Int'l Tax News
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International Tax News: June 2013 edition available
International Tax News is designed to help multinational organisations keep upwith the constant flow of international tax developmentsworldwide. Among thearticles featured in this month's edition are:
* Recent legislative changes reaffirm Cyprus' attractive tax regime
* Netherlands renews decree on limitation of interest deduction
* Azerbaijan expands tax treaty network
* Billwould liberalise Hong Kong's exchange of information regime
For the June edition of International Tax News, go here.
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Potential Vodafone conciliation could open door for alternative dispute resolution in India
If Vodafone accepts the Indian cabinet's offer to enter a conciliation process under the Indian Arbitration and Conciliation Act to try and resolve its longstanding tax dispute, the Indian government may have to open up such resolution mechanisms to other multinationals.
For the story, go here.
For the story, go here.
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When multinationals should use ADR to resolve UK tax disputes
HM Revenue & Customs officials discusswhen taxpayers should consider using alternative dispute resolution (ADR) to resolve large and complex tax cases.
For the story, go here.
For the story, go here.
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OECD and U.N. Officials Discuss Transfer Pricing Challenges
Aworldwide consensus on transfer pricing issues is becoming increasingly challenging to reach, and the process for achieving it is important, Joseph Andrus, head of transfer pricing at the OECD, said June 5.
At the Transfer Pricing Minds Americas conference in Coral Gables, Fla., Andrus previewed the OECD'swork on intangibles and base erosion and profit shifting (BEPS), and Michael Lennard, chief of international tax cooperation in the Financing for Development Office at the United Nations, discussed the U.N. approach.
"We think at the OECD that agreement among countries in the transfer pricing area is extremely important," Andrus said. One area of general agreement is that the arm's-length standard should be retained. However, the arm's-length standard is notworking theway some countrieswould like, he said.
For the story, go here. (Subscription required.)
At the Transfer Pricing Minds Americas conference in Coral Gables, Fla., Andrus previewed the OECD'swork on intangibles and base erosion and profit shifting (BEPS), and Michael Lennard, chief of international tax cooperation in the Financing for Development Office at the United Nations, discussed the U.N. approach.
"We think at the OECD that agreement among countries in the transfer pricing area is extremely important," Andrus said. One area of general agreement is that the arm's-length standard should be retained. However, the arm's-length standard is notworking theway some countrieswould like, he said.
For the story, go here. (Subscription required.)
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Reputational Risk Is Here to Stay, Transfer Pricing Panel Says
The popular sentiment that corporations are poor citizens for legally minimizing their tax liabilities is incorrect, but that perception is a lasting problem for multinationals, according to a panel of practitioners and commentators at the Bloomberg BNA and Baker & McKenzie North American Transfer Pricing Conference inwashington on June 5.
The theme for the panelwas set earlywith the recital of the famous quote from Judge Learned Hand that taxpayers may arrange their affairs so they pay no more tax than they are legally obligated to pay. Therewas also broad endorsement of Apple CEO Tim Cook's recent recommendations to the Senate Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations that the United States simplify its corporate tax code and adopt a lower rate.
For the story, go here. (Subscription required.)
The theme for the panelwas set earlywith the recital of the famous quote from Judge Learned Hand that taxpayers may arrange their affairs so they pay no more tax than they are legally obligated to pay. Therewas also broad endorsement of Apple CEO Tim Cook's recent recommendations to the Senate Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations that the United States simplify its corporate tax code and adopt a lower rate.
For the story, go here. (Subscription required.)
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Spotlight on Transfer Pricing Shows Need for Global Cooperation, Maruca Says
With public attention recently drawn to the income-shifting practices of multinational corporations, transfer pricing is becoming increasingly challenging for taxpayers and administrators and the need for global cooperation is more apparent than ever, according to Samuel Maruca, transfer pricing director, IRS Large Business and International Division.
"Transfer pricing has gone mainstream," Maruca said June 5 at the Bloomberg BNA and Baker & McKenzie North American Transfer Pricing Conference inwashington. Previously, transfer pricing issueswere mostly out of the public's sight, but the pressures of an economic downturn and fiscal austerity measures have created a "geopolitical firestorm," he said. Recent events like the Senate hearing on Apple's international tax practices illustrate the growing public attention to profit shifting, he said.
For the story, go here. (Subscription required.)
"Transfer pricing has gone mainstream," Maruca said June 5 at the Bloomberg BNA and Baker & McKenzie North American Transfer Pricing Conference inwashington. Previously, transfer pricing issueswere mostly out of the public's sight, but the pressures of an economic downturn and fiscal austerity measures have created a "geopolitical firestorm," he said. Recent events like the Senate hearing on Apple's international tax practices illustrate the growing public attention to profit shifting, he said.
For the story, go here. (Subscription required.)
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IRS Could Update Regs on Transfers of Intangibles to Foreign Corporations
The IRS believes it has the authority to modify section 367(d) regulations dealingwith transfers of intangibles to foreign corporations to close most perceived loopholeswithout a change to the tax code, according to Chris Bello, branch 6 chief, IRS Office of Associate Chief Counsel (International).
