Int'l Tax News

Who runs your business? According to Treasury Secretary Jack Lew, or at least implied from the Treasury's new rules aimed at barring many so-called "tax inversions," the government does.
Lew, other administration officials and congressional Democrats decry these transactions as "eroding the tax base" and being "unpatriotic." Lew has said that the companieswhich effect "inversion" transactions are "effectively renouncing their citizenship to get out of paying taxes."
Businessmen, investors, and ordinary Americans should reject each of these spurious self-serving charges and the idea that government has either the right or the responsibility to determine how otherwise law-abiding private companies structure themselves.
For the story, go here.

The federal government recently passed new rules designed to remove the attractiveness of corporate tax inversions. Tax inversions are considered to be a strategy that corporations utilize to improve operational efficiencies and reduce their tax burden.will the new rules accomplishwhat the administration and many members of Congress desire?
The Treasury Department issued four new rules on Monday, September 22, 2014. In this articlewe'll discuss the following:
1) How tax inversionswork.
2) The first two rules.
3)will corporations find away around them?
For the article, go here.

In a passive aggressiveway, former President Bill Clinton recently criticized new rules from the Obama Treasury Department to curb blatant corporate tax dodging.
What does Mr. Clinton think about the Treasury's effort? "Everythingwe are doing now, including these inversion rules," he told CNBC, "I have no problemwith….But…."

Butwhat?

For the blog post, go here.

It's autumn, and Halloween is right around the corner. That's good timing, since the Obama administration has beenworking feverishly all summer to create a new scary character for the year: the corporate tax inversion.
The administration'swork has been a pretty neat trick. Corporate tax inversions can take different forms, but the administration has concentrated on those inwhich a U.S. firm mergeswith a foreign corporation to take advantage of the tax laws of the foreign jurisdiction in the interests of minimizing taxes, maximizing profits, and increasing shareholder value – I'm sorry, I mean in the interest of stealing tax revenue from you and me.
For the blog post, go here.

The OECD's release of seven progress and final reports under the base erosion and profit-shifting initiative represents a major step forward, but morework remains on refining the recommendations and considering how to implement them, Treasury officials said September 24.

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A Treasury Department official said that itwill be challenging for the countries participating in the international project to combat base erosion and profit shifting (BEPS) to reach a consensus on the project's outstanding transfer pricing issues.

Robert Stack, Treasury's deputy assistant secretary for international tax affairs, said Sept. 24 that there are some "areaswhere consensuswas more difficult." Hewas addressing the Organization for Economic Cooperation and Development's first seven BEPS deliverables, released Sept. 16.

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Pfizer Inc. has approached Actavis Plc about a deal that could allow the U.S. drugmaker to move its address overseas and reduce taxes, in a sign the Obama administration's efforts to curtail inversions might fall short.
Pfizer made its approach before the U.S. Treasury Department announced new rules Sept. 22 to make such deals -- called tax inversions -- more difficult, peoplewith knowledge of the matter said. Those changeswon't deter Pfizer, even if they are a complication, one of the people said, asking not to be identified discussing private information.
For the story, go here.

Therewas a timewhen American pharmaceutical companies had finally found away to access the large reserves of cash they had piling up in places like the Cayman Islands. The processwas simple: Acquire a smaller foreign rival, repatriate in the rival's home country and then dip into the offshore moneywithout fear of paying the U.S. corporate tax rate of 35 percent.
But the U.S. Treasury Department effectively undercut that strategy thisweek, issuing new rules thatwill make it a lot harder for U.S. companies to tap into offshore cashwithout paying taxes -- even if they move their headquarters abroad in one of these deals, known as "inversions."
Of the pending inversions, those involving pharmaceutical and related industries seem to be most immediately at peril, tax experts told The Huffington Post, because those companies are the most likely to be pursuing inversions as away to get tax-free access to offshore cash.
For the story, go here.

Thisweek the Obama administration announced new regulations aimed at discouraging the controversial practice of corporate inversions. That'swhat happenswhen a U.S. company mergeswith a foreign partner, so it can move its headquarters overseas and cut its tax bill. As NPR's Jim Zarolli reports, the new rules are likely to slow but not stop the number of inversions now being planned.

