Int'l Tax News

Umesh Gala and Shruti Lohia of Dhruva Advisors examine India's new tax concessional regimes, introduced to give domestic companies and manufacturers a boost. India also make its move towards a tax e-assessment system.India has traditionally been a high corporate tax jurisdiction. Up until September 2019, the effective corporate tax rates (including surcharge and cess)were almost 35% for large domestic companies and a little less than 30% for smaller companies.with a view to making Indian domestic companies competitive, a tax ordinancewas passed by the government on September 20 2019.As part of the ordinance, two concessional tax regimeswere introduced. Both regimes are optional and companies are required to elect the tax rate regime bywhich theywant to be governed.

The OECD is tinkeringwith technical challenges in its global anti-base erosion (GloBE) proposal under pillar two of the digital tax proposals and is seeking public input by December 2.The OECD's latest consultation document, released on November 8, sets rules to maintain a minimum tax rateworldwide. The rules aim to address risks from structures that allow companies to shift profits to jurisdictionswhere they are subject to either no or low taxation.The OECD 'Programme ofwork on Pillar Two' consultation document is seeking feedback on simplifications, thresholds, carve-outs, and exclusions from the suggested pillar two rules. There are already design issues that need to be addressed such as the determination of an appropriate tax base.

The OECD has released further country-by-country reporting guidance to clarify additional issues,such as the treatment of dividends, and to flag common mistakes that multinational groups makewhenpreparing their CbC reports.

Disagreements between Treasury and lawmakers over base erosion and antiabuse tax provisions areholding up passage of tax treatieswith Chile, Hungary, and Poland, but observers say U.S. companies canhelp push the treaties through.

In the third article in a series on provisions that could be part of an extenders bill or Tax Cuts andJobs Act technical corrections bill, Mindy Herzfeld examines recent legislative proposals from Democraticlawmakers

Congress's latest effort to pierce the opacity surrounding ownership of some U.S. companiesappears to be flying under the taxworld's radar even though tax evasion is a central focus of the legislation.

A December election in the U.K.will mean that the government's draft finance bill,which includes a proposal to tax digital giants,will be shelved.

The EU is trying to find agreement among its members on how to take a united position on the OECD's plan to tax the digital economy.

Peter A. Glicklich and Heath Martin, of Daviesward Phillips & Vineberg LLP, New York, consider the response by U.S. companies and the U.S. government to unilateral digital taxation.

The European Commission should scrap the idea of a carbon border tax and favor incentives for energy-intensive companies to create a greener future, a leading research group concluded.

By Ruth Mason

This short article discusses five major themes emerging from the EU General Court decisions in Starbucks and Fiat, namely, (1) the treatment of the arm's-length standard, (2) implications of the decisions for Apple, (3) implications of the decisions for non-arm's-length allocation rules in the proposed CCCTB and pending in the BEPS 2.0 negotiations, (4)whether the decisions mean that the OECD Transfer Pricing Guidelines have now been incorporated into EU law via the state-aid rules, and (5) implications of the General Court's conceptualization of arm's-length income allocation as analogous to the "market economic operator" test.

By Ari Glogower and David Kamin

Regarding "pass-through" deduction under § 199A and the general reduction in corporate tax rates to 21%, Glogower and Kamin argue that these poorly targeted tax preferences, coupledwith private-sector tax gaming and political economy constraints, create the potential forwhat they term the "progressivity ratchet," inwhich lawmakers cannot readily reverse revenue-losing tax preferences by raising nominal rates on high-earning taxpayers. To escape this predicament, Glogower and Kamin suggest restoring the relative penalty for operating in corporate solution, eliminating existing tax preferences, or better targeting those tax preferences that policymakers choose to keep.

Requiring employers to make contributions to Medicare for All, imposing a financial transaction tax and raising the corporate tax rate to 35% are a fewways to finance a single-payer health care proposal revealed Friday by Sen. Elizabethwarren, D-Mass.The 2020 presidential candidate's Medicare for All proposalwould cost roughly $20.5 trillion between 2020 and 2029, according to a letter on the costs prepared by a panel of economists and policy experts, andwould be paid forwith a myriad of new tax provisions aimed at increasing the burden on thewealthy and corporations.warren's health care planwould eliminate private health insurance options in favor of an expanded version of Medicare available to everyone.