Speaking June 5 at the Bloomberg BNA and Baker & McKenzie North American Transfer Pricing Conference inwashington, Bello said the IRS is considering updating the section 367(d) regulations, a project that it hasworked on "in fits and starts" over the years.
For the story, go here. (subscription required)
Speaking June 5 at the Bloomberg BNA and Baker & McKenzie North American Transfer Pricing Conference inwashington, Bello said the IRS is considering updating the section 367(d) regulations, a project that it hasworked on "in fits and starts" over the years.
For the story, go here. (subscription required)
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Economic Policy Institute Produces Dual Axis Chart That Proves Nothing Affects Economic Growth
The progressive Economic Policy Institute likes the corporate income tax because EPI likes tax revenue in general and feels that the corporate income tax raises it in a distributionally progressiveway. They also offer the chart above to prove that corporate income tax rates don't drive economic growth.
And indeed they don't. But though this is an unusually egregious example, it highlights a big flaw in the entire chart-blogging genre.
For the article, go here.
And indeed they don't. But though this is an unusually egregious example, it highlights a big flaw in the entire chart-blogging genre.
For the article, go here.
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Corporate taxes dont cause recessions. But do they hurt growth?
Congressional Research Service reports arent generally the cause of political dust-ups. The agency is known for its rigorous yet completely dispassionate analysis of everything from national security threats to budget policy to Congressional procedure. At one hearing I attended three years ago, a CRS analyst recalled a time her bosswas askedwhat he thought about a particular piece of legislation and replied,Im not allowed to think.
So itwas surprisingwhen Thomas Hungerford, a veteran tax analyst at the agency, issued a report last year that Senate Republicans immediately tried to revoke. The report found no correlation between the top personal income tax rate and economic growth.
A revised version of the reportwas eventually released, softening some language and citing reports suggesting negative growth effects from high taxes. But soon after, Hungerford departed CRS for the left-leaning Economic Policy Institute.
Now, he's conductingsimilar researchat EPI, this time focusing on the corporate tax rate. His latestreportfindsno evidence that eitherthe statutory top corporate tax rate or the effective marginal tax rate on capital income is correlatedwith real GDP growth.
For the story, go here.
So itwas surprisingwhen Thomas Hungerford, a veteran tax analyst at the agency, issued a report last year that Senate Republicans immediately tried to revoke. The report found no correlation between the top personal income tax rate and economic growth.
A revised version of the reportwas eventually released, softening some language and citing reports suggesting negative growth effects from high taxes. But soon after, Hungerford departed CRS for the left-leaning Economic Policy Institute.
Now, he's conductingsimilar researchat EPI, this time focusing on the corporate tax rate. His latestreportfindsno evidence that eitherthe statutory top corporate tax rate or the effective marginal tax rate on capital income is correlatedwith real GDP growth.
For the story, go here.
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G8 tax avoidance drive alarms US business
Corporate America's biggest lobby groups havewarned Barack Obama against embracing Group of Eight proposals to crack down on international tax avoidance, days ahead of expected Senate questioning of one of the president's advisers about his investments in a Cayman Islands fund.
For the story, go here.
For the story, go here.
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Calculating Apples True U.S. Tax Rate
Some have suggested that Timothy D. Cook's calculation of Apple's tax rate is based on a badly distorted measure of United States income.One lesson from the Senate hearing about Apple's offshore tax planning is that figuring outwhat a multinational company actually pays in taxes is harder than it should be. At the risk of sounding Clintonesque, it depends onwhat the meaning ofpays is.
For the story, go here.
For the story, go here.
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Taxpayers should continue to prepare for the FTT despite reports of its demise
A number of media reports in the lastweek suggest that the financial transaction tax (FTT) is going to bewatered down and delayed. But the Commission has denied this and FTT proponents remain sceptical of such claims.
For the story, go here.
For the story, go here.
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OECD drive against tax avoidance gets fresh backing
The dayswhen multinational companies could exploit fiscal loopholes to escape tax could soon be numbered, after governments gave the OECD strong backing to design an international clampdown on corporate tax avoidance.
Ministers from Organisation for Economic Cooperation and Development and other countries backed OECD efforts on Thursday to press aheadwith new guidelines to ensure firms are not able to pay little or no tax due to differences between tax regimes.
The Group of 20 economic powers have asked the OECD to deliver an action plan at a July meeting of G20 finance ministers in Moscow.
For the story, go here.
Ministers from Organisation for Economic Cooperation and Development and other countries backed OECD efforts on Thursday to press aheadwith new guidelines to ensure firms are not able to pay little or no tax due to differences between tax regimes.
The Group of 20 economic powers have asked the OECD to deliver an action plan at a July meeting of G20 finance ministers in Moscow.
For the story, go here.
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New Business Group ACT Pushes Tax Overhaul
A group of 42 U.S. companies is announcing a potentially powerful new coalition on Tuesday to push for a comprehensive tax overhaul. The group representing a broad cross-section of both multinational and domestic-focused big businesses could give a boost to the slow-moving effort on Capitol Hill.
