Int'l Tax News

International negotiations on new tax rules for the digital agewill fail to conclude this year, raising the risk of a transatlantic trade conflict and a proliferation of contentious national levies on global tech giants.

The OECDwants to design a tax reporting framework for cryptocurrency assets by 2021, the group's leader said Monday. The project aims "to design a tax reporting framework thatwill ensure tax transparencywith respect to crypto-assets, including the income derived from the sale of such assets," OECD Secretary-General Angel Gurría said in a report to the Group of 20 finance ministers and central bank governors, released Monday.

Members of the U.N. model tax convention subcommittee remain divided on a proposal to treat payments forsoftwareas royalties taxable by source states, a potential revision that has drawn opposition from business groups.

Countries may have a solid foundation for a revamp of the international corporate tax system, but theOECD's chiefwill urgeG-20finance ministers to overcome their political differences to reach agreement on the new rules.

The Spanish Senate gave final parliamentary approval October 7 to controversial taxes on digital services and stock transactions.

Countries now "strongly encourage" the United States to pull back on its base erosion and antiabuse tax as part of a key proposal to introduce global corporate minimum taxation, according to a newly leaked document.

In this article, the authors discussPerrigo, a case involving tax assessments on the sales of a pharmaceutical company's intellectual property pending before theIrish High Court.

During the September 6 meeting of theEconomic and Financial Affairs Council, Ireland said that it had concerns about potential tax conditionality being linked to the disbursement of EU recovery funds.

TheOECD's digital taxationwork has progressedwell, but member states should think further about transitioning from an industrial tax system to a digital one in a post-pandemicworld, according to Estonia's pick forOECDsecretary-general.

Every four years a Democrat runs for president on a platform that includes higher taxes for thewealthy. And every four years a group of people predicts that the skywill fall if those plans are implemented. Yet every time their plans have been implemented, the sky hasn't fallenÔøΩif anything, economic growth and business investment have been stronger under Democratic than Republican presidents.

The first glimpse is emerging of a levy the European Union is drawing up to ensure its Green Deal environmental rules aren't undone by nationswithweaker standards.The measure being drafted by the EU's executive armwill penalize the greenhouse-gas pollution produced by factories outside the region that ship their products into Europe. The so-called Carbon Border Adjustment Mechanism is meant to ensure that domestic industries most at risk from stricter climate policies aren't hurt by the Green Deal.

A license to use copyrightedworks is a taxable supply, an adviser to the European Court of Justice confirmed Thursday in an opinion that complicates arrangements for the collection of royalties in the bloc.

Treasury took a firm stance in newly released proposed rules, saying companies subject to measures like digital services taxes abroad probablywon't be able to receive U.S. credits for those taxes.

African countries must prepare to come upwith their own solution for taxing the digital economy in case international negotiations to rewrite global tax rules fail, a continent-wide forum of tax administrators saidwednesday.

The IRS needs more time for guidance meant to modernize how it treats digital inventories of companieswith foreign assets, an agency official said.The IRS issued final income-sourcing rules under tax code Section 863(b) earlier thisweek. The preamble to the rules acknowledges that Treasury may release future guidance addressing income sourcing from digital transactions.

The Czech Republic expects 2.5 billion koruna ($109 million) in proceeds from its proposed digital tax, according to a 2021 draft national budget obtained by Bloomberg Tax.

A recently concluded consultation by theEuropean Commissioncould result in the effective extension ofEUstate aid rules to subsidies, including tax relief, provided by non-EU countries such as China and the United States.

Negotiations on a part of a proposed global tax overhaul are taking longer than expected, so it's unlikely countrieswill find consensus by the end of 2020 as originally planned, theOECD's tax chief said.

EU member stateswill remove the Cayman Islands and Oman from theEUlist of noncooperative jurisdictions for tax purposes and add Barbados and Anguilla through awritten procedure concluding October 6.

Countries developing a digital services tax should consider a rate of between 1 and 3 percent for companies or multinational enterprise groupswith high turnover and online business sales, theAfrican Tax Administration Forum(ATAF) says.

Mindy Herzfeld likens the OECD two-pillar proposals to various developments over the last century, including the Brettonwoods Agreement,which shaped the economic institutions that formed the basis for global economic relationships.

Countries hoped the base erosion and profit-shifting projectwould carve a path for taxing digital activity. But five years later, it's still not clear if that pathwill lead to a new paradigm or chaos.

TheOECDplans to release practical guidance this year addressing some of the issues that participants in a recent consultation have identified as the most pressing transfer pricing challenges caused by the COVID-19 pandemic.

European CouncilPresidentCharles Michelhas informed EU leaders that hewill organize a summit on digital issues, including digital taxation, on March 25 and 26.

The Finance Committee of theSpanish Senateon October 1 approved legislation to implement a digital services tax and a financial transaction tax.

In the event that OECD-level negotiations do not yield an agreement on digital taxation, any European proposalwould supersede member states' individual digital services taxes, according to theEU's top tax official.

