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Expanded Worldwide versus Territorial Taxation after the TCJA
One of the principal U.S. tax policy issues leading up to the Tax Cuts and Jobs Actwas how foreign-source active business income of U.S. multinational enterprises should be taxed by the U.S. if the system of deferring U.S. tax on active foreign income of a foreign subsidiarywas ended. Much of the U.S. multinational business community urged adoption of a territorial or exemption system,while others, including many labor-backed groups, favored adopting an expandedworldwide tax regime. Congress chose both. This report takes a preliminary look at the extent towhich the TCJA's purely outbound international provisions caused a degree of movement in either direction. The authors have concluded that expandedworldwide taxation is the normatively preferred position. The report explains how the new global intangible low-taxed income regime may serve as a platform to shift the U.S. international tax regime to expandedworldwide taxation and identifies steps thatwould accomplish that objective.
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Companies Hazy on Reporting Tax in Earnings; IRS Rules Up in Air
More than a year after passage of the 2017 tax overhaul, multinational companies like Nike Inc. andwalgreens Boots Alliance, Inc. still aren't surewhat the new rules mean for their bottom linesÔøΩsetting up a bumpy ride through the upcoming earnings season. Companies are stillwaiting for the government to answer questions about the law's international provisions so they can calculate their tax bills properly.
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EU's Plans to End Tax Policy Veto Doomed, Advisers Say
The European Commissionwill launch the findings of a consultation into replacing veto powers on tax policywith a qualified majority voting system Jan. 15. The move could pave theway for the European Union to pass key tax laws such as the digital services tax and the financial transaction tax,which up to now have been stalled since the policy for tax measures requires unanimity from all member countries, and means some countries could block significant laws through exercising their right to veto.
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Bermuda Issues Economic Substance Regulations
Bermudian Finance Minister Curtis Dickinson issued the Economic Substance Regulations 2018 on December 28, aweek after the passage of the Economic Substance Act. The regulations took effect December 31.
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News Analysis: How the Tax Code Opens U.S. Politics to Foreign Nationals
Special counsel Robert Mueller is looking intowhether any foreign money illegally flowed to President Trump's inaugural committee. In August 2018 the U.S. District Court for the Southern District of New York obtained a guilty plea from awashington consultantwho used a U.S. citizen to purchase inauguration tickets so that a foreign person could attend the inauguration. Donations to an inaugural committee, including ticket purchases, can't come from foreign persons (see Rebecca Davis O'Brien, Rebecca Ballhaus, and Aruna Viswanatha, "Trump Inauguration Spending Under Criminal Investigation by Federal Prosecutors," Thewall Street Journal, Dec. 13, 2018).
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News Analysis: What the OECD Can Learn From the U.S. GILTI Regime
The OECD is committed to finding reasonable solutions for addressing digital taxation this year. As previously reported, the organization has been considering a three-pronged approach involving a proposal for a minimum tax, favored by the Germans and the French; a proposal for a shift to destination-based source rules, favored by the United States; and a proposal for allocating taxing rights based on user location, favored by the United Kingdom.
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News Analysis: BEAT-Up Service Providers
In the realms of the beaten, there's the Red Devils, and there's service providers,which are looking at being beaten down by . . . BEAT. That'd be the new Tax Cuts and Jobs Act base erosion and antiabuse tax (section 59A). Proposed regulations interpreting this new lawwere issued on December 13 (REG-104259-18).
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Chile considers new 19 percent tax on multinational e-commerce firms
Chile isweighing proposals for a new tax of up to 19 percent on multinational digital commerce companieswith local operations Finance Minister Felipe Larrain said on Thursday, a rate nearly double that originally proposed.
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Tax Cut Helped Banks' Earnings Growth - But Not for Much Longer
The earnings outlook is about to get dicier for big banks. The 2017 tax overhaulwas a boon. The reduction in the corporate tax rate sent billions of additional dollars flowing to banks' bottom lines, helping earnings grow sharply. But fourth-quarter results, due to start thisweek,will mark the last period inwhich the new law's drop in the rate to 21% from 35% magnifies earnings growth. The boost came from favorable comparisons to year-earlier periods in 2017,when taxeswere higher.