The new group, the Alliance for Competitive Taxation (ACT), is promoting a tax overhaul as away to make the economy grow faster, attract more investment to the U.S., generate jobs and help companies compete against their international rivals. Coalition members are hoping a tax overhaulwill prove to be a rare area of agreement for feuding Republicans and Democrats inwashington over the next couple of years.
For the story, go here.
The new group, the Alliance for Competitive Taxation (ACT), is promoting a tax overhaul as away to make the economy grow faster, attract more investment to the U.S., generate jobs and help companies compete against their international rivals. Coalition members are hoping a tax overhaulwill prove to be a rare area of agreement for feuding Republicans and Democrats inwashington over the next couple of years.
For the story, go here.
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Permanent Establishments: Some Common Cost Sharing Structures May Circumvent PE Rules, U.S. Official Says
A hypothetical cost-sharing arrangement for sales through a subsidiary, similar towhat many multinationals have used around the globe, could causeconcern that itwas circumventing rules aboutwhat constitutes a permanent establishment, a Treasury Department attorney-adviser said June 3.
Arlene Fitzpatrick spoke at a panel discussion on the Organization of Economic Cooperation and Development's efforts to fine-tune the definition ofpermanent establishment,which began in 2009. The panelwas part of the 2013 OECD International Tax Conference inwashington.
For the story, go here. (subscription required)
Arlene Fitzpatrick spoke at a panel discussion on the Organization of Economic Cooperation and Development's efforts to fine-tune the definition ofpermanent establishment,which began in 2009. The panelwas part of the 2013 OECD International Tax Conference inwashington.
For the story, go here. (subscription required)
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Large Business Compliance Requires Cooperation Among Administrators and Taxpayers, Danilack Says
A recent report from the Forum on Tax Administration (FTA) that compiled countries' approaches to ensuring compliance by large business taxpayers suggests that cooperation among tax administrators and taxpayers can improve compliance, according to Michael Danilack, deputy commissioner (international), IRS Large Business and International Division.
"The principal behind cooperative compliance is that compliance can be greatly enhanced through reaching understanding," said Danilack,who delivered the keynote address at the 2013 OECD International Tax Conference inwashington on June 4. That understanding is based on "commercial awareness, impartiality, proportionality, responsiveness, and openness through mutual disclosure and transparency," he said.
For the story, go here. (subscription required)
"The principal behind cooperative compliance is that compliance can be greatly enhanced through reaching understanding," said Danilack,who delivered the keynote address at the 2013 OECD International Tax Conference inwashington on June 4. That understanding is based on "commercial awareness, impartiality, proportionality, responsiveness, and openness through mutual disclosure and transparency," he said.
For the story, go here. (subscription required)
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Australian Tax Legislation includes transparency
The Tax Laws Amendment legislation,whichwas just introduced in Australia, includes a provision to improve the transparency of Australia's corporate tax system. The provision requires the Commissioner of Taxation to publish limited information about the tax affairs of large corporate taxpayers (total income of $100 million or more).
For the legislation, go here.
For an explanation of the legislation, go here.
For a statement from Assistant Treasurer Bradbury, go here.
For the legislation, go here.
For an explanation of the legislation, go here.
For a statement from Assistant Treasurer Bradbury, go here.
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NFTC Letter to President Obama
President Obama at an upcoming G-8 meeting should support tax policies that enhance theworldwide competitiveness of U.S. businesses, the National Foreign Trade Council and eight other groups said in a June 4 letter, adding that it is imperative that international tax policy discussions focus on promoting stable international tax rules.
For the letter, go here.
For the letter, go here.
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OECD's Work on Permanent Establishments on Hold for BEPS
The OECD's finalwork on revising the commentary to article 5 of the OECD model tax treaty on permanent establishmentswill depend on the progress the OECD makes on its base erosion and profit shifting (BEPS) project, an official told Tax Analysts June 3.
Speaking on the sidelines of the 2013 OECD International Tax Conference inwashington, Jacques Sasseville, head of the tax treaty unit at the OECD, said that it's possible the BEPS project could affect article 5,which in turn could affect the commentary to article 5. The OECD began a project in 2009 to clarify the existing definition of a PE through revised language in the commentary.
For the story, go here. (subscription required)
Speaking on the sidelines of the 2013 OECD International Tax Conference inwashington, Jacques Sasseville, head of the tax treaty unit at the OECD, said that it's possible the BEPS project could affect article 5,which in turn could affect the commentary to article 5. The OECD began a project in 2009 to clarify the existing definition of a PE through revised language in the commentary.
For the story, go here. (subscription required)
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Officials Wrestle With Inclusion of Goodwill in OECD Intangibles Definition
Although the final language of the new intangibles discussion draft remains unresolved, Joseph Andrus, head of the OECD transfer pricing unit,warned against getting "bogged down in the definitional game" ofwhether goodwill should be regarded as an intangible asset.
Speaking at the 2013 OECD International Tax Conference inwashington on June 4, Andrus said thatwhat is important for evaluatingwhether something generally classified as goodwill should be priced into a transaction iswhether unrelated partieswould have paid for the transfer. However, he said that itwas an "awkward time" to discuss the OECD intangibles draft since he and his fellow panelists could only discusswhat issueswere being debated byworking Party 6 and not the conclusions thatwill be released later this year. (June 2012 OECD intangibles discussion draft.)
