Int'l Tax News

The G20 / OECD project on BEPS is likely to preoccupy tax executives over the next two years, even in jurisdictions that do not belong to either group.

For the story, go here.

The IMF has called for input into how national policy and tax design choices under the current international tax architecture influence economic outcomes for other countries; interested parties should submit comments by March 31.

For the request for comments, go here.

On March 3 the OECD made public the approximately 1,200 pages of comments1 it received on the proposed draft transfer pricing documentation rules and the development of a template for country-by-country (CbC) reporting reflecting input from approximately 150 commentators, including individual businesses, business groups, nonprofit advocacy groups, academics, law and accounting firms, and other associations interested in cross-border tax issues.
The volume of commentary received reflects the enormous interest in the topic. The sharp polarity in the nature of the comments may be an indication of the difficulties the OECD faces as it attempts to finalize the new reporting guidelines and accompanying templates.

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It's unbecoming for the FBI to use criminals to entrap greedy politicians. It's also unbecoming for the IRS to help U.S. multinationals avoid tax in market countries,while Treasury officials are trying to reassure those same countries that the United States respects the goals of the OECD base erosion and profit-shifting project.
As the discussion at the recent International Fiscal Association USA annual conference in San Francisco demonstrated, multinationals' income stripping and global supply chain restructuring still present unresolved questions under subpart F.

For the story, go here.

EY has released a report titled "The outlook for global tax policy in 2014."

Taxes around theworld are on the rise. But these rises may be a bit less obvious than in the past. Governments are generally making fewer changes to headline corporate, personal and indirect tax rates in 2014 compared
with 2013 and 2012. Instead, more are putting legislative changes in place thatwill adjust and expand the tax base for 2014 and beyond, often at the net expense of taxpayers.

For the report, go here.

With foreign governments moving to enact anti-base erosion and profit shifting rules, the U.S. could be pressured to address the issue before moving on to a comprehensive tax code rewrite, practitioners said during awebcast.
A Houseways and Means Committee tax counsel, however, did not commit to the prospect during the March 7 discussion, hosted by KPMG LLP.

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A proposal by Houseways and Means Committee Chairman Dave Camp (R-Mich) to ditch the U.S.worldwide tax system could be a safe bet for MGM Resorts International.

By revamping theway the U.S. taxes foreign income, Campwould head off attempts by the Obama administration to levy heftier taxes on so-called dual capacity taxpayers such as multinational casinos or energy companies that reap specific economic benefits from other countries.

Camp's plan isn't painless. Companieswould lose some ability to claim foreign tax credits and be open to double taxation on up to 5 percent of foreign income returned to the U.S. in the form of dividends, lobbyists following the issue told Bloomberg BNA. Camp released the draft Feb. 26.

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Practitioners raised concerns about the impact of the administration's new revenue proposal to limit the ability of companies to "invert" their operations by expatriating inways thatwould avoid U.S. taxes, saying the proposal could create an incentive for firms to move their operations out of the U.S.
At a March 5 luncheon, a practitioner raised questions about situations inwhich large foreign multinationals buy small U.S. firms,with a Treasury official saying it is possible certain transactions could fall under the rules but that likely isn't the government's intent.

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There's at least one clear loser in President Obama's latest budget blueprint: U.S. multinational corporations.
The 2015 budget request Obama sent to Congress on Tuesday contains six proposals for plugging some major leaks in the international portion of the corporate tax code. All told, the budget blueprint calls for $276 billion in higher taxes on overseas earnings by U.S. multinationals - about $120 billion more than the president sought in last year's budget.

For the story, go here.

Practitioners on March 5 highlighted the absurd results that could arisewere Congress to enact a special rule in the Obama administration's fiscal 2015 budget plan thatwould eliminate the ownership continuity test under section 7874 and focus only on the amount of business activities and management and control in the United States.

