Int'l Tax News

Under a new EU directive known as DAC 6 (EU Directive 2018/822), intermediaries that advise, assist, and direct cross-border arrangementswill now be required to report those transactions to their home member state. The first reports are due in August.

Although Norwegian officials remain optimistic that countries participating in theOECD's inclusive frameworkwill reach consensus on taxing the digital economy by 2020, the governmentwill move forwardwith unilateral measures if those countries cannot agree.

This article makes some projections about howwashingtonwill dealwith the BEPS 2.0 project over the coming months.Treasuryhijacked the European-led BEPS agenda once before, andwe're in the process of doing it again.

Implementing the recommendations of theOECD's base erosion and profit-shifting project could cost Ireland up to ÔøΩ2 billion in corporation tax revenue from 2022, according to theDepartment of Finance.

International agreement on taxing the digital economy needs to be reached by the end of 2020, given the proliferation of unilateral measures, but the solutionwon't be simple,according to anOECDofficial.

CbC reportswere supposed to help tax officials identify good candidates for audit, that is, "help theIRSperform high-level transfer pricing risk identification and assessment." But the data are blurredwith biases of unknown magnitude.why didwe spend hundreds of millions, or perhaps billions, of dollars developing and collecting datawith such questionable value?

Mindy Herzfeld examines the various tranches of regulations promulgated to interpret the Tax Cutsand Jobs Act and askswhether Treasury followed notice and procedure requirements in developing them

Finance Minister Siv Jensen confirmed that the countrywould consider unilaterally implementing a digital services tax as soon as 2021 if international negotiations to rewrite tax rules for the digital economy fail to reach consensus.

Tariffs and year-end transfer pricing adjustments present a unique conundrum in this era of tradewars. The authors analyze how tariffs can upset carefully planned transfer pricing arrangements and how to adjust those arrangements in response.

Pressure from voters has forced politicians to co-ordinate aninternational response

The U.S. Trade Representative's recommendation to impose tariffs on French imports in response toFrance's digitalservices tax has received mostly positive reviews from U.S. companies,whichwant amultilateral solution to digital taxation.

French Finance Minister Bruno Le Mairewarned that his governmentwould immediately go to theWTO to fight anysanctions imposed by the United States,which found that France's digital services taxdiscriminates against U.S. companies.

Mindy Herzfeld discusses the recently released final section 59A regs, saying Treasury's explanationsfor granting some taxpayer requests and not others aren't logical.

The author's research describes the plausible magnitude of US revenue loss due to profit shifting, building on recent developments in the literature aswell as new country-by-country data on US multinational companies in 2016. In the past, the most complete data sources have all shown large magnitudes of profit shifting, suggesting substantial revenue losses in non-haven countries.This research note uses recently released country-by-country tax data to estimate plausible benchmarks regarding the scale of profit shifting, finding that profit shifting is likely to be costing the US government about $110 billion a year in 2016 (at 2016 tax rates).The author concludes thatwhile much can be done to refine these estimates and learn more about the scale of the problem, the problem remains unambiguously very large.

Judge Albert G. Lauber of the U.S. Tax Court ruled that the U.S.-U.K. tax treaty protecting certain British enterprises from U.S. federal income taxes does not protect the U.K. company from the IRS increasing its taxable income by nearly $50 million.

In the last two years, dozens of governments have proposed or introduced unilateral tax measures to tax foreign-based technology companies. The new tax innovations include specialwithholding taxes, diverted profit taxes, minimum taxes, and digital services taxes. The rise of these unilateral measures threatens an international tax 'war' among governments that could stiflenew business models or even the spread of the global digital economy. This article reviews how international reform efforts have failed to constrain aggressive international tax planning and how the global digital tax conflict masks a growing dissatisfactionwith how to tax value associatedwith global transactions.The author concludes thatacoordinated solution that creates an economic presence test (a Quantitative Economic Presence Permanent Establishment) and modifies how tax revenues are divided between countries (e.g., the Residual Profit Split by Income proposal) is the bestway to address these global developments.

Officials to hold talks to head off new round of US trade sanctions

Internet company to consolidate all of its intellectual property in the US

Austria's coalition government has announced a four-year program that calls for a corporate tax cutfrom 25 percent to 21 percent, aswell as a revised goal of climate neutrality by 2040.

Although tax avoidance by multinationals has become an international political priority, it remainsunclearwhether anti-profit-shifting measures are economically beneficial for either high-tax or low-taxcountries, according to an IMFworking paper.

The OECD isworking at a breakneck pace to find a multilateral solution to update the internationalcorporate tax rules for the digital age, and going into 2020, the stakes for thatwork have never been higher.

The outlook for U.S. tax treaties and the OECD multilateral instrument in 2020 seems uncertain,particularly in light of the stormy international trade climate among major trading nations, practitioners say.