For the story, go here. (Subscription required)
Speaking at the 2013 OECD International Tax Conference inwashington on June 4, Andrus said thatwhat is important for evaluatingwhether something generally classified as goodwill should be priced into a transaction iswhether unrelated partieswould have paid for the transfer. However, he said that itwas an "awkward time" to discuss the OECD intangibles draft since he and his fellow panelists could only discusswhat issueswere being debated byworking Party 6 and not the conclusions thatwill be released later this year. (June 2012 OECD intangibles discussion draft.)
For the story, go here. (Subscription required)
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Intangible Related Returns Taken Up in OECD Base Erosion Initiative
The OECD's base erosion and profit-shifting (BEPS) initiative appears to be lending greater credibility to views on the transfer pricing aspects of intangibles that some multinationals might findworrisome.
Speaking June 4 at the OECD's 2013 International Tax conference, Christopher Bello, branch 6 chief, IRS Office of Associate Chief Counsel (International), and a member of OECDworking Party 6, said that the BEPS project has taken up the issue of how to take into account situationswhere a company makes a financial investment to develop an intangible but does not engage in functional activity.
Working Party 6,which is responsible for the OECD's draft intangibleswork, is considering how to price these transactions in the context of the intangibles project, Bello said. "At the same timewe are talking about how, 'Maybe these are a type of transaction thatwewill not respect at all,'" he said.
For the story, go here. (Subscription required)
Speaking June 4 at the OECD's 2013 International Tax conference, Christopher Bello, branch 6 chief, IRS Office of Associate Chief Counsel (International), and a member of OECDworking Party 6, said that the BEPS project has taken up the issue of how to take into account situationswhere a company makes a financial investment to develop an intangible but does not engage in functional activity.
Working Party 6,which is responsible for the OECD's draft intangibleswork, is considering how to price these transactions in the context of the intangibles project, Bello said. "At the same timewe are talking about how, 'Maybe these are a type of transaction thatwewill not respect at all,'" he said.
For the story, go here. (Subscription required)
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Negotiating Transfer Pricing Safe Harbors Will Take More Time, Maruca Says
Although the United States is pleased that momentum is growing behind the concept of bilateral and multilateral safe harbors, negotiating any agreementswill take time because officials are approaching the process slowly and deliberately, Samuel Maruca, transfer pricing director in the IRS Large Business and International Division, said June 4.
The U.S. is looking forways to reduce its inventory of routine transfer pricing cases and believes that safe harbors may help, Maruca said, but he added that so far, discussions have been limited to expressions of interest among a few countries that the U.S. dealswith regularly. "I don'twant to get people too excited about timing. This is going to take awhile," he said at the 2013 OECD International Tax Conference inwashington.
For the story, go here. (Subscription required)
The U.S. is looking forways to reduce its inventory of routine transfer pricing cases and believes that safe harbors may help, Maruca said, but he added that so far, discussions have been limited to expressions of interest among a few countries that the U.S. dealswith regularly. "I don'twant to get people too excited about timing. This is going to take awhile," he said at the 2013 OECD International Tax Conference inwashington.
For the story, go here. (Subscription required)
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ACT Coalition to Push for Corporate Tax Reform
A group of 42 American companies including Google Inc.,wal-Mart Stores Inc., Bank of America Corp., and the Coca-Cola Co. announcedJune 4 the creation of a coalition to advocate revenue-neutral business tax reform that includes lowering the corporate rate and moving to a hybrid international tax system.
The Alliance for Competitive Taxation (ACT)will advocate a corporate income tax rate of 25 percent, paid for by the elimination of business tax expenditures. The group alsowants to move to a hybrid international tax system that taxes income in countrieswhere the income is earned and includes protections for base erosion and American jobs.
For the story, go here. (Subscription required)
The Alliance for Competitive Taxation (ACT)will advocate a corporate income tax rate of 25 percent, paid for by the elimination of business tax expenditures. The group alsowants to move to a hybrid international tax system that taxes income in countrieswhere the income is earned and includes protections for base erosion and American jobs.
For the story, go here. (Subscription required)
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Want Tax Reform? Base Erosion Actions Come With It, Solomon Says
As Robert Stack, Treasury deputy assistant secretary (international tax affairs),was inwashington telling multinationals that theywould have to pay tax somewhere, at almost the same moment in New York, Eric Solomon of Ernst & Young LLP, former Treasury assistant secretary for tax policy,was suggesting that somewherewould be the United States.
If multinationals succeed in convincing Congress to lower the corporate income tax rate and adopt a territorial system, that reformwill comewith base erosion provisions, Solomon told thewall Street Tax Association (WSTA) on June 3.
For the story, go here. (Subscription required)
If multinationals succeed in convincing Congress to lower the corporate income tax rate and adopt a territorial system, that reformwill comewith base erosion provisions, Solomon told thewall Street Tax Association (WSTA) on June 3.
For the story, go here. (Subscription required)
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France to force big companies to disclose foreign tax bill
France plans to force large companies to declare details of their foreign activities as away of reducing tax avoidance, a finance ministry official said on Sunday.