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Some members of the Organization for Economic Cooperation and Development's Business and Industry Advisory Committee (BIAC)want the "income tax paid" column to be deleted from the OECD's proposed template on country-by-country reportingÔøΩa change thatwould significantly undermine the purpose of the template.

In its Feb. 21 letter to the OECD, BIAC included "non-consensus comments" from a subset of its members stating that the "income tax paid" column,whichwould require a multinational group to report income tax paid, on a cash basis, to its country of organization, has "nothing to dowith transfer pricing."

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President Barack Obama is proposing more tax increases for U.S. multinational corporations, seekingways to prevent them from avoiding taxes by exploiting gaps in international law.

In the fiscal 2015 budget proposed yesterday, the Obama administration seeks to generate $276 billion over the next decade fromwhat it calls loophole-closing in the international tax system. The revenue -- 75 percent more thanwas sought through such changes in last year's budget plan --would be used to reduce corporate tax rates.

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Marchwill see the release of discussion drafts on data and effective tax rate methodology; the tax challenges of the digital economy and tax treaty abuse.

For the story, go here.

Heads of tax and tax administrators should look to expand the G20 / OECD BEPS project and make it more inclusive, theworld Bank's top tax official has said.

For the story, go here.

The close of the 2014winter Olympics brought a number of reflections in theworld media on topics ranging fromwhy a summer resortwas the host city to the "trouser crisis" that faced Norway's curling team.wewould like to add our own reflection, albeit on something quite distinct from the thrill of victory and the agony of defeat: that driving force of the global economy called comparative advantage.

For the report, go here.

The Italian government, after much deliberation has quashed the Google tax,whichwas designed to retrieve missed revenues from the digital economy.

For the story, go here.

The Obama administration took aim at companies that shift income and assets overseas to avoid taxes in several new revenue proposals accompanying its fiscal year 2015 budget, including provisions to stop the creation of "stateless income"not subject to tax anywhere.

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Business Roundtable President John Engler made the following statement today
on President Obama's fiscal year 2015 budget request to Congress:

"The President's international tax proposalswould move the U.S. economy in the
wrong direction, placing U.S. companies in aworse competitive position than they face today."

For the statement, go here.

At the recent International Fiscal Association USA annual conference in San Francisco, Jeffrey Parry, senior counsel, IRS Office of Chief Counsel (International), sparred on February 27with practitioners concerned about the effect of recent IRS guidance on foreign tax credit planning.

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The international provisions included in the Obama administration's fiscal 2015 budget, released March 4, appear to be designed to address the concerns raised in the OECD's base erosion and profit-shifting project.
"Without mentioning the OECD or BEPS, I thinkwhatwe can see from this budget are the contours of how Treasury may view the issues" covered in the BEPS action plan, Joshua D. Odintz of Baker & McKenzie told Tax Analysts.

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With many participants in the OECD's base erosion and profit-shifting project seeking to recharacterize transactions that are believed to be too difficult to price, the United States is seeking to use its experiencewith pricing such transactions to stave off the more "extreme" measures envisioned by some countries, according to Chris Bello, branch 6 chief, IRS Office of Associate Chief Counsel (International).
Speaking February 28 at a transfer pricing session of the Federal Bar Association Section on Taxation annual meeting inwashington, Bello said that in conversations on the sidelines of the OECD'sworking Party 6, it is often apparent that some of the more extreme ideas stem from the belief that although a transaction may have occurred, it cannot be priced.

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The landmark judgement by the Delhi High Court (DHC) in the eFunds case offers clear guidance forwhat constitutes permanent establishment (PE) in India.

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In its Cadbury-Schweppes decision of 12 September 2006 (C-196/04), the Court of Justice of the European Union decided that the UK controlled foreign corporation rules,whichwere implemented to subject low taxed passive income of foreign affiliates to UK corporate tax, implied an infringement of the freedom of establishment. Consequently, many EU countries including Germany changed their legislation. The paper discusses towhich extent the ECJ ruling has impacted on the allocation of passive assets in German multinationals. Using firm level data the authors find evidence for an increased preference for low-tax European countries compared to non-European countries.

