Int'l Tax News
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Business Community Questioning BEPS Project Motives, Former Treasury Counsel Says
by Matthew R. Madara (Tax Analysts, Tax Notes Today)
Several issues surrounding the OECD's base erosion and profit-shifting project remain unclear and have raised concerns among the business community, according to David Ernick of PricewaterhouseCoopers LLP, former Treasury associate international tax counsel and U.S. delegate to OECDworking Party 6.
Speaking on his own behalf September 19 in New York at the Global Transfer Pricing Forum sponsored by the International Tax Review, Ernick said several people asked himwhy the OECD is undertaking the BEPS initiative andwhat it expects the project to achieve. The myriad subjective, undefined terms used throughout the action plan are a chief concern, he said.
For the story, go here. (Subscription required)
Several issues surrounding the OECD's base erosion and profit-shifting project remain unclear and have raised concerns among the business community, according to David Ernick of PricewaterhouseCoopers LLP, former Treasury associate international tax counsel and U.S. delegate to OECDworking Party 6.
Speaking on his own behalf September 19 in New York at the Global Transfer Pricing Forum sponsored by the International Tax Review, Ernick said several people asked himwhy the OECD is undertaking the BEPS initiative andwhat it expects the project to achieve. The myriad subjective, undefined terms used throughout the action plan are a chief concern, he said.
For the story, go here. (Subscription required)
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Hodge denounces corporate tax reform
by Vanessa Houlder (Financial Times)
A senior MP has attacked the government's reform of international corporate tax rules for creating a loophole that allows companies to pay less tax in the UK.
Margaret Hodge, chair of the cross-party Public Accounts Committee, said the new rules, designed to stop the artificial diversion of profits to tax havens, contained anabsurd loophole thatwould encourage companies to minimise their UK tax liability.
For the story, go here.
A senior MP has attacked the government's reform of international corporate tax rules for creating a loophole that allows companies to pay less tax in the UK.
Margaret Hodge, chair of the cross-party Public Accounts Committee, said the new rules, designed to stop the artificial diversion of profits to tax havens, contained anabsurd loophole thatwould encourage companies to minimise their UK tax liability.
For the story, go here.
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Government accused of double standards over tax avoidance
by Vanessa Houlder (Financial Times)
After months of championing the global crackdown on tax avoidance by multinationals, the UK government is facing mounting scrutiny at home and abroad over its own aggressive approach to tax competitiveness.
Thisweek, Margaret Hodge, the Labour MPwho has campaigned against corporate tax avoidance, attacked aloophole in reforms thatwould allow companies to cut their UK tax bills by hundreds of millions of pounds.
For the story, go here.
After months of championing the global crackdown on tax avoidance by multinationals, the UK government is facing mounting scrutiny at home and abroad over its own aggressive approach to tax competitiveness.
Thisweek, Margaret Hodge, the Labour MPwho has campaigned against corporate tax avoidance, attacked aloophole in reforms thatwould allow companies to cut their UK tax bills by hundreds of millions of pounds.
For the story, go here.
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Special Report: How a German tech giant trims its U.S. tax bill
by Tom Bergin (Reuters)
In July 2012, then-U.S. Treasury Secretary Tim Geithner traveled to an island off the German coast to meetwolfgang Schaeuble, Germany's finance minister. Schaeublewas on vacation, but Geithner visited to discuss the euro zone crisis. Talk also turned to a long-running bugbear of Schaeuble's: corporate tax avoidance.
For the story, go here.
In July 2012, then-U.S. Treasury Secretary Tim Geithner traveled to an island off the German coast to meetwolfgang Schaeuble, Germany's finance minister. Schaeublewas on vacation, but Geithner visited to discuss the euro zone crisis. Talk also turned to a long-running bugbear of Schaeuble's: corporate tax avoidance.
For the story, go here.
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Practitioners Concerned About Possible Disregard of Arm's-Length Standard for BEPS
by David D. Stewart (Tax Analysts, Tax Notes Today)
A proposal under the OECD project on base erosion and profit shifting that may depart from the arm's-length standard for the transfer pricing of intangibles has practitioners concerned that the standard may be undermined to solve a problem that has not been proven to exist.
Speaking at a September 18 session of the Practising Law Institute's International Tax Issues 2013 program in Chicago, Thomas M. Zollo of KPMG LLP said the case for BEPS has been made through the questioning of executives from successful companies that have achieved low effective tax rates. However, "a full view of the playing field"would show that numerous companies have entered into cost-sharing arrangements that have notworked out aswell, he said.
For the story, go here. (Subscription required)
A proposal under the OECD project on base erosion and profit shifting that may depart from the arm's-length standard for the transfer pricing of intangibles has practitioners concerned that the standard may be undermined to solve a problem that has not been proven to exist.
Speaking at a September 18 session of the Practising Law Institute's International Tax Issues 2013 program in Chicago, Thomas M. Zollo of KPMG LLP said the case for BEPS has been made through the questioning of executives from successful companies that have achieved low effective tax rates. However, "a full view of the playing field"would show that numerous companies have entered into cost-sharing arrangements that have notworked out aswell, he said.
For the story, go here. (Subscription required)
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CTJ: "FedEx Responds to CTJ, Avoids the Tough Questions about Its Taxes"
by Citizens for Tax Justice
As Senator Max Baucus and Congressman Dave Camp, the chairmen of the tax committees in the Senate and House, took their tax reform road show to the FedEx headquarters in Memphis lastweek, CTJ released a short report and op-ed concluding that the company had paid just 4.2 percent of its profits over the previous five years in federal corporate income taxes. FedEx's Corporate Vice President for Tax, Michael D. Fryt, respondedwith an op-ed of his own that took issuewith CTJ but avoided the actual issue raised.
For the report, go here.
As Senator Max Baucus and Congressman Dave Camp, the chairmen of the tax committees in the Senate and House, took their tax reform road show to the FedEx headquarters in Memphis lastweek, CTJ released a short report and op-ed concluding that the company had paid just 4.2 percent of its profits over the previous five years in federal corporate income taxes. FedEx's Corporate Vice President for Tax, Michael D. Fryt, respondedwith an op-ed of his own that took issuewith CTJ but avoided the actual issue raised.
For the report, go here.
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Tax Policy Bulletin: Momentum behind the Action Plan on Base Erosion and Profit Shifting
by PwC
Leaders of the G20 countries publicly endorsed outline proposals to address BEPS during their summit in St. Petersburg on 4/5 September 2013. Responding to a report presented to them by Angel Gurria, OECD Secretary-General,which included progress on the challenges originally set by them, the G20 encouraged swift time frames for further development and implementation.
For the Bulletin, go here.