The European Union meeting of finance ministers is set to remove Belize from the bloc's tax blacklist at a meeting Friday.

The U.S. Department of the Treasury's planned paring down of Obama-era internal debt regulations could put the Internal Revenue Service at a disadvantage in targeting abusive transactions.

The OECD has the difficult task of building a consensus between competing nations, but it also faces the critical eye of NGOs convinced that the proposals do not go far enough.

Indonesian Minister of Finance Sri Mulyani Indrawati said her government is exploring how to taxdigital companies that don't have a permanent establishment in the country.

Treasury and the IRS announced plans to substantially modify the anti-inversion debt-equity fundingrules, alongwith issuing final regulations that remove the documentation rules.

Finance ministerswill discuss the state of play of international discussions related to digital taxationand agree on new rules to tackle VAT fraud in e-commerce at the upcoming Economic and Financial AffairsCouncil meeting.

The OECD should propose taxing multinational groups as one entity to prevent tax leakage, according to a report recently issued by a public-sector trade union group.

By Alex M. Parker

A report from the conservative Heritage Foundation called Tuesday for the U.S. Treasury Department towithdraw from a global initiative to overhaul international tax rules.

A number of European Union stateswant to check the legality under EU law of a possible minimum corporate tax,which is a key part of an international effort to reform.

ByNir Fishbien

In this paper, the author calls for the adoption of a Dividends-Paid Deduction form of tax integration and for current-base taxation of foreign earnings. The author argues that the already reduced corporate tax rate (21%), combinedwith tax integration,will provide a significant relief from the relatively high burden of corporate double taxation, allowing U.S. multinationals to better compete in the global economy.

India may lack adequate resources to meet the OECD's recommended two-year period to settle tax disputes involving multinational companies in treaty partner countries, the organization said.

The Chinese State Administration of Taxation Oct. 14 announced new measures concerning corporate income tax and personal income tax advantages for nonresident individuals and corporations under DTAs signed by mainland China, Hong Kong, and Macao.

The General Court of the European Union recently annulled the European Commission's decision that Starbucks' advance pricing agreementwith the Netherlands constituted unlawful state aid. Monique van Herksen of Simmons & Simmons explainswhy the outcome is not as reassuring as it might appear.

With less than three months before service tax on imported digital services is implemented in Malaysia, Yvonne Beh and Sarah Sheah, ofwong & Partners, look atwhat foreign service providers should be doing now to prepare.

European Union efforts to force large companies to publicly report the taxes they pay on a country-by-country basis have been stopped dead after Germany declined to back the legislation.

Retroactive transfer pricing adjustments in China are becoming increasingly feasible, and multinational corporations have the incentive to make them. Dr. James Zhao and Alina Huang of Deloitte China explain recent developments and share their observations.

ByWilliam Byrnes

This paper address two issues related to the EU decision in the Starbucks state aid case: the properway to allocate the residual between SMBV and Starbucks intermediary IP management limited partnership, and how to allocate the residual among Starbucks' global value chain.

Turkey's government has proposed several revenue-raising measures, including a digital services tax, an increase in income taxes for high earners, and new residential property and hotel accommodations taxes.

The UK financial sector could face a financial transaction tax (FTT) among a raft of tax reforms if the Labour Partywins the upcoming snap general election.The UK has an SDRT rate of 0.5% on share trading,which raised £3.5 billion ($4.5 billion) in 2017/18. Labour's proposalwould expand this to include transactions involving corporate bonds, equity and credit derivatives, raising an extra £2.1 billion in annual tax revenues.

France made some bignewsrecently in theworld of global taxation. It enacted a tax targeting large U.S. tech companies – including Facebook, Amazon, Google and Apple – that are earning massive global profits. For years these multinational enterprises have avoided paying corporate taxes in the U.S., thanks to shell operations in tax havens like the Bahamas and the Cayman Islands. But France is tired of seeing these companies get awaywith large-scale tax avoidance.It's not just France, however. More than 20 European countries are poised to impose digital taxes on large U.S. tech companies.