For the paper, go here.

PricewaterhouseCoopers LLP has submitted comments on behalf of a group of 14 multinational enterprises on the OECD's January 30 discussion draft on transfer pricing documentation and country-by-country reporting.

For the comments, go here.

A provision in the tax reform discussion draft released February 26 by Houseways and Means Committee Chair Dave Camp, R-Mich., thatwould limit treaty benefits on some deductible related-party payments is intended to improve the U.S. government's ability to curb treaty shopping, according to Ray Beeman,ways and Means tax counsel and special adviser for tax reform.
The measure, located in section 3705 of the draft and captioned "Limitation on treaty benefits for certain deductible payments,"would deny a treatywithholding rate reduction on a related-party deductible payment unless the taxwould be reduced under a treaty if the paymentwere made directly to the ultimate foreign parent of the payee.

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The OECD base erosion and profit-shifting project is obviously about getting U.S. multinationals to pay more tax to European countries, but it is also a fundamentally European project -- a fact often lost on American observers. The likely results of this project are a series of measures that make EU members' domestic laws look more like German laws, or more like changes the European Commissionwants to see.
As the February 27 discussion at the International Fiscal Association USA meeting in San Francisco demonstrated, U.S. observers perceive BEPS action plan proposals moving toward formulary apportionment, forgetting that theworld already has a hybrid system. Formulary methods are in use to correct the inefficacy of separate company accounting and transfer pricing in capturing excess profits.

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Last year saw the pace of tax policy changes across theworld step up a gear. But the tax revolution is far from complete. From BEPS to US corporate tax reform and the EU financial transaction tax, many of the key initiatives that dominated the headlines in 2013will continue to gather pace in 2014.

For the special report, go here.

In 2011, the consulting firm McKinsey & Co. identified "big data" as the next frontier for innovation, competition, and productivity. Big data has since caught upwith the taxworld,which is not known for being on the forefront of information technology (IT) innovation, in the form of the OECD's recent release of the discussion draft on transfer pricing documentation on January 30. The discussion draft, prepared in fulfillment of Action 13 of the OECD base erosion and profit shifting effort, represents the OECD's and tax administrations' efforts to capture multinationals' big data and use it for their benefit.

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The various international tax reform measures contained in the discussion draft released February 26 by Houseways and Means Committee Chair Dave Camp, R-Mich., look to balance simplicitywith precision and relief,ways and Means tax counsel indicated.
Simplicity had likewise been a goalwhen designing the international tax reform discussion draft Camp released in 201, said Ray Beeman,ways and Means tax counsel and special adviser for tax reform. "At every juncturewherewe had choices to make between something that may be a little more precise versus something that may be a little bit simpler to do,wewentwith the simpler approach," he said February 27, speaking on awebcast sponsored by Deloitte.

For the story, go here.

You can only stall so long on the details of tax reform. On February 26 the clock ran out. Houseways and Means Committee Chair Dave Camp, R-Mich., provided 194 pages of details, and now tax reform gold has turned to dust. The political damagewill mainly be to Republicanswho made tax reform part of their brand.
Where dowe go from here? "I thinkwewill not be able to finish the job, regretfully. I don't see howwe can," said Senate Minority Leader Mitch McConnell, R-Ky. Andwhen asked if hewould allow a vote on the Camp draft, House Speaker John A. Boehner, R-Ohio, could only respondwithwhat may be the quote of the year: "Blah, blah, blah."

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An international tax regime featuring a dividend exemption systemwith a transition rulewill continue to be a top priority for Houseways and Means Committee Chairman Dave Camp (R-Mich.) as discussions continue on the new draft of his tax overhaul plan, a top committee aide said.
"The goal remained the same on international," Ray Beeman,ways and Means tax counsel and special adviser for tax reform, said as part of awebcast on the new draft hosted by Deloitte Tax LLP.

