Int'l Tax News

The largest tech companies in the Bay Area have avoided paying federal taxes on more than $225 billion they have accumulated through foreign subsidiaries, documents filedwith the Securities and Exchange Commission show.

Lastweek, the investor David Einhorn sued Apple, inwhich his hedge fund has a large stake, over how the company can issue preferred stock. At the heart of the dispute is the $137 billion pile of cash that Apple has accumulated, andwhether it could be used to better reward shareholders.

Mr. Einhorn's action highlights a growing problem: many corporations are holding vast amounts of cash and other liquid assets, using them neither for investment nor to benefit shareholders. These assets are largely earned and held overseas, and not subject to American taxes until the money is brought home.

A multicountry adoption of the OECD's new authorized intermediary system for streamlining the process for portfolio investors to claim treatywithholding rates on cross-border investments could provide awin for investors aswell as source and residence countries, according to OECD representatives.

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A new report by the Organization for Economic Cooperation and Development could eventually contribute to a redefinition of international tax rules thatwould be aimed at preventing certain multinational companies from shifting profits to avoid taxation, according to the organization's top tax official.

OECD Feb. 12 released its Addressing Base Erosion and Profit Shifting report in response to growing concerns that multinationals, especially internet giants, are exploitinggaps in international tax standards and transfer pricing rules to shift profits away from jurisdictionswhere those profitswere generated.

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With the so-called budgetsequester set to begin on March 1, U.S. Senator Sheldonwhitehouse (D-RI) today introduced two bills to replace the across-the-board cuts. The bills,which are cosponsored by U.S. Senators Carl Levin (D-MI), Tom Harkin (D-IA), and Bernie Sanders (I-VT),would raise the revenue needed to replace the sequester by closing tax loopholes that currently benefit thewealthiest Americans and big corporations.

Claimingwithholding tax relief under treaties and domestic law is often cumbersome, time and resource intensive for the bulk of foreign portfolio investors and thus often does not happen.

After several years ofworkwith governments and businesses around theworld and in close co-operationwith the EU, the OECD has developed and approved a standardised system of effective treaty and domestic relief including a complete implementation package for countries to move forward (“TRACE). This is a major step in streamlining processes, reducing costs, and giving investors their rightswhile improving tax compliance.

Drug makers are taking new steps to lower their taxes significantly, in a boon to their bottom lines.

A consumer advocacy group is urging states to get ahead of Congress in cracking down on offshore tax avoidance that costs states an estimated $40 billion in annual revenue.

State governments can take several steps to collect revenue fromwealthy individuals and corporations, even if those actions are not matched on the federal level, the United States Public Interest Research Group says in a report released Tuesday.

Trade bodies representing MMFs have been left dismayed at the emergence of revised and strengthened plans from Brussels for a so-called "Tobin tax on equity, bond and derivative transactions, reported by the Financial Times lastweek.

Wolfgang SchÔøΩuble and George Osborne, finance ministers of Germany and the UK, call for "concerted international co-operation" to make corporate taxation more effective. The sentiment cannot be faulted. But they need to prove this is not all talk and no action.

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Westminster is rarely a palace of pleasure, but Thursday brought the magnificent spectacle of Margaret Hodgewalloping the big four accountancy firms for their role in helping companies deprive the Treasury of taxes everyone else has to pay. Four heads of tax at PWC, Ernst & Young, Deloitte and KPMGwriggled and obfuscated, hiding behind the polite euphemisms of their trade. Never say avoidance or, God forbid, evasion but call it "tax planning" and "tax efficiency".

The initiativewas announced in a report titled "Tackling Offshore Tax Evasion" thatwas issued by OECD Secretary-General Angel Gurría and submitted on June 19 to G-20 leaders meeting in Los Cabos, Mexico.

Catherine the Great is supposed to have said,A greatwind is blowing, and that gives you either imagination or a headache. In Washington,winds are stirring for corporate tax reform. Butwhile there is broad bipartisan agreement that tax rates should be reduced, there is less consensus regardingwhat the tax rate should be, how to pay for a tax cut, or generally how to treat international business income. These considerations are inextricably intertwined because the U.S. assesses its corporations onworldwide income.

A Conservative MP haswritten to the chief executives of all FTSE 100 companies seeking their support for corporate tax transparency and a new international accounting standard requiring country-by-country reporting of profits and taxes paid.

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This article is about allocatingworldwide interest using gross profits as the allocation factor. The term "gross profits" means profits before interest or taxes. In addition to the salutary effects on artificial profit shifting that it shareswith other interest allocation methods -- in particular, allocation of interest by assets -- interest allocation using gross profitswould reduce the incentive to shift profits by adjusting transfer prices. It does this by narrowing the difference between domestic and foreign effective tax rates.