Leaders of the G20 countries publicly endorsed outline proposals to address BEPS during their summit in St. Petersburg on 4/5 September 2013. Responding to a report presented to them by Angel Gurria, OECD Secretary-General,which included progress on the challenges originally set by them, the G20 encouraged swift time frames for further development and implementation.
For the Bulletin, go here.
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OECD Official Addresses Concerns Surrounding BEPS
by Matthew R. Madara (Tax Analysts, Tax Notes Today)
The OECD's base erosion and profit shifting (BEPS) project is designed to maintain the ability to eliminate double taxation and ensure that tax is properly attributed to jurisdictionswhere value is created, according to Pascal Saint-Amans, head of the OECD Centre for Tax Policy and Administration.
For the story, go here. (Subscription required)
The OECD's base erosion and profit shifting (BEPS) project is designed to maintain the ability to eliminate double taxation and ensure that tax is properly attributed to jurisdictionswhere value is created, according to Pascal Saint-Amans, head of the OECD Centre for Tax Policy and Administration.
For the story, go here. (Subscription required)
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Inversion Projects' Progress, or Lack Thereof
by Lee A. Sheppard (Tax Analysts, Tax Notes Today)
The anti-inversion statute, section 7874, doesn'twork verywell at its stated goals, and Congress hasn't bothered to fix section 163(j), the ineffectual interest-stripping rule. And there's not awhole lot the IRS can do about it, except treat the departed corporations the sameway it treats real foreign parents.
Thatwas the implicit message of the September 18 International Tax Institute Inc. lunch in New York,wherewillard Taylor, now an adjunct professor at New York University School of Law, hosted John Merrick, special counsel to the IRS associate chief counsel (international), and Lew Steinberg of Credit Suisse Group AG.
For the story, go here. (Subscription required)
The anti-inversion statute, section 7874, doesn'twork verywell at its stated goals, and Congress hasn't bothered to fix section 163(j), the ineffectual interest-stripping rule. And there's not awhole lot the IRS can do about it, except treat the departed corporations the sameway it treats real foreign parents.
Thatwas the implicit message of the September 18 International Tax Institute Inc. lunch in New York,wherewillard Taylor, now an adjunct professor at New York University School of Law, hosted John Merrick, special counsel to the IRS associate chief counsel (international), and Lew Steinberg of Credit Suisse Group AG.
For the story, go here. (Subscription required)
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BEPS Seen as Area of Both Consensus and Conflict
by David D. Stewart (Tax Analysts, Tax Notes Today)
Although the United States still faces significant challenges enacting tax reform, the issue of base erosion and profit shifting is a rare case inwhich there is consensus among U.S. and foreign tax authorities, according to Eric Solomon of Ernst & Young LLP, a panelist at the Practising Law Institute's International Tax Issues 2013 program in Chicago.
"Issues about base erosion are here to stay," Solomon said during a September 18 session on international tax reform. Hewas joined on the panel by Robert Stack, Treasury deputy assistant secretary (international tax affairs),who said the United States faces challenges in its engagement on BEPS.
For the article, go here. (Subscription required)
Although the United States still faces significant challenges enacting tax reform, the issue of base erosion and profit shifting is a rare case inwhich there is consensus among U.S. and foreign tax authorities, according to Eric Solomon of Ernst & Young LLP, a panelist at the Practising Law Institute's International Tax Issues 2013 program in Chicago.
"Issues about base erosion are here to stay," Solomon said during a September 18 session on international tax reform. Hewas joined on the panel by Robert Stack, Treasury deputy assistant secretary (international tax affairs),who said the United States faces challenges in its engagement on BEPS.
For the article, go here. (Subscription required)
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Profit Shifting: Base Erosion, Profit Shifting Concerns Driving Tax Overhaul Agenda, Official Says
by Michael Bologna (Bloomberg)
Multinational corporations need to prepare for a paradigm shift in theway they honor their tax obligations around the globe, despite the political and technical obstacles emerging as nations draft multilateral accords permitting them to limit base erosion and profit shifting (BEPS), a U.S. Treasury Department official said.
Robert Stack, deputy assistant secretary for international tax affairs in Treasury's Office of Tax Policy, pointed to a long list of complexities thatwill confront the Organization for Economic Cooperation and Development's BEPS action plan. Stack said that countries have different motivations and vested interests to protect, potentially hampering progress. Closer to home, Stack pointed to disagreements over BEPS's potential role in congressional negotiations aimed at overhauling the tax code.
For the article, go here. (Subscription required)
Multinational corporations need to prepare for a paradigm shift in theway they honor their tax obligations around the globe, despite the political and technical obstacles emerging as nations draft multilateral accords permitting them to limit base erosion and profit shifting (BEPS), a U.S. Treasury Department official said.
Robert Stack, deputy assistant secretary for international tax affairs in Treasury's Office of Tax Policy, pointed to a long list of complexities thatwill confront the Organization for Economic Cooperation and Development's BEPS action plan. Stack said that countries have different motivations and vested interests to protect, potentially hampering progress. Closer to home, Stack pointed to disagreements over BEPS's potential role in congressional negotiations aimed at overhauling the tax code.
For the article, go here. (Subscription required)
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Why the European Councils challenge does not mean the end of the road for the FTT
by Matthew Gilleard - ITR
After lastweek's legal opinion from the European Council stated that part of the residence principle of the proposed European financial transaction tax (FTT) is incompatiblewith European law, some proponents feared theworst. But the end is not necessarily nigh.
For the article, go here.
After lastweek's legal opinion from the European Council stated that part of the residence principle of the proposed European financial transaction tax (FTT) is incompatiblewith European law, some proponents feared theworst. But the end is not necessarily nigh.
For the article, go here.
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A Territorial Tax System Would Create Jobs and Raise Wages for U.S. Workers
by Curtis S. Dubay (Heritage Foundation)
Sinceways and Means released its draft legislation on international reform almost two years ago there has been a steady drumbeat of criticism that has for the most part gone unchallenged. This paper pushes back on those criticisms and makes three crucial points.
For the paper, go here.
Sinceways and Means released its draft legislation on international reform almost two years ago there has been a steady drumbeat of criticism that has for the most part gone unchallenged. This paper pushes back on those criticisms and makes three crucial points.
For the paper, go here.
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The Faltering Financial Transaction Tax and the Future of Wall Street
by Jeremy Scott (Tax Analysts Blog)
The financial meltdown in 2008was supposed to change how banks andwall Streetwere regulated and taxed. The idea that tradingwas too volatile and that bankswere engaged in numerous risky transactions caught hold. Therewas a growing belief that financial institutions and investment firms should help fund the cost of future bailouts. However, five years later little has changed. The United States got the Dodd-Frank Act, a heavilywatered-down regulation package, and some of the European Union pushed aheadwith a financial transaction tax. But Treasury and the SEC are struggling to implement the former, and the latter has run afoul of the complicated European legal framework.
