Int'l Tax News

Political pressures motivating some global digital tax discussions appear to originate principally from concernswith the business-to-consumer market, according to a U.S. Treasury official.

U.S. officials believe the OECD'swork on the digital economywill lead to a modest reallocation of taxing rights, most likely based on the marketing intangibles approach set out in the OECD discussion draft.

Treasury appears to be hedging its bets on its June 22 goal for delivering several pieces of international guidance from the U.S. Tax Cuts and Jobs Act thatwould statutorily allow retroactivity for its rules.

The European Commission failed to convince the EU General Court that Belgium's tax rulings exempting companies from tax on "excess profits" attributable to their being part of an international group constituted an illegal state aid scheme.

Germany's finance ministry is looking into the possibility of a 15 percent special tax on online advertising revenue collected by foreign internet companies such as Google or Facebook from German operators,wirtschaftswoche magazine reported on Friday.

President Trump and Republicans bet that the 2017 tax overhaulwould invigorate the U.S. economy after a long but slow expansion, putting controversial economic theories about growth to a crucial test. A broad measure of business investment surged early in 2018 but slowed in the second half of the year, in part reflecting changes in energy prices. Shipments of capital goods tailed off after rising briskly early in the year.

Italy's Banca Mediolanum S.p.A. said its net profit for 2018was reduced by ÔøΩ102.5 million because of extraordinary costs related to the settlement of a tax dispute involving the banking group's Irish unit.

Four U.S. territories ÔøΩ Guam, American Samoa, U.S. Virgin Islands, and Puerto Rico ÔøΩ have been blacklisted by the European Commission for being lax on money laundering and terrorist financing controls.

For the second time in as many hearings on key international provisions from the U.S. Tax Cuts and Jobs Act, government officials sat in silence as tax experts launched critiques on proposed guidance.

A new OECD discussion draft containing more detailed proposals to address the tax challenges of the digital economy is drawing diverse responses from the tax community, setting the stage for lively debates in Paris.

Legislative revisions to the Tax Cuts and Jobs Actwill depend on internal and external policy pressures, including the response from U.S. trading partners, according to a former Senate Finance Committee staffer.

EU finance ministers at a February 12 meeting of the Economic and Financial Affairs Councilwere divided over the European Commission's communication on the possibility of moving toward qualified majority voting (QMV) on tax issues.

Carbon tax advocates recently received a huge boost from awide group of famous economistswho signed a letter supporting a carbon tax that sends revenues directly to citizens and shrinks redundant environmental regulation. A tax of $40 per ton is estimated to generate $2,000 in the first year for a family of four and rebateswould risewith tax rates. Signers include previous chairs of the Council of Economic Advisors and of the Federal Reserve and countless Nobel laureates.

Recent bills in Montana and Oregon thatwould require multinationals to report their global profits present a legally sound option for recouping tax revenue from overseas, but the method has a history of foreign resistance that could remain a challenge.

The National Foreign Trade Council has asked that proposed global intangible low-taxed income regulations (REG-104390-18) include a GILTI high-tax exception, eliminate the basis adjustment rule, narrow the anti-abuse rule, amend the effective date, and clarify that section 245A applies to subpart F dividend income received by domestic corporations and controlled foreign corporations.

The Idaho State Tax Commission adopted a temporary rule that allows taxpayers to exclude repatriated dividend income if the taxpayer can prove that the incomewas previously included in Idaho apportionable income in a prior tax year, and that clarifies the state's treatment of global intangible low-taxed income.

The New York state tax department's recent guidance on global intangible low-taxed income includes factor relief for some corporations, confirmingwhat some practitioners thought the agencywould do.

A European proposal to require tax laws to be passed by a majority vote, rather than through unanimous consent, could be derailed by small member nations at a Feb. 12 meeting.

A small group of hedge funds are being rewarded for backing an $18 billion restructuring of Puerto Rico's sales-tax debt that saddled other investorswith losses.

Indiawill abandon its significant economic presence (SEP) rule and drop the equalisation levy once OECD members come to an agreement on how to tax the digital economy, a leading government figure has said. But taxpayerswant clarity on SEP thresholds now.

A package proposed by the Austrian government includes a reform to platforms' VAT obligations, mirroring the UK's and Germany's laws. Butwith the EU poised to act in 2021,why is Austria bothering to move in 2020?

Tax Executives Institute Inc. has commented on proposed foreign tax credit regulations (REG-105600-18), addressing clarifications under the regs on how deductions are allocated and apportioned and special rules for determining the amount of business profits attributable to a qualified business unit for foreign branch income purposes.

The New York State Department of Taxation and Finance has issued a technical memorandum explaining the effects on businesses of the new provisions under the federal Tax Cuts and Jobs Act that address income earned from overseas operations, including mandatory deemed repatriation income, foreign-derived intangible income, and global intangible low-taxed income.