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China to Cut Company Tax and Fees Further to Spur Growth-Minister
Chinawill cut company taxes and fees further this year to support economic growth, Finance Minister Liu Kun told state television in an interview aired on Friday. Chinese officials have pledged more aggressive reductions in 2019, after cutting about 1.3 trillion yuan (£150.3 billion)in taxes and fees last year. "Wewill step up new tax and fee cuts this year on the basis (of last year) to lower companies' burden, stimulate vitality of firms and promote economic growth," Liu said, adding that value-added tax (VAT)would be reformed.
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Austria Says Will Tax Internet Giants 3 Percent of Ad Revenue
Austria on Thursday announced details of a plan to tax internet giants including Amazon, Google, Facebook and Alibaba 3 percent of their advertising revenue, accusing them of failing to pay their fair share. The announcement comesweeks after Austria failed to clinch a European Union-wide deal on a digital tax in its capacity as president of the bloc, a role it relinquished on Jan. 1.while it is pressing aheadwith its own national measure, Chancellor Sebastian Kurz said Austria also supported an EU-wide levy.
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A carbon tax to fund increased border security?
As the old saying goes, politics makes strange bedfellows. A national carbon tax to fund increased border security fits that description. President Trump's request for these funds is a major sticking pointwith Democrats in the current budget impasse. However, many of the younger generation of Democrats elected to the House in the midterm election strongly support government action to address the climate challenge. Is there away for all sides to declare victory from this solution? Increased funding for border securitywould allow the president to fulfill a campaign promise that is extremely important to his base. A carbon taxwould allow Democrats to score a major climate policy victory.
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The Role of Corporate Taxation Today and the UN's 2030 Sustainable Development Goals
This article discusseswhat the Sustainable Development Goals ("SDGs") are,what the role of (corporate) taxation is in reaching these goals andwhy both in-house tax practitioners and thoseworking in a law firm or advisory firm should pay close attention to the SDGs.
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Alibaba Purges 200,000 Tax-Avoiding Vendors as Nations Crack Down
Alibaba has blocked 200,000 vendors globally since September in response to governmental pressure for the Chinese e-commerce giant to crack down on tax avoiders using its platform.
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Mexico Plans to Cut Tax for Companies Holding IPOs to 10%
Mexicowill cut the tax rate paid by companies on the proceeds of initial public offerings to 10 percent as part of a broad-ranging plan to boost public offerings and spur growth in the financial system.
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Italy Courts Controversy With Adoption of Digital-Revenue Tax
Amazon, Facebook, and other American technology giants could owe Italy hundreds of thousands of dollars under a new digital-revenue tax lawmakers approved as part of the country's 2019 budget.
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U.K. Companies Can Avoid 'Google Tax' Penalties Under New Program
The U.K. tax office is giving companies a chance to avoid a 30 percent penalty if they disclose their exposure to the "Google" tax through a new notification program.
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EU opens probe into Nike's Dutch tax arrangements
Brussels has launched a probe intowhether Nike benefited from sweetheart tax arrangements in the Netherlands that breached EU curbs on state support.
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Nike's Tax Deals Probed as EU Targets Another U.S. Giant
Nike Inc. is the latest U.S. giant to become embroiled in the European Union's crackdown on tax deals regulators say give a select group of big firms an unfair edge over their rivals.
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Trump Tariffs Soften Fiscal Hit from Corporate Tax Cut, CBO Says
Money collected from the U.S. government's new import tariffs helped offset the loss of revenue it suffered from corporate tax reductions, according to estimates published Jan. 8 by the Congressional Budget Office.
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AICPA Points to Need for Changes in Proposed GILTI Regs
The American Institute of CPAs has addressed issues in proposed regulations (REG-104390-18) on global intangible low-taxed income that include the carryforward of net tested losses by U.S. shareholders, anti-abuse rules, and the availability of the section 245A dividends received deduction to controlled foreign corporations.
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OECD Holds International Tax Development Meeting
The Organization for Economic Cooperation and Development held a meetingwith the Netherlands that focused on international cooperationwithin the tax field and the adoption of measures by the Dutch government to update the international tax system and address tax evasion.
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A Comparison of the Greek GAAR and the EU Anti-Tax-Avoidance GAAR
In this article, the author examines the relationship between Greece's general antiavoidance rule and the GAAR included in the EU's anti-tax-avoidance directive.