For the blog post, go here.
The financial meltdown in 2008was supposed to change how banks andwall Streetwere regulated and taxed. The idea that tradingwas too volatile and that bankswere engaged in numerous risky transactions caught hold. Therewas a growing belief that financial institutions and investment firms should help fund the cost of future bailouts. However, five years later little has changed. The United States got the Dodd-Frank Act, a heavilywatered-down regulation package, and some of the European Union pushed aheadwith a financial transaction tax. But Treasury and the SEC are struggling to implement the former, and the latter has run afoul of the complicated European legal framework.
For the blog post, go here.
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European Union: European Commission Insists FTT Discussions Continue Despite Council's Legal Concerns
by Joe Kirwin (Bloomberg)
European Taxation Commissioner Algirdas Semeta insisted that negotiations to finalize the terms of the European Union financial transactions tax should continue even though the Council of Ministers legal service concluded that a key principle that defineswhowill be required to pay the levy violates EU single market rules.
Speaking Sept. 14 at the conclusion of a meeting of EU finance ministers in Vilnius, Lithuania, Semeta also insisted thatworkwithin the EU to complete the revision of the EU cross-border savings tax directive should not be delayed towait for the completion of a global standard on information exchange for bank accounts as agreed aweek earlier by the Group of 20 nations in Russia.
For the story, go here. (Subscription required)
European Taxation Commissioner Algirdas Semeta insisted that negotiations to finalize the terms of the European Union financial transactions tax should continue even though the Council of Ministers legal service concluded that a key principle that defineswhowill be required to pay the levy violates EU single market rules.
Speaking Sept. 14 at the conclusion of a meeting of EU finance ministers in Vilnius, Lithuania, Semeta also insisted thatworkwithin the EU to complete the revision of the EU cross-border savings tax directive should not be delayed towait for the completion of a global standard on information exchange for bank accounts as agreed aweek earlier by the Group of 20 nations in Russia.
For the story, go here. (Subscription required)
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Profit Shifting: OECD's BEPS Project Must Remain Focused on Stateless Income, Stack Says
by Kevin A. Bell (Bloomberg)
The Organization for Economic Cooperation and Development's base erosion and profit shifting project must remain focused on addressing the problem of stateless income if the project is to have a chance of success, a U.S. Treasury official said Sept. 13.
Robert Stack, deputy assistant secretary for international tax affairs, said if the BEPS project veers from this objective and seeks instead to rebalance source and residence taxation rights, the project likelywill fail.
For the story, go here. (Subscription required)
The Organization for Economic Cooperation and Development's base erosion and profit shifting project must remain focused on addressing the problem of stateless income if the project is to have a chance of success, a U.S. Treasury official said Sept. 13.
Robert Stack, deputy assistant secretary for international tax affairs, said if the BEPS project veers from this objective and seeks instead to rebalance source and residence taxation rights, the project likelywill fail.
For the story, go here. (Subscription required)
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Tax Credits: Foreign Corporate Joint Ventures: Foreign Tax Credit Planning
by Lowell D. Yoder (Bloomberg)
U.S. multinationals commonly enter into foreign joint ventureswith foreign companies; one important tax consideration is the application of the foreign tax credit ruleswith respect to income derived from the joint venture.
When the foreign joint venture is a corporation, planning into status as a controlled foreign corporation (CFC) can be beneficial.
For the article, go here. (Subscription required)
U.S. multinationals commonly enter into foreign joint ventureswith foreign companies; one important tax consideration is the application of the foreign tax credit ruleswith respect to income derived from the joint venture.
When the foreign joint venture is a corporation, planning into status as a controlled foreign corporation (CFC) can be beneficial.
For the article, go here. (Subscription required)
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BEPS and the Law of Unintended Consequences
By Kartikeya Singh and Aparna Mathur (Tax Analysts, Tax Notes Today)
This article discusses possible economic implications and ramifications of recent positions on transfer pricing taken by the OECD in its project on base erosion and profit shifting.
For the article, go here. (Subscription required)
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Japan to Consider Corporate Tax Cut in Stimulus Package
By Andy Sharp and Takashi Hirokawa (Bloomberg)
Japan is considering a reduction in corporate taxes as part of a planned package to cushion the economy from raising the national sales levy, Economy Minister Akira Amari said.
Paring income taxes is another option,while a lower priority, Amari told reporters in Tokyo. Prime Minister Shinzo Abe earlier this month instructed officials to compile a plan by the end of September to counter the blow from a scheduled 3 percentage point bump in the consumption tax in April, to 8 percent.
For the story, go here.
Japan is considering a reduction in corporate taxes as part of a planned package to cushion the economy from raising the national sales levy, Economy Minister Akira Amari said.
Paring income taxes is another option,while a lower priority, Amari told reporters in Tokyo. Prime Minister Shinzo Abe earlier this month instructed officials to compile a plan by the end of September to counter the blow from a scheduled 3 percentage point bump in the consumption tax in April, to 8 percent.
For the story, go here.
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Dutch tax avoidance crackdown sparks debate
By Matt Steinglass in Amsterdam and Jamie Smyth in
Dublin
A Dutch initiative to crack down on tax avoidance by multinational corporations is being fiercely resisted by the business community,with the American Chamber of Commerce in the Netherlandswarning it could drive US corporations to move their European headquarters out of the country.
The Netherlands, Ireland and Luxembourg are facing a European Commission inquiry over tax practices that critics say allow multinationals to lower their tax bills by billions of euros. This month the Netherlands responded to rising criticismwith a plan to tighten conditions for so-called letterbox companies, shell companies that multinationals establish largely for tax purposes.
For the story, go here.
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Adobe shows its creativity with Ireland tax base
by Jamie Smyth (Dublin) (Financial Times)
Adobe Systems is a pioneer in creativity. Since the 1980s its software has facilitated a desktop publishing revolution.what is lesswell-known is that its creativity extends to its tax structure,which enables the US software company to avoid paying tens of millions of dollars in corporate taxes every year.
By establishing two companies registered in low-tax Ireland, Adobe slashed its tax bill on $2.1bn profits earned outside the US over the three years to the end of December 2012 to $144m, giving it an effective tax rate of 6.9 per cent. During this period the company paid $527.1m in US federal taxes on $1bn in profits an effective tax rate of 52 per cent.
Adobe is one of hundreds of technology and pharmaceutical companies, including Apple, Google and Abbott Laboratories,which funnel non-US sales through Ireland to cut their tax bills. Controversy over these tax avoidance strategies has prompted the Organisation for Economic Co-operation and Development (OECD) to call for an overhaul of global tax rules.
For the story, go here.
