Int'l Tax News

Senate Democrats' international tax framework contemplates partial relief from several Tax Cuts and Jobs Act taxpayer-unfavorable provisions, butwithout details, it's unclear how much those changeswill lessen the sting of tougher proposals.

The government filed a supplemental brief in a U.S. district court arguing for the dismissal of a U.S. citizen and his Israeli law firm's challenge of the global intangible low-taxed income tax law's validity, arguing that the plaintiffs lack standing for the same reasons as the court cited in a related case on the validity of the section 965 transition tax.

At an April 22 debate hosted by the Institute for Fiscal Studies and the Chartered Institute of Taxation, Helen Miller, head of tax at the Institute for Fiscal Studies, critiqued the UK's planned increase in the main rate of U.K. corporation tax from 19 percent to 25 percent.

Although proposals to raise the U.S. corporate tax rate to 28 percent have grabbed more general media headlines, some multinational tax executives appear more concernedwith potential changes to the global intangible low-taxed income provision.

Speaking at a meeting hosted by the Irish Finance Ministry on April 21, Irish Finance Minister Paschal Donohoe emphasized that Ireland supported an OECD-led international agreement, itwould not budge from its 12.5 percent rate.

Nana Ama Sarfo considerswhat adoption of a 21 percent minimum tax rate, as proposed by President Biden,would mean for developing countries.

Developing countries havewon the backing of a U.N. committee to include language in their treaties aimed at helping them tax big tech companies. The language, known as Article 12B,would update the United Nations model treaty and give developing countries a new framework for deciding how to tax cross-border digital revenuewhen they negotiate double tax agreements. The U.N. Committee of Tax Experts adopted article 12B on Tuesday after dissenting countries decided to forgo a vote, said Rajat Bansal, a member of the committee and chair of the tax subcommittee that drafted the article. The U.N. didn't immediately return a request for comment.

The Organization for Economic Cooperation and Development isworking to find consensus among nearly 140 countries on a two-pillar plan to address concerns that multinationalsÔøΩespecially tech giantsÔøΩaren't paying enough in taxes. If governments don't reach a deal, more countrieswill likely turn to unilateral measures to capture digital revenues from tech giants like Amazon.com Inc. and Facebook Inc. In early April, the U.S. proposed simplifying the plan's first pillar on profit reallocation rules to only capture about 100 of the most largest and most profitable multinationals. The second pillar of the plan is a global minimum tax.

Tax executives from multinational companies are bracing for a potential increase in the corporate tax rate, though they're optimistic itwon't be raised all theway to 28% as President Joe Biden has proposed. Biden's planned increase to 28%, from the current 21% rate, has faced resistance from corporate America and Republicans. And not all Democrats are on boardwith it.

Technology giants led by Apple Inc. and Microsoft Corp. disclosed more than $100 billion in profit outside the U.S. in their last fiscal years, making them prime targets of President Joe Biden's proposals to boost taxes on earnings stashed overseas. The tax proposals, unveiled this month to help foot the bill for massive infrastructure plans, target common tactics used by U.S. multinationals such as stashing income-generating assets in low-tax offshore jurisdictions. The tech industry is particularly adept at shifting profits to tax-friendly locales because its main assets -- software code, patents and other intellectual property -- are relatively easy to move around compared to factories and other physical assets.

Europe's low-tax nations have responded positively to the Biden administration's plans for a radical reform of global corporate taxation, even though theywill lose out ÔøΩ but signalled thatwashington can expect a fight over much of the detail.

Martin Sullivan provides three policy justifications ÔøΩ contrary to theOECDand consistentwith the Biden administration'sintentions ÔøΩ for repealing QBAI. He then offers a simple alternative to the QBAI approach for exempting routine returns as a possible compromise between theOECDand administration positions.

Mindy Herzfeld analyzes the different proposals to change the taxation of foreign earnings in the international tax rules, specifically the Biden administration's proposal for imposing GILTI on a country-by-country basis.

Now that the Biden administration has proposedways to revitalize global tax reform negotiations, chances are high that countrieswill be able to agree on a commonway forward, the EU's tax commissioner said.

A proposal for public country-by-country reporting is tied up in interinstitutional negotiations,where the European Parliament and EU Council have differing views on the scope of the proposal, according to an EP committee chair.

The OECD reported improvement in all eight jurisdictions covered in its latest peer reviews on implementation of the inclusive framework's dispute resolution minimum standards, but it said some countries have made more progress than others.