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Thailand Enacts International Business Center Tax Regime
Thailand has implemented a new international business center (IBC) tax regime in linewith action 5 (harmful tax practices) of the OECD's base erosion and profit-shifting project.
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Practitioners Puzzled by BEAT Base Erosion Payment Rules
Recently released guidance on the base erosion and antiabuse tax may have provided taxpayerswith much-needed detail, but practitioners are not fully satisfiedwith answers provided on base erosion payment operating rules.
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EU Commission Plans for Qualified Majority Voting on Tax Issues
On January 15 the European Commissionwill present a communication setting out options to move from unanimity to qualified majority voting in tax matters.
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European Commission to Probe Nike's IP Structure
The European Commission has launched a state aid investigation into tax rulings granted to U.S. footwear giant Nike that approvedwhat may have been excessive royalty payments to group intellectual property holding companies.
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Big Pharma's Cancer Race
The GOP corporate tax reform,which cut the U.S. rate to 21% from 35% and allowed businesses to repatriate overseas profits tax-free, has given U.S. drug makers more cash to invest. Now they're acquiring companies to advance innovation rather than engage in tax arbitrage as they did pre-reform.
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Europe Settles Some Tax Scores
Americans are used to debating the impact of tax policy on economic growth, so it might come as a surprise (or not) that the European Union is far behind the curve in this regard. New research helping Brussels fill that gap is a breath of fresh air. At issue is dynamic scoring, a method economists use to estimate how tax-policy changes affect economic growth, employment and revenue. Dynamic-scoring projections have featured prominently in U.S. debates for years. Yet EU economists cling to static scoring, a less realistic method that assumes tax policy has no bearing on broader economic incentives. This leads them to overstate lost revenue from tax cuts and overestimate the revenue gains from tax increases.
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Spain- Amortization of Financial Goodwill
The Spanish goodwill cases could give the European Commission more room for maneuver in state aid investigations and could have consequences on pending and future fiscal state aid cases.
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Changing Tax Environment for Multinational Groups in Hungary
Hungary has traditionally maintained a very favorable corporate income tax environment for decades, making it a competitive option for international holding structures. Changes in the corporate tax environment in Hungary in 2019will provide further opportunities for international holding structures.
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Google Cuts Taxes By Shifting Billions to Bermuda- Again
Google Inc. continued to reduce its taxes for another year by taking advantage of loophole structuresÔøΩthis time shifting $22.6 billion.
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UK Legislators' Tax Law Ups Pressure To Avoid No-Deal Brexit
A U.K. finance bill amendment passed Tuesdaywould limit the government's ability to tweak tax legislation after Brexit, in a bid to discourage the government from leaving the European Unionwithout a transitional trade agreement. The amendment, approved by 303 votes to 296 in the House of Commons,would mean the government cannot make technical changes to maintain the effect of the tax code should the country leave the European Unionwithout a deal in two months' time unless lawmakers have given their express consent to a so-called no-deal Brexit.
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Dems look to chip away at Trump tax reform law
Democrats in the coming yearwill be laying the groundwork to eventually roll back parts of President Trump's tax law. No Democratic lawmakers voted for the measure Trump signed in December 2017, criticizing the bill for providing large benefits towealthy individuals and corporations and for adding to the federal deficit.with Republicans controlling the Senate and thewhite House, Democrats are unlikely to be able to undo any significant portion of the law in the next two years.
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Have We Got a Carbon Tax 'Dividend' for You
This could be the year Congress tries to enact the mother of all taxes, a carbon taxÔøΩa levy on the use of oil, natural gas and coal. Everything that is fabricated, grown, operated or moved is made possible by hydrocarbons. That makes the carbon tax different from a mere consumption or excise tax. The latter is attached to purchasingÔøΩspend more, pay more. A carbon tax is a tax on existence, because all aspects of living require energy, and hydrocarbons provide 80% of America's energy, more for the rest of theworld. And hydrocarbons are used to create or build everything else that produces energy.
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Isle of Man Parliament Approves Substance Requirements
Isle of Man's parliament recently approved new corporate substance requirements in linewith the recommendations of the EU Code of Conduct Group on Business Taxation.