A Kansas measure to exempt global intangible low-taxed income and deferred foreign income from state taxationwas approved by the state Senate.

The French Council of State has upheld a transfer pricing adjustment to the sales price of a subsidiary's shares, holding that sale of a subsidiary's stock for nominal consideration is an indirect transfer of profit.

Proposals submitted to France's National Assemblywould assess financial transaction tax on intraday trading and extend the holding period for exemption from exit tax, thereby undoing recent changes limiting the reach of the regime.

Corporations that elect to file a single consolidated tax return must take into consideration the effect of the Tax Cuts and Jobs Act's base erosion and antiabuse tax. Under section 59A, the BEAT is imposed on corporations having substantial gross receipts that make base erosion payments, or payments to foreign related parties. New proposed regulations (REG-104259-18) address how the BEAT applies to these consolidated groups.

A proposal by the European Commission to impose a 3 percent digital services tax on multinational companies' revenue is discriminatory, likely to lead to double taxation, andwould create a new transatlantic trade barrier, Senate Finance Committee Chair Chuck Grassley, R-Iowa, said in a February 7 floor statement.

S. 223, the Patriot Employer Tax Credit Act, introduced by Senate Democraticwhip Richard J. Durbin of Illinois,would allow a tax credit of up to $15,000 per employee to "patriot" companies that maintain U.S. headquarters and meetwage and benefit requirements.

Taxes on unhealthy foods ÔøΩ and the political support required to implement them ÔøΩ have important roles to play in the fight against several global pandemics, according to a Lancet Commission report.

In 2017, Congress passed the Tax Cuts and Jobs Act. Many of the jobs it is creating, it turns out, are in the tax industry. The overhaul continues to generate thousands of jobs for tax professionals as companies analyze the law, restructure operations and rely on tax experts to do all thework flowing from the legislation and IRS regulations, according to lawyers and executives at tax firms. Business is unusually strong and should remain robust for years as a result of the law, they say.

A report claiming that multinational tax avoidance cost EU governments 825 billion euros ($940 billion) in 2015 relied on outdated data and didn't take into consideration the European Union's Anti-Tax Avoidance Directive, according to a German business group.

Credit Suisse Group AG, Switzerland's second-largest bank, said its earnings last yearwill probably be subject to higher taxes than the bank had assumed because of changes in the U.S.

Major U.S. banks shaved about $21 billion from their tax bills last year ÔøΩ almost double the IRS's annual budget ÔøΩ as the industry benefited more than many others from the Republican tax overhaul.

Many countries, including members of the OECD, raise revenuewith a consumption tax levied on incremental increases in the value of goods and services as they move through the supply chain. These value-added taxes generate considerable income and are relatively efficient to administer.The Congressional Budget Office recently issued a report highlighting this policy option to possibly help reduce the U.S. budget deficit.

Part 2 of this two-part Insight looks at the different forms of digital services tax being introduced as interim measures in a number of jurisdictions until a global solution is reached.

Lawmakers are urging the Dutch government to delay the effective date of a tax measure thatwould hit thousands of the country's largest companies. Several lawmakers urged Dutch State Secretary for Finance Menno Snel on Feb. 6 to make the rules retroactive to Jan. 1, 2019, instead of the proposed Jan. 1, 2018. These are rules thatwould limit the deductibility of intragroup interest payments made by Dutch consolidated companies that file a single tax return.

Companies arewaiting for IRS guidance to seewhether and how they can benefit from a new tax deduction designed to encourage exports under the foreign-derived intangible income provision.

The Treasury Department may or may not give a credit to companies for payments they make under digital tax regimes of other countries said Lafayette G. "Chip" Harter, deputy assistant secretary of international tax affairs at U.S. Treasury.

Merck & Co. Inc. and Honeywell International Inc. revised their estimates for 2017 tax overhaul expenses during their most recent quartersÔøΩa full year after enactment of the law.

Numerous tax jurisdictions have undertaken to ensure internet companies pay their share of tax: new regulations are being implemented, such as a digital services tax ("DST") in the EU, the equalization levy in India, and other similar taxes. Part 1 of this two-part Insight looks at the new digital business models and the challenges they pose to current international corporate tax regulation.

Microsoft Corp.'swin in a landmark tax case at Denmark's Supreme Court may force the Danish tax authority to re-examine theway it goes after global companies.

Simplicity is a main priority of developing countries in the ongoing global discussion about redrawing international tax rulesÔøΩmaking a solution such as formulary apportionment attractive said Ruud de Mooij, chief of the tax policy division at the International Monetary Fund's fiscal affairs unit.

Chile is studying how to incorporate blockchain technology to improve its tax-collection powers as part of a broader move toward digital government. The government is preparing a conceptual model thatwould use blockchain to monitor payments received from banks and other private entities and then automatically inform the corresponding government service said Cristian Cespedes, head of information technology at the General Treasury of the Republic.