The EU is planning a measure to increase tax transparency in its further delayed communication on business taxation for the 21st century, according to a top EU tax official. Benjamin Angel, director of direct taxation at the European Commission's Directorate General for Taxation and Customs Union, said the commissionwelcomes the progress in discussions between the European Parliament and the EU Council on a public country-by-country reporting proposal and hopes to build on that momentum by adding another initiative to increase tax transparency.

President Biden's tax plan proposes to extend tax credits for renewable energywhile ending tax benefits for fossil fuels. Oil-and-gas lobbyists could soon find themselves in the awkward position of denying that any special treatment for those companies exists,while digging in their heels to protect that treatment. Andwhile the impact on actual hydrocarbon production could be limited, such a movewould mark the end of an era for an industry that has held much influence over the past century. The U.S. Treasury said lastweek the tax planwould "end long-entrenched subsidies to fossil fuels,"which it estimateswould increase government tax receipts by more than $35 billion over the next 10 years.

Executives at American companies are bracing for higher taxes following the unveiling of President Biden's $2.3 trillion infrastructure plan,which is proposing to raise the corporate tax rate to 28% from 21%, and increase taxes on companies' foreign earnings. The proposed tax changeswould overhaul or replace much of the international tax structure that camewith the 2017 Tax Cuts and Jobs Act. Companies are alsoweighing potential implications of the global minimum tax for multinational corporations that Treasury Secretary Janet Yellen floated earlier this month.

President Joe Biden's desire for a 21% global minimum corporate tax risks further complicating global tax reform discussions, some European Union lawmakers said Tuesday.Nearly 140 countries are deep in discussions facilitated by the Organization for Economic Cooperation and Development to change international tax rules to better reflectwhere value is created and reduce opportunities for legal tax avoidance.

President Biden recently introduced a $2.7 trillion spending package designed to be partially offset by an array of corporate tax increases. Those tax changes are justified by the assertion that the U.S. corporate tax burden is less than the OECD average. Authors of the article counter that the figure is misleading and show how the proposed packagewould bring the U.S. corporate tax burden above the OECD average.

The Biden administrationwants countriesworking on an OECD-led effort to overhaul global tax rules to agree to shut down digital levies aimed at U.S. tech giants. The U.S.'s plan lastweek sparked new optimism for nearly 140 counties to reach agreement on a plan this summer. But the administration's call to end unilateral measures in countries like France, the U.K., Italy, and India could meet resistance as negotiators try to define the types of taxes to roll back, observers say.

President Joe Bidenwas told by a Republican senator at awhite House meeting that the tax hike he's proposedwouldn't be approved by the GOP. Biden suggested some flexibility toward a smaller package than his $2.25 trillion infrastructure-focused economic plan, another meeting participant said.

The Biden administrationwants countriesworking on an OECD-led effort to overhaul global tax rules to agree to shut down digital levies aimed at U.S. tech giants. The U.S.'s plan lastweek sparked new optimism for nearly 140 counties to reach agreement on a plan this summer. But the administration's call to end unilateral measures in countries like France, the U.K., Italy, and India could meet resistance as negotiators try to define the types of taxes to roll back, observers say.

Netflix Inc., Spotify Technology SA, and Snap Inc. endorsed a recent U.S. proposal to refocus a plan to rewrite global tax rules on the 100 largest, highly profitable companies. The U.S. pitch could bring much-needed simplifications to an OECD-led plan, the companies said in a letter to Treasury released Tuesday under the Freedom of Information Act. The OECD is trying to get nearly 140 countries to agree to overhaul decades of tax rules and agreements to better tax the digital economy.

Both the Biden administration, through its just announced "The Made in America Tax Plan,"and several senators, including Senate Finance Committee Chair Ronwyden (D-OR), Sherrod Brown (D-OH) and Markwarner (D-VA), are trying to revamp the complicated, and to some extent, flawed changes made to the U.S. international tax systemin 2017 by the so-called Tax Cuts and Jobs Act. The target of this effort should be to encourage corporations to keep and create new good paying jobs in the United States, to avoid tax barriers to repatriation of offshore profits and to prevent U.S. taxation from making U.S. companies noncompetitivewith their foreign rivals.

A 15% minimum tax on large, profitable corporations that is part of President Biden's infrastructure proposalwould affect far fewer companies than the version he campaigned on, according to details the Treasury Department releasedwednesday. The taxÔøΩaimed at companies that report large profits to investors but low tax paymentsÔøΩwould apply only to companieswith income exceeding $2 billion, up from the $100 million threshold that Mr. Biden pushed during the campaign. The Biden planwould now also let companies subject to the tax get the benefit of tax credits for research, renewable energy and low-income housing, a recognition that the campaign-trail version could have undercut the president's preference to encourage companies to invest in those areas.