The move is France's follow-up to a European Union summit last monthwhere EU leaders said theywould close loopholes to stop companies such as Google, Apple and Amazon aggressively avoiding taxes.
For the story, go here.
The move is France's follow-up to a European Union summit last monthwhere EU leaders said theywould close loopholes to stop companies such as Google, Apple and Amazon aggressively avoiding taxes.
For the story, go here.
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Tax Avoidance Crackdown: France to Force Companies to Reveal Foreign Activity and Bills
France is cracking down on large companies,which are aggressively avoid paying corporation tax, by forcing them to disclose the details of foreign business activities and tax bills.
One of France's ministry official said that the countrywill extend draft rules, initially planned only for banks by the European Union (EU), to other large companies in order to present aggressive corporate tax avoidance, demonstrated by Google, Amazon and Apple.
"Our aim is to extend to large companies the requirement to disclose activities abroad country-by-country," said the official to Reuters.
For the story, go here.
One of France's ministry official said that the countrywill extend draft rules, initially planned only for banks by the European Union (EU), to other large companies in order to present aggressive corporate tax avoidance, demonstrated by Google, Amazon and Apple.
"Our aim is to extend to large companies the requirement to disclose activities abroad country-by-country," said the official to Reuters.
For the story, go here.
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India: As Aggressive Audits Continue in India, Hopes Turn to High Courts, APA Program
Transfer pricing uncertainty has long been a fact of life for multinational companies operating in India, as businesses have had to contendwith aggressive transfer pricing audits,which have led to prolonged court disputes or difficult competent authority negotiations—or both.
For the story, go here. (Subscription required)
For the story, go here. (Subscription required)
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Tax Havens: Apple's Arrangement With Ireland Meets Common-Sense Tax Haven Status, Levin Says
Sen. Carl Levin (D-Mich.), chairman of the Permanent Subcommittee on Investigations, and ranking member Sen. John McCain (R-Ariz.) said May 31 that testimony by Apple Inc. executives, including Chief Executive Officer Tim Cook, corroborates that the company had a special arrangementwith the Irish government to cut its tax bill.
“Most reasonable peoplewould agree that negotiating special tax arrangements that allow companies to pay little or no income tax meets a common-sense definition of a tax haven, they said in a statement.
For the story, go here. (Subscription required)
“Most reasonable peoplewould agree that negotiating special tax arrangements that allow companies to pay little or no income tax meets a common-sense definition of a tax haven, they said in a statement.
For the story, go here. (Subscription required)
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Irish Embassy Refutes Senate Tax Haven Accusations and Apple Special Tax Deal Claims
Irish Ambassador Michael Collins in a May 29 letter to the Senate Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations refuted claims in a report prepared for the panel that Ireland is a tax haven and that the Irish government negotiated a special tax dealwith Apple Inc.
For the letter, go here. (Subscription required)
For the letter, go here. (Subscription required)
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News Analysis: As American as Apple
Some senators do not admire Apple's tax planning nearly as much as consumers admire the company's products. The May 21 hearing before the Senate Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations emphasized the fact that U.S. transfer pricing rules are highly problematic. But it provided little hope that Congresswill find the motivation to do anything about them.
For the story, go here. (Subscription required)
For the story, go here. (Subscription required)
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More countries adopt and update GAARs to fight base erosion and profit shifting
Many countries around the globe have undergone significant change and developmentwithin the last year surrounding the use of General Anti-Avoidance Rules (GAARs). This term generally refers to a statutory rule or regime that empowers a revenue authority to deny taxpayers the benefit of an arrangement entered into for an impermissible tax-related purpose. Great variations may occur between jurisdictions as to their operation but the current impetus for these fast-moving changes is similar -- revenue authoritieswish to broaden their enforcement capabilities at this time of rising deficits and falling tax revenues throughout theworld.
For the report, go here.
For the report, go here.
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U.S. Multinationals Still Pursuing APAs With India, Practitioners Say
U.S. multinationals continue to apply for bilateral advance pricing agreements in India, despite thewidely publicized stalled relationship between the U.S. and Indian competent authorities, tax advisers said June 3.
Speaking during awebcast sponsored by her firm, Sabinewahl of PricewaterhouseCoopers India said that comments made by Michael Danilack, deputy commissioner (international), IRS Large Business and International Division, earlier this year regarding India's APA programwere like a "cold shower" on multinational corporations' growing interest in India's APA program.
For the story, go here. (Subscription required)
Speaking during awebcast sponsored by her firm, Sabinewahl of PricewaterhouseCoopers India said that comments made by Michael Danilack, deputy commissioner (international), IRS Large Business and International Division, earlier this year regarding India's APA programwere like a "cold shower" on multinational corporations' growing interest in India's APA program.
For the story, go here. (Subscription required)
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Days of Double Nontaxation Are Over, Stack Says
The days of double nontaxation for multinational companies are over, according to Robert Stack, Treasury deputy assistant secretary (international tax affairs).