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The US tax reform discussion draft from Dave Camp, chairman of the Houseways and Means Committee, achieves two key goals for business, says John Engler, the leader of one of America's most influential employers' organisations: a corporate tax rate of 25% and a modern tax system.

For the story, go here.

The European Union has dropped a requirement for mandatory country-by-country tax reporting in reaching an agreement to include social, environmental, human rights and anti-corruption criteria in EU accounting legislation that applies to listed companies.
After a fierce battle between EU member states and the European Parliament, the unexpected compromisewas reached after itwas agreed that the European Commissionwill file a report to include tax criteria by 2018. Companies from Europe and the U.S. lobbied fiercely to block adding mandatory country-by-country tax reporting standards as part of the current agreement.

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A new tax plan from Rep. Dave Camp (R-Mich.), chairman of the Houseways and Means Committee,would shift the U.S. into a mostly territorial tax systemwhile beefing up rules against earnings stripping and reinsurance and expanding Subpart F taxation of highly valuable intangibles.
Camp released his tax overhaul plan Feb. 26 amid speculation that the proposal has little hope of success in the highly polarizedwashington climateÔøΩespecially since his Senate Democratic counterpart, Sen. Max Baucus (Mont.), resigned his post Feb. 6 to become the U.S. ambassador to China.

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Reactionwas mixed to awide-reaching plan to reshape the U.S. tax code by Houseways and Means Committee Chairman Dave Camp (R-Mich.),who pushed his draft legislative language as away to improve domestic economic prospects.

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Houseways and Means Committee Chairman Dave Camp (R-Mich.) outlined a tax overhaul that lowers individual and corporate tax rates to no more than 25 percent, relying on vigorous economic growth and the scaling back of popular tax preferences to achieve the reduction.
Camp's plan, released Feb. 26,would eliminate the federal deduction for state and local taxes, impose a new surcharge on somewealthier households and hit large bankswith a new tax; these are among the provisions sure to spark conversation in Congress and spur a newwave of lobbying.

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Lawmakers should include in tax reform a "competitive domestic tax rate" for businesses and "a modern, hybrid international tax system" to stimulate investment and protect the U.S. tax base, the Let's Invest for Tomorrow Coalition said in a February 26 release on the release of the Tax Reform Act of 2014 discussion draft.

For the release, go here.

The tax reform proposal introduced by Houseways and Means Committee Chair Dave Camp, R-Mich., is a significant step toward achieving key corporate tax reform priorities, but furtherwork is needed to address competitiveness concerns and to increase growth, Business Roundtable President John Engler said in a February 26 release.

For the release, go here.

The top Republican tax-writer in Congress proposed restructuring the U.S. tax code to eliminate dozens of breaks to pay for reductions in the corporate and individual rates.
The 979-page plan from Representative Dave Campwould mark the most significant changes to the U.S. tax system since 1986, affecting every part of the economy and reflecting politically unpopular tradeoffs that sparked immediate complaints from business groups.

For the story, go here.

Many provisions in the tax reform proposal introduced by Houseways and Means Committee Chair Dave Camp, R-Mich., are problematic, including the decrease in the corporate tax rate from 35 percent to 25 percent and the expansion of some corporate tax "loopholes," Citizens for Tax Justice Director Robert McIntyre said in a February 26 release.

For the statement, go here.

Earlier today,we published Part 1 of our analysis of Houseways and Means Committee Chairman Dave Camp's proposal for tax reform,which dealt specificallywith provisions thatwould modify the individual income tax regime. Now let's take a look at Part II,which focuses on changes to the corporate, flow-through, and international tax laws.

For the story, go here.