As long as there are corporate taxes therewill be arguments aboutwhat is fair, competitive and how to avoid a "race to the bottom" ("U.S. Aims for Global Minimum Corporate Tax Rate," Page One, April 6). Alas, there is a simple solution: Set the rate at zero. Corporate taxes support only about 10% of federal receipts, a figure that could be easily covered by raising other taxes. Economists already debatewhether corporations truly pay taxes or merely pass them along in an inefficient and, yes, unfair, manner. Clever ploys such as domicile shifting and inversionswill be relegated to the scrapheap of corporate history. And if none of thisworks,well, deficit spending is all the rage anyway; there isn't the slightest pretense of fiscal discipline anywhere near our nation's capital.

An IRS proposal denying foreign tax credits for companies hit by digital taxes outside the U.S. is too broadlywritten, business groupswarned. The 2020 proposed rules (REG-101657-20; RIN: 1545-BP70)would prevent companies from getting U.S. tax credits on many taxes onwhich they've historically been able to do soÔøΩsuch aswithholding taxesÔøΩand could lead to double taxation, they told the IRS during a virtual hearingwednesday.

The Biden administration has floated a compromise proposal to counterparts around theworld thatwould apply a new international tax code to, at most, 100 global corporate giants. The U.S. planwould consider a company's profitability in determiningwhether more of its income should be taxed by the countrieswhere it does business -- something the Biden administration argueswill resolve long-standing disputes aboutwhich companies should be targeted by new global tax rules -- according to a document obtained by Bloomberg News.

Multinational companies have long used creative -- and legal --ways to shrink their tax bills. One is to book profits from customers in places like Boston and Berlin as if they came from, say, Bermuda,which has no corporate income tax. Long-stalled efforts to revamp the global tax system are getting a new push, thanks to the pandemic and a policy U-turn from the U.S. The complex proposals boil down to two basic notions: setting a minimum corporate tax rate across theworld (think of this as making a bigger revenue pie), and rewriting the rules for allocating that revenue among countries (cutting the pie up differently).

A surprise U.S. drive to overhaul international corporate taxation promises a new era for governments to capture a bigger tax take from some of the most successful global businesses -- if only the rest of theworld can agree.

Martin Sullivan developsa checklist of proposed statutory changes to theGILTIrules, including allowing carryover of FTCs in the GILTI basket, providing for equal treatment of tested loss CFCs, removing the income limitations of the section 250 deduction, and discontinuing expense allocation for the GILTI FTC basket.

A trio of Senate Democrats unveiled a proposal Monday to raise taxes on multinational corporations as lawmakers begin to refine their plans to pay for President Joe Biden's infrastructure package.

The framework released by Finance Committee Chair Ronwyden (Ore.) and fellow taxwriters Sherrod Brown (Ohio) and Markwarner (Va.) generally agreeswithwhat the administration proposed lastweekwhen it called for a host of tax hikes on corporations, though it differs on several points and includes additional details.

The Biden administration is calling for theworld's biggest multinational companies to pay levies to national governments based on their sales in each country, as part of an ambitious proposal for a global minimum tax. The planwould apply to the global profits of the very largest companies, including big US technology groups, regardless of their physical presence in a given country. The US Treasury laid out its proposal in documents obtained by the Financial Times,which had been sent to the 135 countries negotiating international taxation at the OECD in Paris.

Senate Democrats unveiled an international tax framework short on numbers as theyworkwith the Biden administration on corporate tax reform.

While Germany and France cheered U.S. Treasury Secretary Janet Yellen's reaffirmation of support for global minimum corporate taxation, business groupswarned that the movewould dampen American competitiveness unless other countries follow suit.

Fueled by a recent show of U.S. support for global minimum taxation, G-20 finance ministers remain optimistic about getting a multilateral corporate tax reform agreement over the finish line by their July meeting. In a communiqué published at the end of their April 7 virtual meeting, G-20 finance ministers and central bank governors said theywould continue cooperating for a "globally fair, sustainable, and modern international tax system."