Speaking June 3 at the 2013 OECD International Tax Conference inwashington, Stack offered a rebuttal to impressions recently conveyed to him from an "unnamed tax reporter" that the Treasury Department does not appear to be taking the OECD base erosion and profit shifting (BEPS) project seriously andwill defend the status quo.
For the story, go here. (Subscription required)
Speaking June 3 at the 2013 OECD International Tax Conference inwashington, Stack offered a rebuttal to impressions recently conveyed to him from an "unnamed tax reporter" that the Treasury Department does not appear to be taking the OECD base erosion and profit shifting (BEPS) project seriously andwill defend the status quo.
For the story, go here. (Subscription required)
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Shift to Territorial System Won't Trigger a Flood of Repatriations, Gravelle Argues
Accumulated foreign profits haven't grown simply because of the tax on repatriated earnings, according to Jane Gravelle, a senior specialist in economic policy for the Congressional Research Service,who provided new evidence that a shift to a territorial system of taxationwouldn't significantly reduce the amount of accumulated foreign profits.
For the story, go here. (Subscription required.)
For the story, go here. (Subscription required.)
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Dick Harvey: "Apple Hearing: Observations From an Expert Witness"
J. Richard (Dick) Harvey Jr., the Distinguished Professor of Practice at the Villanova University School of Law and Graduate Tax Program,was an expertwitness at the May 21 Senate Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations hearing on Apple Inc.'s international tax planning. In this article, Harvey describes one of the arguments used by Apple and Sen. Ron Johnson, R-Wis., to justify the amount of income Apple recorded in the United States. Although Harvey disagreeswith Apple's argument, he believes that if it is accepted, it should result in Apple recording substantially more income in foreign countries other than Ireland. Harvey also questions the 30.5 percent effective tax rate advocated by Apple during the hearing and instead suggests a rate between 7 and 15 percent.
For the story, go here. (Subscription required.)
For the story, go here. (Subscription required.)
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Tax All Profits of Companies Based in the U.S.
The fundamental question about multinationals iswhether they retain their national identity in the 21st century. From the Dutch East India Company onward multinationalswere closely identifiedwith the country that created them. However, in a globalizedworld inwhich the shareholders, production facilities and distribution centers of multinationals arewidely dispersed, it is less clear that one can identify a multinational as American.
Ideally, in such aworld each country should tax the multinational only on income arisingwithin that country. But as the Apple case shows, such a territorial system invites multinationals to shift their profits to tax havens. Avoiding that outcomewithout over- or under-taxation requires a degree of coordination among countries that is difficult to achieve.
For the story, go here.
Ideally, in such aworld each country should tax the multinational only on income arisingwithin that country. But as the Apple case shows, such a territorial system invites multinationals to shift their profits to tax havens. Avoiding that outcomewithout over- or under-taxation requires a degree of coordination among countries that is difficult to achieve.
For the story, go here.
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Protecting the corporate tax base from erosion and loopholes - Addressing profit shifting through the artificial loading of debt in Australia
On 14 May 2013 the Australian Deputy Prime Minister and Treasurer announced a package of reforms to protect the corporate tax base from erosion and loopholes.
Thisproposals paper outlines measures included in that package that address profit shifting through the artificial loading of debt in Australia.
For the paper and related news release, go here.
For additional related news releases, go here and here.
Thisproposals paper outlines measures included in that package that address profit shifting through the artificial loading of debt in Australia.
For the paper and related news release, go here.
For additional related news releases, go here and here.
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Business hit with massive tax clawback
Corporate Australiawill be slugged an extra $4.2 billion over the next four years to "protect the corporate tax base", as Labor seeks to squeeze more revenue from existing business taxes rather than introducing new imposts.
Multinational companies, miners and bankswill be among the sectors the governmentwill depend on to deliver the higher tax take,which Treasurerwayne Swan said closed loopholes and stopped big businesses gaining an unfair advantage.
For the story, go here.
Multinational companies, miners and bankswill be among the sectors the governmentwill depend on to deliver the higher tax take,which Treasurerwayne Swan said closed loopholes and stopped big businesses gaining an unfair advantage.
For the story, go here.
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Tax Treaties: OECD Tax Leader Says BEPS Project Could Produce New Multilateral Treaty
An international project on base erosion and profit shifting (BEPS) could culminate in a new multilateral treaty toautomatically revise some 3,000 existing bilateral double-tax treatiesworldwide to address BEPS, and the project could be completed in two years, the Organization for Economic Cooperation and Development's top tax official said May 30.
Pascal Saint-Amans, head of OECD's Center for Tax Policy and Administration, made his comments during OECD's annual May 29-30 ministerial council meeting,which produced a declaration urging the Committee on Fiscal Affairs, the organization's key tax decision body, to quickly complete itswork on an action plan for addressing BEPS to deliver to the Group of 20 Finance Ministers meeting July 18-19 in Moscow.
For the story, go here. (Subscription required.)
Pascal Saint-Amans, head of OECD's Center for Tax Policy and Administration, made his comments during OECD's annual May 29-30 ministerial council meeting,which produced a declaration urging the Committee on Fiscal Affairs, the organization's key tax decision body, to quickly complete itswork on an action plan for addressing BEPS to deliver to the Group of 20 Finance Ministers meeting July 18-19 in Moscow.