Adobe Systems is a pioneer in creativity. Since the 1980s its software has facilitated a desktop publishing revolution.what is lesswell-known is that its creativity extends to its tax structure,which enables the US software company to avoid paying tens of millions of dollars in corporate taxes every year.
By establishing two companies registered in low-tax Ireland, Adobe slashed its tax bill on $2.1bn profits earned outside the US over the three years to the end of December 2012 to $144m, giving it an effective tax rate of 6.9 per cent. During this period the company paid $527.1m in US federal taxes on $1bn in profits an effective tax rate of 52 per cent.
Adobe is one of hundreds of technology and pharmaceutical companies, including Apple, Google and Abbott Laboratories,which funnel non-US sales through Ireland to cut their tax bills. Controversy over these tax avoidance strategies has prompted the Organisation for Economic Co-operation and Development (OECD) to call for an overhaul of global tax rules.
For the story, go here.
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European Union: European Commission, Council Clash On Legal Basis for Financial Transactions Tax
Top legal advisers at two EU institutions have started a dispute overwhether the controversial financial transactions tax—known as the Tobin tax—is completely legal.
On Sept. 11, the Brussels-based European Commission rebutted a leaked opinion from the legal services of the Council of Ministers,which found a crucial part of the FTT to be incompatiblewith the European Union Treaty.
“We strongly disagreewith the Council legal service's opinion on the FTT.we expect the member states to not just follow the Council legal service's views unquestioningly, but to assess them critically against the Commission's robust legal analysis of this proposal, Emer Traynor, the commission's spokeswoman, said in a statement.
For the article, go here. (Subscription required)
On Sept. 11, the Brussels-based European Commission rebutted a leaked opinion from the legal services of the Council of Ministers,which found a crucial part of the FTT to be incompatiblewith the European Union Treaty.
“We strongly disagreewith the Council legal service's opinion on the FTT.we expect the member states to not just follow the Council legal service's views unquestioningly, but to assess them critically against the Commission's robust legal analysis of this proposal, Emer Traynor, the commission's spokeswoman, said in a statement.
For the article, go here. (Subscription required)
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OECD Transfer Pricing Documentation Draft Shows Naivete, Practitioner Says
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OECD - The Tax Policy Landscape Five Years after the Crisis
by Pierre LeBlanc, Stephen Matthews, & Kirsti Mellbye (OECD-France)
The height of the economic and financial crisis is nowwell past, but its aftermath remainswide-ranging,with many OECD countries still someway from restoring strong and sustainable economic growth. Even before the Great Recession OECD economies faced a range of challenges, most notably from globalisation, but also other challenges such as climates change, growing inequality and population ageing. Against this background, this paper discusses how tax policies have responded to fiscal and macroeconomic developments over the past five years and these longer-term structural economic developments.
For the paper, go here.
The height of the economic and financial crisis is nowwell past, but its aftermath remainswide-ranging,with many OECD countries still someway from restoring strong and sustainable economic growth. Even before the Great Recession OECD economies faced a range of challenges, most notably from globalisation, but also other challenges such as climates change, growing inequality and population ageing. Against this background, this paper discusses how tax policies have responded to fiscal and macroeconomic developments over the past five years and these longer-term structural economic developments.
For the paper, go here.
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Europe financial transaction tax hits legal wall
By Alex Barker in Brussels
Europe's plan for an expansive financial transaction tax hit awall after the top legal adviser to finance ministers concluded it exceeds national jurisdiction,infringes on EU treaties andis discriminatory to non-participating states.
The unusually blunt paper from the EU Council legal service, obtained by the Financial Times, deals a heavy blow to a European Commission proposal to introduce a $35bn eurozone levywith global reach.
For the article, go here.
Europe's plan for an expansive financial transaction tax hit awall after the top legal adviser to finance ministers concluded it exceeds national jurisdiction,infringes on EU treaties andis discriminatory to non-participating states.
The unusually blunt paper from the EU Council legal service, obtained by the Financial Times, deals a heavy blow to a European Commission proposal to introduce a $35bn eurozone levywith global reach.
For the article, go here.
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Looking into sweetheart tax deals
By Jamie Smyth in Dublin, Matt Steinglass in Amsterdam and Vanessa Houlder in London (Financial Times)
Ireland, the Netherlands and Luxembourg have long been suspected ofwooing multinationals through tax deals. But Brussels preliminary inquiry intowhether some of the tax deals are in contravention of EU state aid rules, adds political pressure at a critical juncture for the countries already under pressure from international efforts to tackle tax avoidance.
The European Commission's move to issue questions to the three member states about their tax relationshipwith individual companies, including Apple and Starbucks, follows recent publication of an action plan by the Paris-based Organisation for Economic Co-operation and Development,which is designed to close corporate tax loopholes that have enabled companies to save tens of billions of euro in tax over the past decade.
For the article, go here.
Ireland, the Netherlands and Luxembourg have long been suspected ofwooing multinationals through tax deals. But Brussels preliminary inquiry intowhether some of the tax deals are in contravention of EU state aid rules, adds political pressure at a critical juncture for the countries already under pressure from international efforts to tackle tax avoidance.
The European Commission's move to issue questions to the three member states about their tax relationshipwith individual companies, including Apple and Starbucks, follows recent publication of an action plan by the Paris-based Organisation for Economic Co-operation and Development,which is designed to close corporate tax loopholes that have enabled companies to save tens of billions of euro in tax over the past decade.
For the article, go here.
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Brussels probes multinationals tax deals
By Alex Barker in Brussels, Jamie Smyth in Dublin and Matt Steinglass in Amsterdam (Financial Times)
Brussels is probing Ireland, Luxembourg and the Netherlands over their tax dealswith multinationals paving theway potentially for a formal investigation into illegal sweeteners.
Europes top competition authority has asked the governments to explain their system of tax rulings and give details of assurances given to several specific companies including Apple and Starbucks according to peoplewho have seen the request.
For the article, go here.
Brussels is probing Ireland, Luxembourg and the Netherlands over their tax dealswith multinationals paving theway potentially for a formal investigation into illegal sweeteners.
Europes top competition authority has asked the governments to explain their system of tax rulings and give details of assurances given to several specific companies including Apple and Starbucks according to peoplewho have seen the request.
For the article, go here.
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Congressman Delaney's 'Rebuttal' on His Proposed Tax Amnesty for Offshore Corporate Profits Continues to Misinform
by Citizens for Tax Justice
In July, a letter signed by 30 national organizations and a report from Citizens for
Tax Justice (CTJ) bothwarned members of Congress about a proposal from
Congressman John Delaney of Maryland thatwould have the effect of rewarding
corporations that use offshore tax havens to avoid U.S. taxes. Rep. Delaneys staff
respondedwith a rebuttal that is itself based on misinformation about corporate tax law and about the likely effects of the proposal,whichwould provide a tax amnesty for offshore profits (often euphemistically called a repatriation holiday) for corporations that agree to finance an infrastructure bank.