Although it has been difficult to get countries moving toward a common approach to modernize global corporate tax rules, theOECDremains hopeful that consensus iswithin reach, the organization's tax boss said.

TheEUis finalizing tougher rules to regulate big tech companies,with possible soft law measures to influence their tax behavior.

The OECDwill publish final blueprints and an impact assessment related to a proposal for modernizing global tax rules on October 12 andwill start a public consultation shortly thereafter, the OECD's tax chief said.

Vodafone haswon a long-running disputewith the Indian tax authoritieswhich argued that the UK telecoms group should pay almost ÔøΩ3bn in back taxes and penalties related to its 2007 acquisition of a local operator.

Margrethe Vestager, the EU's executive vice-president in charge of competition policy, said on Friday that Brusselswill appeal against a court decision that quashed an order for Apple to pay back ÔøΩ14.3bn in tax advantages to Ireland.

The Organization for Economic Cooperation and Development is expected next month to officially release its draft "blueprints" for Pillars 1 and 2 of the multilateral program for the digital economy. Jeff VanderWolk of Squire Patton Boggs sees a projectwhere the 137 participantswith differing views fall roughly into three camps, all lacking a shared purpose.

The European Unionwill propose a digital tax on tech companies at the end of the year if nations fail to get a multilateral dealwithin the OECD, EU Commissioner Thierry Breton said Friday in an interview on BFM Business.

The OECD's digital tax overhaul carries "potentially adverse implications" for developing countries,warned a new report from a panel convened by the United Nations. The time frame of the negotiations has been dictated by richer countries, and may be too fast for developing countries,which have fewer resources to devote to the process, the interim report said Thursday. Nearly 140 countries are negotiating a global tax overhaul at the Organization for Economic Cooperation and Development to address concerns about how tech giants and other multinationals are taxed.

The European Commission plans to propose streamlining systemswithin the European Union for claiming relief from double taxation of dividends. Proposals,whichwould be published by the end of 2022,would seek to improve on the current situation of "divergent, burdensome, lengthy and fraud-prone refund procedures for taxwithheld in cases of cross-border investment," the commission, the EU's executive, said in an action plan published Thursday.

Apple Inc.'s victory over a record back-tax order faces a challenge at the European Union's top court as Competition Commissioner Margrethe Vestager seeks to rescue her crackdown on allegedly unfair fiscal deals doled out to multinational companies. The EU's General Court "made a number of errors of law"when it sidedwith Apple in its ruling in July, the European Commission said in a statement on Friday announcing that itwould appeal to the EU Court of Justice.

Finance executives at major U.S. companies expect corporate tax rates to rise following the presidential election in NovemberÔøΩno matterwhowins.

Apple Inc.'s July court triumph over a massive European Union back- tax order is forcing antitrust chief Margrethe Vestager to make a tough choice: Challenge a ruling that faulted the EU investigation or accept judges' criticisms and re-examine a case started more than six years ago.

U.S. multinationals'wish to be excluded from an OECD-led effort to set a global minimum tax rate could comewith new administrative burdens. The nearly 140 countries negotiating a global tax overhaul at the Organization for Economic Cooperation and Development are consideringwhether to allow U.S. companies a pass on global minimum tax rules, because they're already subject to a similar regime in the U.S.

An officialwith theEuropean Commission's Directorate-General forTaxation and Customs Union(DGTAXUD) said observers shouldn't assume a new U.S. administrationwill be more flexible regarding international negotiations on digital taxation.

The GermanEU Councilpresidencywill support a decision on public country-by-country reporting and says a majority of member states appear to support it.

Mindy Herzfeld describes proposals from Democratic presidential candidate Joe Biden to encourage companies to move jobs back to the United States and discourage moving jobs offshore.

Ubersupports the OECD-ledwork on a potential global corporate tax overhaul for the digital age and continues to hope for multilateral agreement on that proposal, the company's tax chief said.

The EU "will spare no effort to reach agreement" on digital taxation in theOECD/G-20inclusive framework, but itwill take unilateral measures if necessary,European CommissionPresidentUrsula von der Leyensaid.

Brazilwill need to align its transfer pricing system more closelywith the arm's-length standard if itwants to implement a proposed global approach to tax the digital economy, a topOECDofficial said.

The Netherlands is canceling its top corporate tax rate cut and plans to offer other relief measures, including employment and investment tax credits,while introducing a carbon tax, according to the government's 2021 tax plan.

The head of theOECD Centre for Tax Policy and Administrationfears that negotiations on pillar 1 of the multilateral solution to taxing the digital economywill take too long and countrieswill move unilaterally.

As part of a broader response to the COVID-19 pandemic's economic fallout, the U.K. government is reportedly considering giving companies a full tax break in a bid to boost investment in plant and machinery.

Most EU member states don'twant to rush a digital tax because the U.S. stance might change after the presidential election, sources said after a meeting of theEconomic and Financial Affairs CouncilSeptember 12.

New Zealand'sLabour Partymade headlines recently in announcing plans to increase taxes for high earners, but the party also said itwill move quickly to implement a digital servicestax ifOECDnegotiations fail.