For the transcript, go here.

The Obama administration's effort to curb corporate inversions ÔøΩ the strategy of moving company headquarters overseas to dodge U.S. taxes ÔøΩ drew boos from business on Tuesday, and cheers from consumer and labor groups.
No surprise there. But the Treasury Department's rule tweaks to discourage tax-avoidance deals also united everyone on one point: The country needs comprehensive tax-reform legislation.
President Obama himself declared, "There's no substitute for congressional action."
So Congresswill jump right on it.
Kidding!
For the story, go here.

Tennesseewilliamswas famous for concocting American dramaswhere something is terriblywrong but no one iswilling to talk about the underlying problem. That is exactlywherewe are nowwith the Obama administration's attack on "corporate inversions" -- transactionswhere a U.S. company mergeswith a foreign company and locates the parent company abroad to reduce taxes.
For the story, go here.

Imagine how frustrating itwould be to have billions of dollars in cash but be unable to spend it as youwish unless you paid a large part to the Internal Revenue Service.
That could be your problem if youwere running a large multinational corporation based in the United States.
For the story, go here.

The United States' high corporate income tax rate and "dysfunctional"worldwide system of international corporate taxation is hindering U.S. economic growth and placing U.S.workers and employers at a significant disadvantage comparedwith global competitors, the Alliance for Competitive Taxation said in a September 25 release.

For the release, go here.

It is important for U.S. policymakers to take immediate interim steps to slow the pace of tax-motivated corporate inversions until broader corporate tax reform is possible because of the potential U.S. revenue loss and the rapid increase in the number of inversions, the Center for American Progress said in a September 25 report.

For the report, go here.

Corporate inversions –when American companies reincorporate abroad to lower their tax bills – have become a political controversy solely because of the screwiness of the U.S. tax system. If our government taxed companies based on their consumption, or on the income they make on U.S. territory, or onwhere their shareholders live, then the placewhere theywere charteredwould have no tax consequences.
Our government has instead decided to tax theworldwide profits of companies chartered in the United States, and is then shocked that companies prefer to move their charters elsewhere.

For the story, go here.

One day after Treasury Secretary Jack Lew, on behalf of the Obama administration, laid down the first official initiatives to thwart inversions, some of those companies thatwere the primary targets of the administration's efforts respondedwithwhat can justifiably be described as a thumb in Obama's eye.

For the story, go here.

The Treasury department thisweek announced a new set of regulations to crack down on thewave of "corporate inversions," inwhich American companies lower their tax bill by, simply put, relocating their legal corporate addresses overseas. The Obama administration is trying to make these inversions more costly and difficult - but how do theywork? Some answers to your questions:

For the Q&A, go here.

US business groups on Tuesday blasted as counter-productive the government's moves to curb tax inversion mergers that allow a company to escape US taxes.
But analysts said the rules could prove only partly successful at stemming corporate flight, and businesses involved in inversion deals had mixed reactions.
For the story, go here.

An interesting critique of the current corporate tax systemwas made on Monday night.
Our system today is closer towhat Iwould call a "stupid territorial" system that raises little revenue on overseas activitieswhile still imposing substantial distortions associatedwith avoiding the statutory taxes.
So,who made the comment? Mitt Romney? Ted Cruz? Jackwelch?
Try Jason Furman ÔøΩ chairman of thewhite House Council of Economic Advisers.
For the blog post, go here.

The Obama administration is not living up to its promise to move the country away from an arrogant, unilateral approach to theworld. And it has not embraced a more consensus-driven, multipolar vision that reflects the fact that America is not the sole player in the global sandbox.
No, I am not talking here about national security or counter-terrorism policy, but rather the telling issue of how governments think about money ÔøΩspecifically the money they are entitled to, as established by their tax policies.
For the article, go here.

Despite the Obama administration's action to reduce inversions, it should prioritize tax reform thatwould cut rates, broaden the base, and reform international taxation because inversions are a symptom of tax code distortions, Committee for a Responsible Federal Budget President Maya MacGuineas said in a September 23 statement.

For the statement, go here.