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Cayman Islands Fires Back at Netherlands Over Blacklisting
The Netherlands' decision to place the Cayman Islands on its tax haven blacklist has brought a backlash of criticism from the British overseas territory.
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U.K. Amazon Rep Slams Digital Services Tax as 'Blunt Instrument'
Although Amazon sympathizeswith governments impatient for an OECD solution to tax the digital economy sooner than 2020, a revenue-based digital taxwould unfairly hit companies like Amazonwith razor-thin margins, a company executive said.
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Netherlands Announces Tax 'Blacklist'
On December 28, 2018, the Dutch Government published in the Official Gazette a list of 21 low-tax jurisdictions. Companies doing business in these territorieswill face new anti-avoidance measures, intended to tackle tax base erosion and profit shifting. Jurisdictions on the list have a corporate tax rate of less than nine percent.
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Correction to TCJA Provision Doesn't Violate Due Process, Firm Says
In a December 31 letter to leaders of the Senate Finance Committee and Houseways and Means Committee, Miller & Chevalier Chtd. offered support for a Tax Cuts and Jobs Act technical correction in H.R. 88 thatwould clarify the application of the stock attribution rules under subpart F to reflect congressional intention, saying that such a correction doesn't raise due process concerns.
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CJEU to Consider French Capital Gains Tax on Merger-Related Securities Transfers
The Court of Justice of the European Union has published the reference for a French case (C-662/18) onwhether the EU merger directive (2009/133/EC) precludes the use of different bases of assessment and rate rules to tax capital gains from transfers of securities received in exchange and deferred capital gains.
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The Blacklist Game: Should the EU Label the United States a Tax Haven?
It's the season for New Year's resolutions. Here's a suggestion for our friends in the EU: Canwe please stop itwith the tax haven blacklists? Ditto for gray lists and other variations on the theme.
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Collections Growth Falls Short of Indian Tax Authority Goal
Lethargic tax collections have prompted India's Central Board of Direct Taxes (CBDT) to instruct income tax officials to follow a multi-pronged approach to reach this fiscal year's $165 billion budget target.
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Perrigo Is Sued in U.S. Court Over Potential Irish Tax Liability
News that pharmaceutical company Perrigo could owe the Irish government over ÔøΩ1.63 billion in tax because of an alleged mischaracterization of income has landed the company in hotwaterwith at least one investor.
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A Multinational Prescription for Global Tax Policy
In this article, the author discusses the influence of the OECD inclusive framework on tax policy and its importance for multinational business in all sectors.
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Albania Introduces Special Tax Rate for Software Companies
A Council of Ministers decision establishing a reduced corporate tax rate for Albanian software companieswas published in the official gazette December 13with immediate effect.
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B.V.I. Parliament Approves Economic Substance Act
The House of Assembly of the British Virgin Islands recently approved legislation designed to assuage EU concerns about economic substance.
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News Analysis: BEAT and Banks, Part 2
Chinese conglomerate HNA is selling its 3 percent Deutsche equity investment. So now Deutsche is looking to the Qatari investment funds for an increase in their nearly 10 percent equity investment. BlackRock owns 6 percent of the bank. Large shareholders have rights to acquire more shares if they're silly enough to throw good money after bad.
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Economic Analysis: Post-Reform Double Taxation and Double Nontaxation
After over a decade of debate about international tax reform,we might have hoped our move to territorialitywould have been accompanied by a bit more rationality. The bookends of the Tax Cuts and Jobs Act ÔøΩ a lower corporate rate and elimination of the lockout of foreign profits ÔøΩ are simple, majestic policy masterstrokes. Unfortunately, they are debt-financed. And all the accompanying baggagewe must livewith ÔøΩ necessary to momentarily piece together a political and budget jigsaw puzzle 13 months ago ÔøΩ not only obfuscate and complicate, but in many cases obliterate, the potential economic benefits of the fundamental framework.
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China Says Will Cut Banks' Reserve Requirements, Taxes, as Bad News Piles Up
Chinawill cut banks' reserve requirement ratios (RRRs), taxes and fees, Premier Li Keqiang said on Friday, as theworld's second-largest economy shows further signs of cooling. The measureswill also included targeted RRR cuts aimed at supporting small and private companies, Liwas quoted as saying in a statement on thewebsite of the Chinese government.