork to close loopholes in the international tax system as a part of a multi-year Base Erosion and Profit Shifting (BEPS) programwhen they meet Nov. 15-16 in Brisbane, Australia.
G-20 leaderswill continue to advance their two-yearwork program to update international tax rules for the 21st century by closing loopholes in the international tax systems and strengthening public finances through its two-year BEPSwork plan.
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Starbucks Corp. may have unfairly lowered its tax bills by routing profits through Dutch subsidiaries, European Union regulators said as they continued to investigate sweetheart fiscal deals between multinational companies and national governments.

"The Dutch authorities confer an advantage" on Starbucks Manufacturing EMEA BV through tax agreements that may have constituted illegal state aid, according to a European Commission letter outlining its case to Dutch officials posted on the EUwebsite today.

The Dutch authorities allowed Starbucks Manufacturing to transfer profits through royalty payments to a unit outside the country that "could be overestimated," the EU said in the letter dated June 11. The regulator's findings are preliminary.

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An EU probe into sweetheart tax deals is confronting the Netherlands by alleging it artificially lowered Starbucks' tax bill through approving a complex, irrational and inappropriate corporate structure.

In a 40-page letter outlining its preliminary conclusions from its probe, the European Commission alleges the US coffee chain paid less tax than it should have done under Dutch law, and that this is a form of favourable treatment that amounts to an illicit state subsidy.

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In 2015, the Australian government is releasing awhite paper on tax policy reform,which analysts expectwill include suggestions to increase the goods and services tax (GST) rate and expand its base.

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A new study analysing the effects of different levels of ICT-related taxes and tariffs around theworld has been published by the Information Technology & Information Foundation,with recent changes affecting India noted.
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The long-awaited goods and services tax (GST) is very likely to be discussed in the Indian Parliament'swinter session, and the tax could be introduced in April 2016.
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The European Commission plans to propose a new version of the Common Consolidated Corporate Tax Base legislation that likelywill exclude the current option provision to the plan and may also include harmonized corporate tax rates.
In a move designed to head off the controversy over revelations stemming from Luxembourg "sweetheart" tax agreements signedwith multinational companies by European Commission President Jean-Claude Junckerwhen hewas prime minister and finance minister of Luxembourg, the European Commission also said the new proposalwill take into account the Organization for Economic Cooperation and Development guidelines on base erosion and profit shifting.
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The OECD has unveiled a plan to bring more developing countries into the discussions on base erosion and profit shifting. But tax justice campaigners have given it only a guardedwelcome.

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In this article, the authors argue that although some U.S. international income tax reforms, such as limitations on earnings stripping, can be handled by targeted legislative action, broad reform of the U.S. international income tax system should take place only as part of a general revision of the U.S. corporate income tax.
For the paper, go here.

The European Commission has released a preliminary view that an advance agreement struck between Starbucks and the Dutch government constitutes state aid.
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