For the report, go here. For the release, go here.
In July, a letter signed by 30 national organizations and a report from Citizens for
Tax Justice (CTJ) bothwarned members of Congress about a proposal from
Congressman John Delaney of Maryland thatwould have the effect of rewarding
corporations that use offshore tax havens to avoid U.S. taxes. Rep. Delaneys staff
respondedwith a rebuttal that is itself based on misinformation about corporate tax law and about the likely effects of the proposal,whichwould provide a tax amnesty for offshore profits (often euphemistically called a repatriation holiday) for corporations that agree to finance an infrastructure bank.
For the report, go here. For the release, go here.
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Washington D.C. talk on corporate and international tax reform
by Daniel Shaviro (Start Making Sense; Dan Shaviro blogspot)
Yesterday I Acela'd from New York towashington D.C. and back again, so that I could spend most of myworking day at a conference, held on Capital Hill in the Rayburn House Office Building,entitled The Federal Income Tax at 100: How Didwe Get Here andwhere Shouldwe Go Next? A Forum of Tax Policy Experts and Tax Policy Makers.
My mission at the conferencewas to give a 15-minute talk on corporate and international tax reform. In the intro for our panel (which discussed reform optionswithin the existing federal income tax generally), the moderator expressed the hope thatwewould point theway forward, assuming that more dramatic reform options (discussed by the preceding panel)were unavailable. But my talk focused instead onwhy it is so hard to specify the bestway forward on corporate and international tax reform, even in the absence of political obstacles.
For the blog post, go here.
Yesterday I Acela'd from New York towashington D.C. and back again, so that I could spend most of myworking day at a conference, held on Capital Hill in the Rayburn House Office Building,entitled The Federal Income Tax at 100: How Didwe Get Here andwhere Shouldwe Go Next? A Forum of Tax Policy Experts and Tax Policy Makers.
My mission at the conferencewas to give a 15-minute talk on corporate and international tax reform. In the intro for our panel (which discussed reform optionswithin the existing federal income tax generally), the moderator expressed the hope thatwewould point theway forward, assuming that more dramatic reform options (discussed by the preceding panel)were unavailable. But my talk focused instead onwhy it is so hard to specify the bestway forward on corporate and international tax reform, even in the absence of political obstacles.
For the blog post, go here.
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G20 communiqué drives BEPS action forward but implementation will be anightmare
by Matthew Gilleard - ITR
G20 leaders met in St. Petersburg lastweek,with international taxation once again high on the agenda.
For the story, go here.
G20 leaders met in St. Petersburg lastweek,with international taxation once again high on the agenda.
For the story, go here.
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Vodafones 3.8% Taxes on $130 Billion Payday Fuels U.K. Dispute
by Amy Thomson (Bloomberg)
Vodafone Group Plc (VOD)'s $130 billion payout from exiting its Verizonwireless venture is largely passing the tax man by.
U.K. politicians have grilled Google Inc. and Amazon.com Inc. executives on their taxes, and Starbucks Corp. (SBUX) agreed in December to pay a voluntary tax to head off a boycott threat. Vodafone, based in Newbury, England, structured the deal through its holding company in the Netherlands,where it benefited from an exemption rule leaving itwith no taxes due there, either.
The lack of British tax ispretty concerning, Margaret Hodge, chairwoman of the House of Commons Public Accounts Committee, said today on BBC radio as she asked tax officials to review the transaction. Vodafonehas a duty not to aggressively avoid tax, but to pay its fair due to British taxpayers out of the substantialwindfall it is making.
for the story, go here.
Vodafone Group Plc (VOD)'s $130 billion payout from exiting its Verizonwireless venture is largely passing the tax man by.
U.K. politicians have grilled Google Inc. and Amazon.com Inc. executives on their taxes, and Starbucks Corp. (SBUX) agreed in December to pay a voluntary tax to head off a boycott threat. Vodafone, based in Newbury, England, structured the deal through its holding company in the Netherlands,where it benefited from an exemption rule leaving itwith no taxes due there, either.
The lack of British tax ispretty concerning, Margaret Hodge, chairwoman of the House of Commons Public Accounts Committee, said today on BBC radio as she asked tax officials to review the transaction. Vodafonehas a duty not to aggressively avoid tax, but to pay its fair due to British taxpayers out of the substantialwindfall it is making.
for the story, go here.
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Latin American Tax Newsalert: 2014 Mexican Tax Reform proposals eliminate tax consolidation and flat tax, limit maquiladora regime and introduce a new 10% dividend tax
by PwC
Yesterday, the Executive Branch of the Mexican government presented its 2014 Tax Reform package to Congress. The package's most significant proposalswould eliminate the tax consolidation regime, eliminate the Flat Tax (IETU), provide a more limited maquiladora regime, retain the 30% income tax ratewithout reduction, introduce a new corporate-level tax on dividends, limit the deduction of certain related party payments, and eliminate the statutory audit (dictamen fiscal) requirement.
For the PwC Newsalert, go here.
Yesterday, the Executive Branch of the Mexican government presented its 2014 Tax Reform package to Congress. The package's most significant proposalswould eliminate the tax consolidation regime, eliminate the Flat Tax (IETU), provide a more limited maquiladora regime, retain the 30% income tax ratewithout reduction, introduce a new corporate-level tax on dividends, limit the deduction of certain related party payments, and eliminate the statutory audit (dictamen fiscal) requirement.
For the PwC Newsalert, go here.
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In Memphis, Baucus, Camp Call for Fairer, Simpler Tax Code that Makes U.S. More Competitive
by Houseways & Means Committee (website)
Senate Finance Committee Chairman Max Baucus (D-Mont.) and Houseways and Means Committee Chairman Dave Camp (R-Mich.) met todaywith family farmers and local business leaders in Memphis, Tennessee, to talk about the critical need to overhaul the nation's tax code in order to boost its fairness, reduce complexity and improve the economy.
“Plain and simple, the tax code is broken. Fixing it is the bestway to spark long-term growth in our economy, create good-paying jobs, and make families lives easier, Baucus and Camp said in a joint statement.Whether it's a chat over coffee in a family's kitchen or a meetingwith business leaders and their employees,were hearing the same thing: the American peoplewant a new tax code that's fair and simple. That'swhat tax reform is about.
For the release, go here.
Senate Finance Committee Chairman Max Baucus (D-Mont.) and Houseways and Means Committee Chairman Dave Camp (R-Mich.) met todaywith family farmers and local business leaders in Memphis, Tennessee, to talk about the critical need to overhaul the nation's tax code in order to boost its fairness, reduce complexity and improve the economy.