The House on Tuesday passed legislation aimed at cracking down on the use of anonymous shell companies for illicit activities. The bill passed by a vote of 249-173. Twenty-five Republicans joined most Democrats in voting for the bill,while five Democrats voted against it.

Both national and international action are necessary to end tax practices that,while legal, are still unfair, the German finance minister said recently, praising aEuropean Uniondisclosure requirement his country is due to adopt by year-end. Under the requirement, companieswould have to notify authorities of legal tax avoidance strategies, Olaf Scholz, the finance minister, said duringa conference for German tax consultants in Berlin on Monday.

President Donald Trump's administration still might double U.S. taxes on French taxpayers and companiesÔøΩeven as negotiatorswork towards a broader international solution.

The French General Directorate of Public Finance Oct. 16 opened a consultation on the implementation of a 3 percent tax on all revenue linked to France for large companies engaging in digital advertising, online platforms, or user data sales.

Developing countrieswant to slow down the OECD's digital tax project so they have time to understand its effect on their revenueÔøΩbut pausing itwould lead to tax chaos, the OECD's chief tax officialwarned.

Over the last five years or so, the European Commission has been using competition law, and in particular the state aid rules, to challenge favorable tax regimes and tax rulings given by some member states to particular multinationals. Catherine Robins of Pinsent Masons looks at the recent decisions of the General Court in the Starbucks and Fiat cases.

James Ross of McDermottwill & Emery looks at the current factors influencing the implementation of the U.K.'s digital services tax.

The United Kingdom Parliament Oct. 15 accepted for consideration a statutory instrument to implement an EU directive clarifying the definition of financial instruments for hybrid mismatch arrangement purposes. The draft instrument includes: 1) reporting procedures for tax periods that fall outside the effective date range, and 2) the exclusion of certain financial instruments.

The European Union Official Gazette Oct. 17 published an order updating the EU list of non-cooperative tax jurisdictions. The order includes measures: 1) removing the United Arab Emirates from the black list; 2) removing Albania, Costa Rica, Mauritius, Serbia, and Switzerland from the gray list; and 3) moving Marshall Islands to the gray list from the black list.

Meeting inwashington, the G20welcomed the recent progress and the announcement lastweek of an OECD initiative to find a compromiseway of taxing profits, particularly of tech giants. Its suggestionwas to rip up almost a century of taxing profits according to the physical presence of a company in a jurisdiction and move to one that gave countries greater taxing rights dependent onwhere saleswere located.

President Donald Trump onwednesday again criticized France's digital services tax, saying that only the U.S. should be allowed to tax its tech companies.

As the dust settles around the federal tax overhaul, states that have largely avoided touching companies' global intangible low-taxed income may still be treating foreign earnings differently from their domestic counterparts inways that could violate the U.S. Constitution. Most states have simply decoupled from the federal provision for GILTI or they've recognized the earnings as dividends that qualify for a 50% deduction under Section 250 of the Internal Revenue Code, and in some cases more than that. Earlier this month, Louisianawent a step further and issued a revenue bulletin stating that itwould recognize GILTI earnings as fully deductible dividends, essentially declining to tax this type of income at all.

The OECD hopes to hammer out details of its proposal to adapt the international tax rules for the digital age in January and reachpolitical agreement in June, the organization's tax chief said.

Energy-related carbon dioxide emissions reached new heights in 2018, but governments are not doing enough to take advantageof environmental taxpolicies to curb the problem, according to a new OECD report.

ByMitchell Kane, Joseph Bankman and Alan Sykes

This paper offers a comparative assessment of the policy instruments that governments might employ to collect a share of rents from non-resident MNEs that operatewithin their borders. The paper beginswith tax instruments, discusses recent attempts to expand those instruments, and then expands the analysis to antitrust policy, state-owned enterprises, price regulation, and various instruments of trade policy. The goal is to identify the strengths andweaknesses of different instruments in different contexts.