The bestway to address corporate tax inversions is by modernizing the U.S. business tax system and encouraging U.S. investment, but Treasury's proposed regulations on inversions go in the opposite direction and "amount to a Band-Aid solution thatwill only make mattersworse," the Business Roundtable said in a September 23 release.

For the release, go here.

The Obama administration's plan for executive action against corporate tax "inversions" is finally out, and it's a potentially significant one. Inversion is the process bywhich a U.S. corporation mergeswith a foreign one so as to pay taxes on overseas income at the other country's lower rates. The new plan, announced late Monday by Treasury Secretary Jack Lew,would crack down on it in severalways.
For the editorial, go here.

Many economists are downgrading their expectations for U.S. growth. So naturally the ObamaTreasury thisweek rolled out a plan to discourage investment in America.
The regulations are ostensibly to prevent so-called corporate inversions, inwhich U.S. companies acquire foreign firms and then relocate their legal headquarters offshore for tax purposes. But the practical impactwill be to make it harder to make money overseas and then bring it back here.
For the editorial, go here.

The Obama administration's move to tighten rules on corporate inversions should discourage new deals, at least for awhile, by making them harder and less profitable, tax experts said. On Tuesday it alreadywas roiling some pending transactions.
Thisweek, Treasury officials used five sections of the U.S. tax code to launch an assault on inversions. They made it tougher for companies to access their overseas cashwithout having it taxed at U.S. rates, and they tightened standards for a merger to qualify as an inversion.
For the story, go here.

New rules from the Treasury Department are likely to slow the offensive practice that allows American companies to avoid taxes by mergingwith foreign rivals. Known as corporate inversions, these are complex, modern variations on the practices of yesteryear,when companies dodged their taxes by moving their addresses to post office boxes in the Caribbean.
For the editorial, go here.

Inversions, the hottest deal structure onwall Street, appear to be safe for now. But they just became less profitable and more difficult to pull off.
Late Monday, the Treasury Department announced a series of measures intended to crack down on the deals, inwhich United States companies reincorporate abroad to lower their taxes.
But the consensus among corporate adviserswas thatwhile the new rules might make some deals less lucrative, theywould not halt the rush of companies seeking tax relief abroad.
For the story, go here.

New Treasury guidance aimed at making inversions more difficult to accomplish aswell as substantially reducing the tax benefit from inverting includes several significant changes to existing rules, but only punishes yet-to-be completed inversions, a practitioner said September 23.
"The transactions that they are targeting are a significant part of post-inversion planning," Layla J. Aksakal of Miller and Chevalier said.
For the story, go here. (subscription required)

Despite continued red flags raised by the financial services and banking industry, ItalyÔøΩin its rotating European Union presidency roleÔøΩsaid it expects an agreement by the end of 2014 on a "first step" financial transactions tax thatwill be imposed in 11 EU member states.
Speaking Sept. 23 before a European Banking Federation conference on taxation, Italian official Susanna Masi,who serves in the Cabinet of Italian Finance Minister Pier Carlo Padoan andwho is coordinating thework, said that negotiations are at a "very sensitive" stage as officials try to resolve issues related to the tax's scope. In particular, these issues include handling shares and derivatives, aswell aswhere to assess the levy and how to dealwith intermediary and collection concerns.
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With the participants in the OECD's base erosion and profit-shifting project having agreed on limiting returns to cash boxes, the focus in 2015will be on determiningwhere the displaced returns should be allocated, Robert Stack, Treasury deputy assistant secretary (international tax affairs), said September 23.
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Developing countries need specific guidance and tools to help them benefit from international efforts to fight tax evasion by big companies andwealthy individuals, according to a pair of Organization for Economic Cooperation and Development reports.
The Paris-based organization on Sept. 22 released a road map for helping developing countries participate in the OECD global standard for automatic exchange of information (AEOI) and also released the second half of its report on how base erosion and profit shifting affects developing economies.
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Calvin H. Johnson proposes increasing the repatriation tax in the future to induce corporations to repatriate their foreign earnings now.

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Treasury's proposed guidance against corporate tax inversions is an important first step toward making it harder for corporations to claim foreign status to avoid U.S. taxes, but only congressional action can put a stop to the practice, Citizens for Tax Justice Director Robert McIntyre said in a September 23 statement.