Automatic exchanges of jurisdiction-based reports that multinational companies file about their tax activitiesworldwide are an unintended outcome of pro-transparency efforts that may inundate tax administrationswith confusing data, the Organization for Economic Cooperation and Development has said.

An abrupt about-face by the U.S. on an international project to overhaul the global tax system has revealed deep divisions among American businesses over the proposal,which could hike their foreign taxes.

States' slow responses to the 2017 federal tax overhaul's provisions on taxing international income have created uncertainty that hampers growth, the Tax Foundation said Thursday in a report that also criticized certain states' partial adoption of the overhaul.

Austria's finance minister has told his German counterpart he can't support Germany's plan for a financial transaction tax, presenting a potentially serious roadblock to efforts by 10 European Union countries to reach agreement on the tax.

U.S. multinationals have repatriated over $1 trillion since Congress overhauled the revenue code in late 2017 to let companies bring home their offshore earnings tax-free after a one-time payment, according to data released Thursday by the U.S. Commerce Department.

The U.S. Treasury Department is consideringwhether to retroactively apply a new high-tax exception to global income, a government official said Thursday.

Sunday marks two years since the GOP's Tax Cuts and Jobs Act sped through Congresswithout a single Democratic vote, and lawmakers are still arguing over the law's impact on federal budget deficits, economic growth and business investments.

The European Parliament advanced a resolution on December 18 to adopt an EU standard to tax digital companies in case the OECD fails to find consensus on its global approach.

Although 2019 delivered two highly anticipated Ninth Circuit decisions in transfer pricing cases,disputes concerning intangible valuation and differing interpretations of the arm's-length standard appearpoised to continue unabated in 2020

EU finance ministers are expected to discuss international reform of digital taxation during anEconomic and Financial Affairs Council meeting in January 2020

Mindy Herzfeld analyzes the various factors that threaten the future of today's international taxregime

A growing empirical literature has documented significant profit shifting activities by multinationals. This paper looks at the impact of such profit shifting on real activity and tax competition. Real activity can be affected as profit shifting changesÔøΩand theoretically most likely reducesÔøΩthe cost of capital. Tax competition, even over real capital, is affected, because a permissive attitude toward profit shifting can be seen as a selective tax reduction for multinationals. Tightening profit shifting rules, in turn, can affect tax competition through the main rate. This paper discusses these issues theoretically andwith the help of a simulation to assess the impact of profit-shifting on investment, revenues, and government behavior. Using the theoretical framework, it also provides a brief overview of the related empirical literature.

The authorsanalyze the impact of the exchange of information in tax matters in reducing international taxevasion between 1995 and 2018. Based on bilateral deposit data for 39 reporting countries andmore than 200 counterparty jurisdictions,theyfind that recent automatic exchange of information frameworks reduced foreign-owned deposits in offshore jurisdictions by an average of 25 percent. This effect is statistically significant and, as expected, much larger than the effect of information exchange upon request,which is not significant.To test the sensitivity oftheirfindings,theyestimatedcountries' offshore status and the impact of information exchange simultaneously using a finite mixture model. The results confirmedthat automatic (and not upon request) exchange of information impacts cross-border deposits in offshore jurisdictions,which are characterized by low-income tax rates and strong financial secrecy.

The United Stateswants an OECD global tax overhaul proposal to apply to "scalewithout mass" digital companies and torestrict the number of countries that can collect taxes paid on those companies' residual profits.

After a 15-month OECD review of Brazil's unorthodox transfer pricing system identified significant double taxation andbase erosion risks, Brazilian officials have announced plans to gradually align the country's regime fullywith OECD standards.

As much as 40% of international corporate investments are actually going into shell companieswith no real connection to local economies, according to a newworking paper released by the International Monetary Fund.

The Mexican government has set out to reform the tax system to include the OECD's recommended limits on interest deductibility in accordancewith BEPS Action 4. Mexican tax reformwill define 2020.

The OECD's global anti-base erosion (GloBE) proposal under pillar two is broader than taxpayers expected. It risks over-complicating international tax before the impact of the BEPS project settles in.

Anglo-Dutch corporate group Unilever has called for the OECD to link its digital tax proposals to the UN's sustainable development goals.

The OECD has embarked upon an ambitious project to redistribute taxing rights around theworld in a bid to avoid more unilateral action. Here Pascal Saint-Amans makes the case for the unified approach to pillar one.

The Conservative Party haswon the 2019 general election. Paul Falvey, of BDO U.K., discusseswhat this means for U.K. taxes. How boldwill the new government be?

Brazil needs to do more to stop multinational companies from shifting profits offshore and to align its tax systemwith the rest of theworld, the OECD and the country's tax authority said.

European Union lawmakerswant member countries to adopt a united position ahead of Organization for Economic Cooperation and Development talks to reform the international tax system for multinational companies.