“Plain and simple, the tax code is broken. Fixing it is the bestway to spark long-term growth in our economy, create good-paying jobs, and make families lives easier, Baucus and Camp said in a joint statement.Whether it's a chat over coffee in a family's kitchen or a meetingwith business leaders and their employees,were hearing the same thing: the American peoplewant a new tax code that's fair and simple. That'swhat tax reform is about.
For the release, go here.
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Mexican President Announces Tax Overhaul --- Pena Nieto Offers Social-Security System, Unemployment Insurance in Exchange for Higher Levies to Boost Nonoil Revenue
by Juan Montes and Anthony Harrup
President Enrique Pena Nieto, facing protests over his attempts to revamp Mexico's economy, unveiled a long-awaited tax overhaul on Sunday, promising to create a universal social-security system and unemployment insurance in exchange for a series of tax increases that seek to boost the government's nonoil revenue.
The proposal, expected towin congressional approval, seeks to raise rates on top earners to 32% from 30%, introduces a 10% capital-gains tax, and closes some corporate loopholes. It also seeks to slap a special tax on sugary soft drinks, in a countrywhere obesity and diabetes are rising.
For the article, go here.
President Enrique Pena Nieto, facing protests over his attempts to revamp Mexico's economy, unveiled a long-awaited tax overhaul on Sunday, promising to create a universal social-security system and unemployment insurance in exchange for a series of tax increases that seek to boost the government's nonoil revenue.
The proposal, expected towin congressional approval, seeks to raise rates on top earners to 32% from 30%, introduces a 10% capital-gains tax, and closes some corporate loopholes. It also seeks to slap a special tax on sugary soft drinks, in a countrywhere obesity and diabetes are rising.
For the article, go here.
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Losses: IRS Unveils Rules to Stop Taxpayers From Shipping Built-In Losses Into U.S.
by Alison Bennett (Bloomberg)
The Internal Revenue Service unveiled proposed regulations Sept. 6 intended to stop taxpayers from importing losses into the U.S. by using tax-free transfers of loss property to corporations that are subject to federal income tax.
“The bottom line is, the government is trying to stop the dilution of the U.S. tax base, Mark Silverman, a partnerwith Steptoe & Johnson LLP inwashington, told Bloomberg BNA Sept. 6.They're saying,we don't like you bringing in artificial losses that can be used to offset your U.S. income.
For the story, go here. (Subscription required)
The Internal Revenue Service unveiled proposed regulations Sept. 6 intended to stop taxpayers from importing losses into the U.S. by using tax-free transfers of loss property to corporations that are subject to federal income tax.
“The bottom line is, the government is trying to stop the dilution of the U.S. tax base, Mark Silverman, a partnerwith Steptoe & Johnson LLP inwashington, told Bloomberg BNA Sept. 6.They're saying,we don't like you bringing in artificial losses that can be used to offset your U.S. income.
For the story, go here. (Subscription required)
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News Analysis: Rosbif Rules: What Should the OECD Do About Base Erosion?
by Lee A. Sheppard (Tax Analysts, Tax Notes Today)
This article looks at a selection of the proposed actions in the OECD base erosion and profit shifting (BEPS) action plan, making recommendations and predictions. Needless to say, the former may be more aggressive than the latter. The predictions differ from the hopeful statements of the OECD action plan. Some Europeans are getting cold feet, and it is a safe bet that the Americanswill do nothing.
For the article, go here. (Subscription required)
This article looks at a selection of the proposed actions in the OECD base erosion and profit shifting (BEPS) action plan, making recommendations and predictions. Needless to say, the former may be more aggressive than the latter. The predictions differ from the hopeful statements of the OECD action plan. Some Europeans are getting cold feet, and it is a safe bet that the Americanswill do nothing.
For the article, go here. (Subscription required)
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G-20 to Begin Automatic Exchange of Tax Information by End of 2015
by Stephanie Soong Johnston (Tax Analysts, Tax Notes Today)
Leaders of the G-20 nations on September 6 said they expected to begin automatic exchange of information in tax matters between their countries by the end of 2015 and pledged to help developing countries participate in such a system aswell. The group also reiterated its continued support of the OECD's action plan to address base erosion and profit shifting.
In a declaration issued at the end of the group's September 5-6 meeting in St. Petersburg, Russia, the G-20 leaders reaffirmed their commitment to making automatic information exchange the new global standard.
For the story, go here. (Subscription required)
Leaders of the G-20 nations on September 6 said they expected to begin automatic exchange of information in tax matters between their countries by the end of 2015 and pledged to help developing countries participate in such a system aswell. The group also reiterated its continued support of the OECD's action plan to address base erosion and profit shifting.
In a declaration issued at the end of the group's September 5-6 meeting in St. Petersburg, Russia, the G-20 leaders reaffirmed their commitment to making automatic information exchange the new global standard.
For the story, go here. (Subscription required)
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Congress Should Fix Uneven Business Taxation | Commentary
by Dan Danner and Bill Hughes (Roll Call)
Tax reform is a hot topic in Congress these days and for good reason. Our current tax system is broken, complicated and clearly gives preference to some industries over others,which is obviously unfair.
A recent study by the respected accounting firm PricewaterhouseCoopers andwidely read on Capitol Hill showed gigantic disparities among industries. Retailing,wholesaler-distributors and service providers had effective tax rates the rate of taxes they actually paid of 36.4 percent or higher. By contrast, utilities and other industries posted effective tax rates as low as 9.4 percent.
For the article, go here.
Tax reform is a hot topic in Congress these days and for good reason. Our current tax system is broken, complicated and clearly gives preference to some industries over others,which is obviously unfair.
A recent study by the respected accounting firm PricewaterhouseCoopers andwidely read on Capitol Hill showed gigantic disparities among industries. Retailing,wholesaler-distributors and service providers had effective tax rates the rate of taxes they actually paid of 36.4 percent or higher. By contrast, utilities and other industries posted effective tax rates as low as 9.4 percent.
For the article, go here.
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The Group of 20 Tackles Tax Avoidance
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Mexico to Unveil Tax Code Overhaul
by Juan Montes (Wall Street Journal)
Mexican President Enrique Pena Nieto is expected to unveil on Sunday awide-reaching proposal to boost federal tax revenue, a move that could prove politically complicated in a slowing economy.
The planned revamp of the country's tax code forms part of Mr. Pena Nieto's ambitious reform agenda,which he launched shortly after taking office in December. The changes are facing challenges from unions and political groups that oppose plans to modernize the country's education system and its state-run energy industry.
The proposal seeks to simplify the tax code, and reorganize public spending to make it more transparent and efficient. If passed, it could represent the most aggressive tax overhaul in Mexico since the introduction of a single federal sale tax that excluded food and medicines in the late 1970s.