For the statement, go here.

The Treasury Department (Treasury) and Internal Revenue Service (IRS) issued Notice 2014-52 (the Notice) on September 22, 2014, addressing certain cross-border business combination transactions, termed 'inversions' in the Notice. Treasury and IRS view such transactions as motivated in substantial part by the ability to undertake certain post-transaction steps designed to
reduce US taxation that the IRS and Treasury believe represent tax avoidance transactions. The Notice announces the intention to issue regulations under Sections 304(b)(5)(B), 367, 956(e), 7701(l), and 7874.

For the Insight, go here.

Former President Clinton declined to call tax inversions "unpatriotic" on Tuesday, shying away from a term that President Obama has used repeatedly against companies that take advantage of the maneuver.

Speaking at the Clinton Global Initiative, hewas asked toweigh in on the practice bywhich a company moves its address to another country to avoid U.S. tax rates. The Democrats have been attacking inversions ahead of the midterm elections.

"Are corporate inversions unpatriotic?" CNBC's Becky Quick asked.

"Well,whether it is or not, companies ÔøΩ particularly those that are answering to shareholders ÔøΩ have a short-term perspective. A lot of these companies feel duty-bound to pay the lowest taxes they can pay," Clinton responded.

For the story, go here.

Corporate America is scrambling to figure out how the Obama administration's new rules for offshore tax deals could affect their business plans ÔøΩ and their bottom lines.

Business leaders have to navigate a maze of highly technical new rules on the offshore tax deals known as inversions, on obscure maneuvers known as "hopscotch" loans and the "de-controlling" strategy.

With the Treasury Departmentwarning that it's laying the groundwork for even more administrative actions, some businesses might bewonderingwhether high-profile tax deals are evenworth the trouble.

For the story, go here.

The Tax Foundation's International Tax Competitiveness Index ranks the United States tax code 32nd out of 34 OECD countries. An obvious question to ask, then, iswhy the U.S. remains sowealthy, and so successful at creating new businesses.
A report from Harvard Business School – a survey on U.S. competitiveness – helps answer this question.
For the blog post, go here.

Rivalry between governments to attract capital and labour can lead to pro-growth policies. That this comes from the power of people to "votewith their feet" has been known for long. For instance, itwas the palpable threat ofworkers and investors deserting them to choose more hospitable economies like the US and Europe that led countries like India to lower economic barriers. Yet public intellectuals have preferred to uphold governments' supposed "right to tax" over citizens' right to keepwhat they earn.

For the story, go here.

America has taken its first concrete steps to stop US companies from moving their headquarters overseas, in a movewhich could scupper tens of billions of dollars-worth of deals already in the pipeline.
The clamp-down follows months of controversy over the so-called "tax inversion" schemes,which typically see an American company buy up a foreign firm and move their headquarters to the new country primarily so that it can take advantage of a lower rate of corporate taxation. President Barack Obama has denounced tax inversion deals as "unpatriotic" and has urged Congress to stop them.
For the story, go here.

Treasury Secretary Jacob J. Lew's crackdown on inversionswill get an immediate test as eight U.S. companieswith pending deals decidewhether to proceed -- and other companies contemplating a foreign address now have to think twice.
That's exactlywhat Lew had in mind.
For the story, go here.

The OECD published a discussion draft in March 2014 on proposals for addressing perceived abuse of tax treaties.

A focal point of the discussion draftwas the proposal for a US-style limitation on benefits article (LoB) to provide an objective basis for entitlement to treaty benefits for companieswith a nexus in the resident country aswell as a subjective main purpose / anti-abuse rulewithin the LOB article.

In lieu of this singular combined LoB/Main Purpose Test approach, the OECD report on Action 6 now proposes a "minimum level of protection" to prevent treaty abuse, suggesting two alternatives to the combined approach that treaty partners may consider. Significantly, the LoB now includes a "derivative benefits test" provision allowing certain entities owned by residents of other States to obtain treaty benefits if these residentswould have obtained the same benefits had they invested directly.

For the Bulletin, go here.