For the story, go here. (Subscription required.)
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Practitioner Argues Against U.N. Role in Transfer Pricing Guidance
The United Nations should get out of the business of setting international transfer pricing standards, according to David Ernick of PricewaterhouseCoopers LLP.
Speaking May 30 at a District of Columbia Bar Taxation Section luncheon on current developments in transfer pricing in India and China, Ernick, a former Treasury official, noted that the U.N. claims that its Practical Manual on Transfer Pricing for Developing Countries is consistentwith OECD guidelines.
Ifwhat the U.N. says is true, "why duplicate the effort?" Ernick asked. If, however, the U.N. guidance is inconsistentwith OECD standards, then the U.N. guidancewill result in multiple standards, double taxation, and barriers to trade and investment, argued Ernick.
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Speaking May 30 at a District of Columbia Bar Taxation Section luncheon on current developments in transfer pricing in India and China, Ernick, a former Treasury official, noted that the U.N. claims that its Practical Manual on Transfer Pricing for Developing Countries is consistentwith OECD guidelines.
Ifwhat the U.N. says is true, "why duplicate the effort?" Ernick asked. If, however, the U.N. guidance is inconsistentwith OECD standards, then the U.N. guidancewill result in multiple standards, double taxation, and barriers to trade and investment, argued Ernick.
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Future U.N. Transfer Pricing Manual Likely to Address Intangibles
Future editions of the U.N. Manual on Transfer Pricing for Developing Countrieswill likely include a chapter on intangibles, a member of the committee responsible for drafting the manual said May 29.
"I assume the next membership of the committeewill consider to include some additional explanation or guidance in the area of intangibles," said Stig Sollund, a member of the U.N. Committee of Experts on International Cooperation in Tax Matters, at a meeting in New York to officially release the final version of the manual.
Sollund added that before acting on intangibles, the next Committee of Experts shouldwait to seewhat comes out of the OECD's project on base erosion and profit shifting (BEPS). Services and cross-contribution agreements could also be addressed in a future transfer pricing manual, he said.
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"I assume the next membership of the committeewill consider to include some additional explanation or guidance in the area of intangibles," said Stig Sollund, a member of the U.N. Committee of Experts on International Cooperation in Tax Matters, at a meeting in New York to officially release the final version of the manual.
Sollund added that before acting on intangibles, the next Committee of Experts shouldwait to seewhat comes out of the OECD's project on base erosion and profit shifting (BEPS). Services and cross-contribution agreements could also be addressed in a future transfer pricing manual, he said.
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Irish Official 'Absolutely Refutes' Senate Tax Haven Accusations and Apple Special Tax Deal Claims
An Irish government official on May 30 said she "absolutely refutes" recent accusations from members of a Senate subcommittee that Ireland is a tax haven and that the Irish government negotiated a special tax dealwith Apple Inc.
"There's no special tax dealwith Apple, and in fact, the CEO of Apple [Tim Cook] yesterday clarified on the record that therewere no special deals," Lucinda Creighton, Ireland's minister for European affairs, told Tax Analysts. Creighton,who is in the United States for four days to speakwith business and political leaders, spoke after an event hosted by the European Institute inwashington.
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"There's no special tax dealwith Apple, and in fact, the CEO of Apple [Tim Cook] yesterday clarified on the record that therewere no special deals," Lucinda Creighton, Ireland's minister for European affairs, told Tax Analysts. Creighton,who is in the United States for four days to speakwith business and political leaders, spoke after an event hosted by the European Institute inwashington.
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OECD Official Calls for Mechanism to Quickly Implement BEPS Tax Changes
A mechanism is needed to quickly implement international tax changes related to the OECD base erosion and profit shifting (BEPS) project, an OECD official told the U.N. Economic and Social Council at a May 29 meeting in New York on international cooperation in tax matters.
Because of the sheer number of tax treaties in effect, it takes a considerable amount of time for changes to be implemented, said Marlies de Ruiter, head of the tax treaty, transfer pricing, and financial transactions division of the OECD's Centre for Tax Policy and Administration.
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Because of the sheer number of tax treaties in effect, it takes a considerable amount of time for changes to be implemented, said Marlies de Ruiter, head of the tax treaty, transfer pricing, and financial transactions division of the OECD's Centre for Tax Policy and Administration.
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Tax Reform Revenue-Neutral Corporate Tax Proposals Will Boost U.S. Economy, CEA's Krueger Says
President Obama's proposals for corporate tax reform can be done in a revenue-neutralway andwould be good for the U.S. economy,white House Council of Economic Advisers Chairman Alan Krueger told BNA May 29.
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Economic Analysis: The Other Problem With Cost Sharing
Investors are entitled to a return on their investment.
This simple and indisputable assertion is the crux of the argument made by multiple commentators regarding the June 2012 OECD discussion draft on transfer pricing of intangibles. (The 1,013 pages of comments are available at http://www.oecd.org.) The source of their concern is the discussion draft's statement that the mere fact that a related party shares the costs of developing assets does not entitle it to the returns on that asset:
Working Party No. 6 delegates [the group of member country officials studying cross-border taxation of intangibles] are uniformly of the view that transfer pricing outcomes in cases involving intangibles should reflect the functions performed, assets used, and risks assumed by the parties. This suggests that neither legal ownership, nor the bearing of costs related to intangible development, taken separately or together, entitles an entitywithin [a multinational enterprise] group to retain the benefits or returnswith respect to the intangibleswithout more.