For the article, go here.
Mexican President Enrique Pena Nieto is expected to unveil on Sunday awide-reaching proposal to boost federal tax revenue, a move that could prove politically complicated in a slowing economy.
The planned revamp of the country's tax code forms part of Mr. Pena Nieto's ambitious reform agenda,which he launched shortly after taking office in December. The changes are facing challenges from unions and political groups that oppose plans to modernize the country's education system and its state-run energy industry.
The proposal seeks to simplify the tax code, and reorganize public spending to make it more transparent and efficient. If passed, it could represent the most aggressive tax overhaul in Mexico since the introduction of a single federal sale tax that excluded food and medicines in the late 1970s.
For the article, go here.
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OECD Secretary-General Report to the G20 Leaders
by OECD (from OECDwebsite)
OECD Secretary-General Angel Gurría today presented to G20 Leadersground-breaking proposals to tackle tax evasion and avoidance by both companies and individuals.
The proposalsestablishautomatic exchange of information for tax purposesas the new international standard for tax co-operation and set out theAction Plan on Base Erosion and Profit Shifting (BEPS),whichwas first presented to G20 Finance Ministers in Moscow in July 2013.
For the report, go here.
OECD Secretary-General Angel Gurría today presented to G20 Leadersground-breaking proposals to tackle tax evasion and avoidance by both companies and individuals.
The proposalsestablishautomatic exchange of information for tax purposesas the new international standard for tax co-operation and set out theAction Plan on Base Erosion and Profit Shifting (BEPS),whichwas first presented to G20 Finance Ministers in Moscow in July 2013.
For the report, go here.
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G20 to back moves to expose tax evaders
by Vanessa Houlder in London and Javier Blas in Madrid (Financial Times)
The Dutch government has offered to renegotiate loophole-ridden tax treatieswith nearly two dozen developing countries, in a sign of the drive to crack down on avoidance and evasion that is set to intensify at the summit ofworld leaders in Russia thisweek.
Leaders of the G20 countries meeting in St Petersburg are due to throw theirweight behind moves to close corporate tax loopholes and expose tax evaders through greater transparency.
For the article, go here.
The Dutch government has offered to renegotiate loophole-ridden tax treatieswith nearly two dozen developing countries, in a sign of the drive to crack down on avoidance and evasion that is set to intensify at the summit ofworld leaders in Russia thisweek.
Leaders of the G20 countries meeting in St Petersburg are due to throw theirweight behind moves to close corporate tax loopholes and expose tax evaders through greater transparency.
For the article, go here.
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Plan at G-20 Is to Tighten Global Rules on Taxes
by Andrew E. Kramer (New York Times)
Many of the leaders of theworld's richest economies are convening at the eighth Group of 20 summit meeting in St. Petersburg, Russia,with the economicwinds at their back, ready to sign on to a sweeping new set of tax rules for multinational corporations.
They are expected on Friday to agree to enact new tax laws thatwould limit the ability of multinational corporations like Apple and Starbucks to legally avoid paying taxes by operating subsidiaries in certain countries.
For the article, go here.
Many of the leaders of theworld's richest economies are convening at the eighth Group of 20 summit meeting in St. Petersburg, Russia,with the economicwinds at their back, ready to sign on to a sweeping new set of tax rules for multinational corporations.
They are expected on Friday to agree to enact new tax laws thatwould limit the ability of multinational corporations like Apple and Starbucks to legally avoid paying taxes by operating subsidiaries in certain countries.
For the article, go here.
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IRS: Sullivan & Cromwell's Wollman Named New Director, International Strategy, at IRS
by Diane Freda (Bloomberg)
The Internal Revenue Service Aug. 23 announced the selection of Dianawollman as the director for international strategy, a newly created position.wollmanwill be joining the IRS on Sept. 16, reporting to Michael Danilack, deputy commissioner of the international unit of the IRS Large Business and International Division, and the U.S. competent authority.
In the new position,wollmanwill serve as the principal adviser to Danilack on awide range of high-level and sensitive international issues, Paul DeNard, acting commissioner of the IRS LB&I Division, said in announcing the selection. She alsowill oversee the development and implementation of all aspects of the IRS's international strategic programs, including risk assessment, data management, and trend analysis, he said.
For the story, go here. (Subscription required)
The Internal Revenue Service Aug. 23 announced the selection of Dianawollman as the director for international strategy, a newly created position.wollmanwill be joining the IRS on Sept. 16, reporting to Michael Danilack, deputy commissioner of the international unit of the IRS Large Business and International Division, and the U.S. competent authority.
In the new position,wollmanwill serve as the principal adviser to Danilack on awide range of high-level and sensitive international issues, Paul DeNard, acting commissioner of the IRS LB&I Division, said in announcing the selection. She alsowill oversee the development and implementation of all aspects of the IRS's international strategic programs, including risk assessment, data management, and trend analysis, he said.
For the story, go here. (Subscription required)
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Tax Evasion: Multilateral Action on OECD Plan Could Be Best Way to Halt BEPS, Treasury Official Says
by Lydia Beyoud (Bloomberg)
Developing a multilateral instrument to enable countries to limit base erosion and profit shifting (BEPS) could be one of the most critical elements to the success of the Organization for Economic Cooperation and Development's BEPS action plan, a U.S. Treasury Department official said Aug. 22.
For the story, go here. (Subscription required)
Developing a multilateral instrument to enable countries to limit base erosion and profit shifting (BEPS) could be one of the most critical elements to the success of the Organization for Economic Cooperation and Development's BEPS action plan, a U.S. Treasury Department official said Aug. 22.
For the story, go here. (Subscription required)
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IRS scrutinizes certain corporate buyouts involving debt
by Lynnley Browning (Fortune)
Private equity firms, buffeted by challenges to long-held tax breaks and growing scrutiny from regulators, have an ugly new headache: awary look by the Internal Revenue Service at one of their preferred acquisition techniques.
The technique involves loaning cash stockpiled in a fund's offshore affiliate to a related U.S. holding company set up to acquire a separate firm, a multistep move that typically generates lucrative tax deductions and boosts returns to fund investors.
The IRSwants to knowwhether private equity funds and their portfolio companies, meaning firms they acquire, are skirting so-called interest-stripping rules by disguising taxable equity investments as tax-deductible loans, according to senior tax lawyers and accountantsworking for firms and companies under the microscope and to persons close to the IRS.
For the story, go here.
Private equity firms, buffeted by challenges to long-held tax breaks and growing scrutiny from regulators, have an ugly new headache: awary look by the Internal Revenue Service at one of their preferred acquisition techniques.