On 16 September 2014, the OECD published its final and interim revisions in relation to Chapters I, II and VI of the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations. These revisions have been developed in connectionwith Action 8 of the Action Plan on Base Erosion and Profit Shifting that is focused on assuring that transfer pricing outcomeswith respect to intangibles are in linewith value creation activities.

For the Insight, go here.

Treasury Secretary Jacob J. Lew's crackdown on inversionswill get an immediate test as eight U.S. companieswith pending deals decidewhether to proceed -- and other companies contemplating a foreign address now have to think twice.

That's exactlywhat Lew had in mind.

"This actionwill significantly diminish the ability of inverted companies to escape U.S. taxation," Lew told reporters on a conference call yesterday. "For some companies considering deals, today's actionwill mean that inversions no longer make economic sense."

For the story, go here.

The OECD and its Global Forum on Transparency and Exchange of Information have today been mandated by the G20 to develop toolkits to support developing countries addressing base erosion and profit shifting (BEPS) and to launch pilot projects to assist them to move towards automatic exchange of information. This mandate comes in response to two reports:
a Report on the Impact of Base Erosion and Profit Shifting in Low Income Countries (Part 2); and
a Roadmap for developing country participation in the new global standard for the automatic exchange of information between jurisdictions.
The G20 communiqué issued yesterday sets out an ambitious agenda for developing countries to take advantage of the tax reforms that have taken shape in 2014.

For the release, go here.

The Obama administration took action Monday to discourage corporations from moving their headquarters abroad to avoid U.S. taxes, announcing new rules designed to make such transactions significantly less profitable.
The rules,which take effect immediately,will not block the practice, and Treasury Secretary Jack Lew again called on Congress to enact more far-reaching reforms. But in the meantime, he said, federal officials "cannotwait to address this problem,"which threatens to rob the U.S. Treasury of tens of billions of dollars.
For the story, go here.

The Treasury Department tightened tax rules Monday to deter U.S. companies from moving their legal headquarters to lower-tax countries, part of awhite House effort to slow awave of so-called corporate inversions that effectively reduce federal revenues.
Treasury officials took action under five sections of the U.S. tax code to make inversions harder and less profitable, removing some of the appeal that has made the transactions more common in recent years, particularly in the pharmaceutical industry.
For the story, go here.

Treasury Secretary Jacob J. Lew announced rules on Monday that are aimed at making it more difficult for American companies to lower their tax bills by relocating overseas and thatwouldwipe out the benefits for those that do. It is the administration's latest move to sidestep a paralyzed Congress and tackle a politically charged element of President Obama's agenda.
''While there's no substitute for congressional action, my administrationwill actwhereverwe can to protect the progress the American people haveworked so hard to bring about,'' Mr. Obama said in a statement after the regulations on the so-called corporate inversionswere announced.
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Steven M. Rosenthal proposes that Treasury curb inversions by issuing factor-based regulations under section 385 that identify situations inwhich corporate obligationswill be treated as stock.
In a recent Tax Notes article, Prof. Stephen Shay argued that Treasury couldwrite regulations to reduce the tax incentives for U.S. corporations to expatriate. Rosenthal agreeswith Shay and analyzes the legal support for regulations under section 385.
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The existing anti-inversion rules under section 7874 create several traps for foreign companies and individuals that could cause transactions to be treated as inversionswhen no inversion has taken place.
Under current guidance, there are several scenarios inwhich a non-inversion transactionwould be subject to the inversion rules, David G. Shapiro of Saul Ewing LLP and Joseph Calianno of Grant Thornton LLP noted during a U.S. Activities of Foreigners and Tax Treaties session of the American Bar Association Section of Taxation meeting in Denver on September 19.
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The G-20 finance ministers and central bank governors on September 21welcomed the "significant progress" made under the OECD's base erosion and profit-shifting action plan and committed to finalizing all action items in 2015.
The group also endorsed the OECD's final global common reporting standard (CRS) for automatic exchange of tax information on a reciprocal basis, saying their countrieswill begin exchanging information automatically between each other andwith other countries by 2017 or by the end of 2018, "subject to the completion of necessary legislative procedures."
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