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This simple and indisputable assertion is the crux of the argument made by multiple commentators regarding the June 2012 OECD discussion draft on transfer pricing of intangibles. (The 1,013 pages of comments are available at http://www.oecd.org.) The source of their concern is the discussion draft's statement that the mere fact that a related party shares the costs of developing assets does not entitle it to the returns on that asset:
Working Party No. 6 delegates [the group of member country officials studying cross-border taxation of intangibles] are uniformly of the view that transfer pricing outcomes in cases involving intangibles should reflect the functions performed, assets used, and risks assumed by the parties. This suggests that neither legal ownership, nor the bearing of costs related to intangible development, taken separately or together, entitles an entitywithin [a multinational enterprise] group to retain the benefits or returnswith respect to the intangibleswithout more.
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News Analysis: What Treasury Should Say to Multinationals
In news analysis, Lee A. Sheppard proposes a memorandum that Treasury should send to U.S. multinationals explaining that the international consensus on transfer pricing issues is changing.
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News Analysis: Apple's Tax Magic
We're not easily shocked by transfer pricing practices that the U.S. government accepts, for better orworse. Google? It's pretty clean under U.S. law -- an advance pricing agreement to get the intellectual property out of the United States, and 2,000 employees in Ireland. Dell? Yawn -- lots of U.S. multinationals have commissionaire structures for selling in Europe.
But Apple's planning, as described in the Senate Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations (PSI) report, is a special case.we're talking grossworldwide revenues the size of the California state budget, and no tax being paid anywhere on a huge chunk of profits.what is truly surprising about the Apple case is its brazenness. PSI concluded that Apple's self-serving intercompany contracts had no effect on its business practices.
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But Apple's planning, as described in the Senate Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations (PSI) report, is a special case.we're talking grossworldwide revenues the size of the California state budget, and no tax being paid anywhere on a huge chunk of profits.what is truly surprising about the Apple case is its brazenness. PSI concluded that Apple's self-serving intercompany contracts had no effect on its business practices.
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To keep corporations here, fix the tax code Read more: http://www.baltimoresun.com/news/opinion/oped/bs-ed-apple-20130523,0,1325651.story#ixzz2UczWv692
The report of Apple avoiding corporate income taxes the past four years signals it's time to overhaul the U.S. corporate tax code.
Like many multinationalswith strong intellectual property, Apple legally earns nearly all of its income offshore. The U.S. tax code requires payment of corporate income taxes on domestic operations, but foreign earnings are not taxed until they are returned to the U.S. parent company, an act called repatriation. According to Senate investigators, Apple has structured its foreign operations to avoid a foreign income tax liability aswell. As a result, its foreign earningswould incur a significant repatriation tax, leading those earnings to essentially be "trapped" overseas.
For the article, go here.
Like many multinationalswith strong intellectual property, Apple legally earns nearly all of its income offshore. The U.S. tax code requires payment of corporate income taxes on domestic operations, but foreign earnings are not taxed until they are returned to the U.S. parent company, an act called repatriation. According to Senate investigators, Apple has structured its foreign operations to avoid a foreign income tax liability aswell. As a result, its foreign earningswould incur a significant repatriation tax, leading those earnings to essentially be "trapped" overseas.
For the article, go here.
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A Is for Avoidance
Even before lastweek's Senate hearing on Apple, itwas clear that the aggressive use of tax havens and other tax avoidance tactics had become standard operating procedure for global American companies.
Microsoft and Hewlett-Packardwere the focus of a similar Senate hearing last September,while Google, Amazon and Starbucks have drawn recent scrutiny in Europe. And, of course, there is General Electric,which achieved a perfect zero on its United States tax bill in 2010. In fact, G.E.was reputed to have theworld's best tax avoidance department until Apple came alongwith tactics to stash some $100 billion in Irelandwithout paying taxes on much of it anywhere in theworld and, apparently,without breaking any law.
And that is the problem. Rampant corporate tax avoidance may not be illegal, but that doesn't make it right or fair.
For the editorial, go here.
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CAPITAL IDEAS: Who Will Crack the Code?
Ireland and Singapore have no natural resources that make them obvious places to manufacture the concentrate used in soda, nor have they developed innovative new soda-making techniques. Yet they have nonetheless become global capitals for making soft-drink concentrate.
What Ireland and Singapore share is a low corporate tax rate. And because soda is such a simple product,with so much of its financial value stemming from the concentrate, Coke and Pepsi can reduce their overall tax rates by manufacturing it in low-tax countries.
For the story, go here.
What Ireland and Singapore share is a low corporate tax rate. And because soda is such a simple product,with so much of its financial value stemming from the concentrate, Coke and Pepsi can reduce their overall tax rates by manufacturing it in low-tax countries.
For the story, go here.
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