Dave Camp, chairman of the Houseways and Means Committee, has released a comprehensive tax reform proposal and the comments are flying in. Iwill try to give you as good a summary of them as possible, but I believe that I can give you the essence of most of them. You can use this as a template to make your own comments if youwant:

Comprehensive tax reform and simplification is a fantastic idea.we here at the ABC Coalition for DEF just love the idea that you areworking on it and totally support you. Of coursewe are sure that you know the DEF is critical to the Americanway of life and the health, safety andwell-being of theworld.wewould just like to remind you that the GHI deduction and the JKL credit play a critical role in supporting DEF. Sowhen you are doing your simplifying don't even think about messingwith the GHI deduction and the JKL credit. As a matter of fact, you probably should beef them up a bit and get busy on the MNO exemption thatwe have been asking for. Other than that, chop away at those special tax breaks and give us a simpler Code.

For the story, go here.

Thomas Barthold, chief of staff of the Joint Committee on Taxation, on February 26 presented testimony regarding pending income tax treatieswith Chile and Hungary, treaty protocolswith Luxembourg and Switzerland, and a protocol amending the Multilateral Convention on Mutual Administrative Assistance in Tax Matters.

For his testimony, go here. (subscription required)

The Joint Committee on Taxation has released a February 26 technical explanation of business tax reform provisions included in the Tax Reform Act of 2014 discussion draft, introduced by Houseways and Means Committee Chair Dave Camp, R-Mich.

For the report, go here.

The Joint Committee on Taxation has released a report, dated February 26, providing a technical explanation of provisions included in the Tax Reform Act of 2014 discussion draft, by Houseways and Means Committee Chair Dave Camp, R-Mich., to reform the participation exemption system for taxing foreign income.

For the report, go here.

The Tax Reform Act of 2014 discussion draft, by Houseways and Means Committee Chair Dave Camp, R-Mich.,would raise $3 billion from 2014 to 2023, according to estimates released by the Joint Committee on Taxation February 26.

For the report, go here.

The recommendations in the discussion draft of the Tax Reform Act of 2014, by Houseways and Means Committee Chair Dave Camp, R-Mich.,would result in an increase in economic output relative to current law, according to a macroeconomic analysis of the proposal by the Joint Committee on Taxation in a February 26 report (JCX-22-14).
The proposal's broadening of the tax base through ending tax expenditureswould provide incentives for more labor, increase demand for goods and services, reduce after-tax return on investment, and provide an incentive for reducing domestic capital stock, according to the analysis.

For the report, go here.

The comprehensive tax reform draft plan released February 26 by Houseways and Means Committee Chair Dave Camp, R-Mich.,would transform the international tax rules by replacing the current systemwith a 95 percent dividend exemption for foreign business income.
Under the plan, therewould be a one-time transition tax on all previously untaxed foreign earnings and profits currently held overseas. E&P retained in the form of cash or cash equivalentswould be taxed at 8.75 percent and any remaining E&Pwould be taxed at 3.5 percent. Funds from this one-time revenue raiserwould be deposited into the Highway Trust Fund and allocated 80 percent to the Highway Account and 20 percent to the Mass Transit Account. That allocationwould "address the deep funding shortfall that currently exists for Federal transportation infrastructure projects," according to a section-by-sectionways and Means summary of the plan.

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Making the corporate income tax rate a flat 25 percent is one of several changes to corporate taxation proposed in the Tax Reform Act of 2014 discussion draft released February 26 by Houseways and Means Committee Chair Dave Camp, R-Mich.
Ensuring that businesses pay no more than a 25 percent corporate tax ratewould "increase America's ability to compete internationally" and "ensure that American corporations have more resources here in the United States to invest, hire and grow their businesses," according to aways and Means executive summary .
According to the summary, the new ratewould end America's "dubious distinction of having the highest corporate rate in the developedworld."

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Houseways and Means Committee Chair Dave Camp, R-Mich., on February 26 released his long-awaited plan to overhaul the tax code, proposing sweeping cuts and changes to individual and business tax breaks to pay for significant tax rate cuts.

For the story, go here.