The technique involves loaning cash stockpiled in a fund's offshore affiliate to a related U.S. holding company set up to acquire a separate firm, a multistep move that typically generates lucrative tax deductions and boosts returns to fund investors.
The IRSwants to knowwhether private equity funds and their portfolio companies, meaning firms they acquire, are skirting so-called interest-stripping rules by disguising taxable equity investments as tax-deductible loans, according to senior tax lawyers and accountantsworking for firms and companies under the microscope and to persons close to the IRS.
For the story, go here.
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Wollman to Fill New LB&I International Strategy Director Position
by Kristen A. Parillo & Andrew Velarde (Tax Analysts, Tax Notes Today)
The IRS Large Business and International Division on August 23 announced that Diana L.wollman of Sullivan & Cromwell LLP in New York has been named director of international strategy, a newly created executive positionwithin LB&I.
LB&I acting Commissioner Paul DeNard made the announcement in an internal bulletin to IRS employees. The bulletin states thatwollmanwill begin her new position September 16 andwill report to Michael Danilack, LB&I deputy commissioner (international). In her new role,wollmanwill serve as the principal adviser to Danilack on awide range of high-level and sensitive international issues andwill oversee the development and implementation of all aspects of LB&I's international strategic program, including risk assessment, data management, trend analysis, training, and knowledge management capabilities.
For the story, go here. (Subscription required)
The IRS Large Business and International Division on August 23 announced that Diana L.wollman of Sullivan & Cromwell LLP in New York has been named director of international strategy, a newly created executive positionwithin LB&I.
LB&I acting Commissioner Paul DeNard made the announcement in an internal bulletin to IRS employees. The bulletin states thatwollmanwill begin her new position September 16 andwill report to Michael Danilack, LB&I deputy commissioner (international). In her new role,wollmanwill serve as the principal adviser to Danilack on awide range of high-level and sensitive international issues andwill oversee the development and implementation of all aspects of LB&I's international strategic program, including risk assessment, data management, trend analysis, training, and knowledge management capabilities.
For the story, go here. (Subscription required)
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BEPS Won't Target U.S. Multinationals, Stack Says
by Matthew R. Madara (Tax Analysts, Tax Notes Today)
U.S. multinationals should be assured that the OECD's base erosion and profit-shifting (BEPS) project is not focused on targeting U.S. multinationals, according to Robert Stack, Treasury deputy assistant secretary (international tax affairs).
At an August 22webinar sponsored by the KPMG Tax Governance Institute, Stack explained that the United States views the BEPS discussion as a conversation on tax reform rather than tax morality and that U.S. policywill not be directed toward "naming and shaming."
For the story, go here. (Subscription required)
U.S. multinationals should be assured that the OECD's base erosion and profit-shifting (BEPS) project is not focused on targeting U.S. multinationals, according to Robert Stack, Treasury deputy assistant secretary (international tax affairs).
At an August 22webinar sponsored by the KPMG Tax Governance Institute, Stack explained that the United States views the BEPS discussion as a conversation on tax reform rather than tax morality and that U.S. policywill not be directed toward "naming and shaming."
For the story, go here. (Subscription required)
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Economic Analysis: Example 13 of the OECD Revised Intangibles Draft
by Martin A. Sullivan (Tax Analysts, Tax Notes Today)
Let's ask a simple question that is central to the debate on base erosion and profit shifting. If a company performs and controls all of its research and development in one country and if a subsidiary in another country funds that research,where should the profits from the resulting intellectual property be taxed?
The view of the OECD on this topic has evolved. In its June 2012 discussion draft, the OECD left the funding entitywith little hope of getting any profits unless it conducted some real activities: "Neither legal ownership, nor the bearing of costs related to intangible development, taken separately or together, entitles an entitywithin a [multinational] group to retain the benefits or returnswith respect to intangibleswithout more."
But in its revised discussion draft on transfer pricing aspects of intangibles released on July 30, the OECD allows a limited return to accrue to the funding subsidiary.
So from the point of view of multinationals that like to fund their research out of subsidiaries in low-tax jurisdictions, this approach is an improvement over the original draft. But the revised draft denies tax plannerswhat they reallywant: the right to park potentially huge upside excess profits to subsidiaries in tax havens that are assigned the costs of research.
For the article, go here. (Subscription required)
Let's ask a simple question that is central to the debate on base erosion and profit shifting. If a company performs and controls all of its research and development in one country and if a subsidiary in another country funds that research,where should the profits from the resulting intellectual property be taxed?
The view of the OECD on this topic has evolved. In its June 2012 discussion draft, the OECD left the funding entitywith little hope of getting any profits unless it conducted some real activities: "Neither legal ownership, nor the bearing of costs related to intangible development, taken separately or together, entitles an entitywithin a [multinational] group to retain the benefits or returnswith respect to intangibleswithout more."
But in its revised discussion draft on transfer pricing aspects of intangibles released on July 30, the OECD allows a limited return to accrue to the funding subsidiary.
So from the point of view of multinationals that like to fund their research out of subsidiaries in low-tax jurisdictions, this approach is an improvement over the original draft. But the revised draft denies tax plannerswhat they reallywant: the right to park potentially huge upside excess profits to subsidiaries in tax havens that are assigned the costs of research.
For the article, go here. (Subscription required)
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News Analysis: The OECD's Special Measures
by Lee A. Sheppard (Tax Analysts, Tax Notes Today)
Practitionerswere rattled in Julywhen the OECD's action plan on base erosion and profit shifting (BEPS) mentioned that "special measures" might be required to correct deficiencies in the arm's-length method. Marlies de Ruiter, head of the tax treaty, transfer pricing, and financial transactions division of the OECD's Centre for Tax Policy and Administration, described these special measures at the August 27 session of the International Fiscal Association's annual congress in Copenhagen, Denmark.
Historically, OECD transfer pricing guidance did not recognize synergies. Now they have to be recognized. "Group-ness needs to be recognized," de Ruiter said. The integration of multinational corporations must be recognized because it produces additional profits (or excess returns, in the lingo of economists).
For the article, go here. (Subscription required)
Practitionerswere rattled in Julywhen the OECD's action plan on base erosion and profit shifting (BEPS) mentioned that "special measures" might be required to correct deficiencies in the arm's-length method. Marlies de Ruiter, head of the tax treaty, transfer pricing, and financial transactions division of the OECD's Centre for Tax Policy and Administration, described these special measures at the August 27 session of the International Fiscal Association's annual congress in Copenhagen, Denmark.
Historically, OECD transfer pricing guidance did not recognize synergies. Now they have to be recognized. "Group-ness needs to be recognized," de Ruiter said. The integration of multinational corporations must be recognized because it produces additional profits (or excess returns, in the lingo of economists).
For the article, go here. (Subscription required)
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