The Biden administration's new tax plan proposes that the controversial base erosion and antiabuse tax be replacedwith a new measure targeting cross-border related-party transactions, the stopping harmful inversions and ending low-tax developments (SHIELD) proposal. Citing the flaws and unintended effects of the BEAT, the Treasury Department's April 7 report on the administration's Made in America Tax Plan argues that its SHIELD proposalwould be a more effective and targeted check on profit shifting by multinationals. (Related coverage.) In explicitly proposing elimination of the BEAT, the report confirms that ÔøΩ as expected ÔøΩ the BEAT is the unspecified "ineffective provision" thatwas slated for repeal in Treasury's March 31 fact sheet on the plan.

President Biden's "Made in America" tax planwould raise the corporate tax rate to 28 percent, modify the global minimum tax, implement a 15 percent minimum tax on corporate book income, and extend and enhance tax credits for clean energy production, among other measures, according to a report released April 7 by Treasury.

Aspects of the OECD's digitalization tax project "include significant departures from accepted international tax principles" and could reduce U.S. tax revenues and allow other countries to attack the U.S. tax base, Republican members of the Houseways and Means Committee said in an April 8 letter to Treasury Secretary Janet Yellen.

The U.N. subcommittee on taxation of the digital economy released the final draft of a new treaty article thatwould allow source-country taxation of revenue from automated digital services. On April 6 the subcommittee published an updated draft of itswork on a new article 12B (income from automated digital services),which is on track to be presented for approval at the next session of the Committee of Experts on International Cooperation in Tax Matters for inclusion in the U.N. model tax treaty. Article 12Bwould allow countries to tax income earned by a beneficial owner residing in another country that arises from automated digital services in the taxing country, even if the owner does not have a fixed place of business in the taxing country. The virtual meetings take place April 19-23 and April 26-28.

An agreement at the OECD level on pillars 1 and 2 of the digital economywork programwill be complicated by EU countries' electoral processes after this summer, French Finance Minister Bruno Le Maire said. "We have to be fast.we have an opportunity for the summer 2021.we have to conclude now; tomorrow might be too late," Le Maire told reporters April 8. He said the upcoming elections, particularly in Germany and in France,would make it difficult for an agreement to be reached after the summer. Le Maire called on OECD countries to meet in the next fewweeks and said that any agreement must include both pillars. "Wewon't adopt pillar 1without pillar 2" and vice versa, he said.

The U.S. Treasury is floating a "comprehensive scoping" idea tied to revenue and profitability to identify a narrow set of multinational enterprises subject to potential new tax rules under an OECD-led global tax reform project. According to a slide deck prepared by Treasury, the Biden administration set out its position on pillar 1 of the two-pillar project,which seeks to overhaul the global corporate tax rules for the digital age. The slideswere prepared as part of Treasury's April 8 presentation to the steering group of the OECD inclusive framework on base erosion and profit shifting, the group of 139 jurisdictions responsible for further standard setting under the OECD/G-20 BEPS project and for reaching agreement on the plan by the summer.

Treasury Secretary Janet Yellen argued for a global minimum corporate tax rate Monday, seeking international cooperation that is crucial to funding the administration's $2.3 trillion infrastructure proposal.

Corporations had amplewarningÔøΩan entire presidential campaignÔøΩthat tax increaseswere coming. But that doesn't take the sting out of President Biden's proposal to raise the corporate tax rate to 28% from 21%.

Senate Democrats offered proposals Monday to increase the tax burden on U.S. companies' foreign profits and move the system in the same general direction as the Biden administration's plan.

President Biden and the Democrats are making a big bet that the politics of taxation have changed. In their view, the American public ÔøΩ frustrated by the economic impact of COVID-19 and years of stagnation for the middle class ÔøΩ iswilling to countenance higher taxes, at least on corporations and thewealthy.

President Joe Biden is proposing to unwind many of the corporate tax changes in President Donald Trump's 2017 tax law. Companies could end up collectively paying hundreds of billions of dollars more in taxes in the coming years. Key to the Biden proposal is the imposition of a new global minimum tax to address a longstanding issue -- the ability of multinational corporations to greatly reducewhat they owe the U.S. government.

The Biden administration's proposal to replace a much-criticized anti-abuse taxwith an internationally standardized rule could help allay a point of contention in global digital tax negotiations. In the $2.25 trillion infrastructure proposal releasedwednesday, the administration appeared to put the base erosion anti-abuse tax, or BEAT, on the chopping blockÔøΩa provision from the 2017 tax law that both companies and other countries view as problematic, according to practitioners. The proposal suggests the U.S. could put in its place an anti-abuse measureÔøΩknown as the under-taxed payments ruleÔøΩthat's part of the "Pillar Two" plan being developed by the OECD to help strengthen its own proposed global minimum tax regime.