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Proposed FTC Regs Balance Accuracy and Administrability
Some controversial aspects of the new proposed foreign tax credit regulationswere intended to reliably approximate economic reality in an administrableway rather than to prevent perceived abuse or avoidance.
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Peer Company ETRs: Benchmarking complexity
The effective tax rate (ETR) of a peer company may be intuitively thought of as an industry benchmark. This benchmark could traditionally be useful to investors, boards of directors, CFOs and tax departments of multinationals and CFOs. But times are changing.
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0%: The correct corporate tax rate
New and returning members of a soon-to-be divided Congress might be tempted to heed thewords of the late Sen. Russell B. Long (D-La.),who once summed up tax reform nicely: "Don't tax you. Don't tax me. Tax that fellow behind the tree." Giant, faceless corporations might seem like an ideal candidate to be that fellow behind the tree. After all, they can't vote. But there is a problem: Regardless ofwhether you buy the argument that "corporations are people," they don't pay taxes. Only people pay taxes (and not just rich CEOs and investors).
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The truth about government spending and the carbon tax
Sinceworldwar II, there has been more than 30 major changes to the tax code. These changes have had a dramatic impact on the economy and, onewould expect, on government revenues. Except in reality, they have not. A recent study by the R Street Institute found that demand for government spending drives tax policy, not the otherway around. This conclusion has important implications for the carbon tax debate.what the R Street Institute study found is the belief that any kind of new taxation introduces even greater government spending is based on very little actual evidence. Instead, Hauser's law provides evidence that certain kinds of tax swaps, such as exchanging an income tax for a carbon tax, may actually increase the rate of economic growthwithout increasing the tax share of the overall economy. This means that taxing pollution more and taxing income less could boost economic growth, keep spending from outstripping revenues, and help clean up the environment.
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CFC Stock Rules Disarm Some Tax Traps But Pitfalls Remain
Proposed regulations that exempt from taxation some investment earnings of a U.S. parent's controlled foreign companies have closed some tax traps related to corporate borrowing, but companies must parse the rules carefully to ensure they meet their requirements.
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Puerto Rico Tax Overhaul Expected To Provide $2B In Relief
Puerto Ricowill have a lower corporate tax rate and a new tax credit aimed at creating a more attractive tax climate under a bill its governor recently signed that is expected to provide about $2 billion in tax relief.
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Indian GAAR disputes to continue but there is hope, say tax directors
Tax departments must be extra-vigilant to avoid costly litigation from India's recurrent and creative use of the general anti-avoidance rule, say tax directors - but even strong documentation may not be enough.
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International Tax News Edition 69
PwC's monthly publication, International Tax News, offers updates and analysis on developments taking place around theworld. This month's publication includes: Columbia's tax reform; Hong Kong's bill modifying certain loss-absorbing capacity requirements of debt instruments; Hungary's tax law changes related to ATAD implementation; Ireland's public consultation to improve corporate anti-tax avoidance measures; Singapore's Income tax (amendment) act 2018, U.K.'s Autumn Budget 2018, Brazil's guidance for the reduced 0% incomewithholding tax rate on international charter leasing payments; U.S.'s Proposed Regulations and section 956, and release of draft instructions for Form 8991 (BEAT) and draft section 163(j) calculation form; Australia's double tax agreementwith India; EU's mandatory disclosure and OECD's MLI needles.
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International Cooperation and the 2017 Tax Act
BySusan C. Morse
There is a silver lining for the corporate income tax in the Tax Cuts and Jobs Act of 2017. This is because the Act's international provisions contain not only competitive but also cooperative elements. The Act adopts a lower, dual-rate structure that pursues a competitiveness strategy and taxes regular corporate income at 21% and foreign-derived intangible income at 13.125%. But the Act also supports the continued existence of the corporate income tax globally, thus favoring cooperation among members of the Organisation for Economic Cooperation and Development (OECD). Its cooperative provisions feature the minimum tax on global intangible low-taxed income, or GILTI, earned by non-U.S. subsidiaries. Another cooperative provision is the base erosion and anti-abuse tax, or BEAT. The impact of the Act on global corporate income tax policywill depend on how the U.S. implements the law and on how other nations respond to it.
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Sharing the Wealth
Oxford University Centre for Business Taxation
ByRichard Bird and Jack Mintz
The paper focuses on obstacles in achieving a global unitary corporate tax, including the EU approach to a consolidated corporate tax basewith formula apportionment, and illustrates the difficulty of creating a global tax by an analysis of the United Nations agreementwith respect to offshore resource developments beyond the 200 nautical-mile limits under the United Nations Convention on the Law of the Sea (UNCLOS). The paper then reviews the almost three-decade debate to develop a European corporate tax that has so far not been resolved.
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BEPS, ATAP and the New Tax Dialogue: A Transatlantic Competition?
The Tax Cuts and Jobs Act (TRA17) signed into law by President Trump on 22 December 2017 contains multiple provisions that incorporate the principles of the OECD/G20 Base Erosion and Profit Shifting (BEPS) into domestic US tax law. Togetherwith the changes in the 2016 US Model Tax Treaty, these provisions mean that the United States is following the European Union in implementing BEPS and particularly its underlying principle, the single tax principle (all income should be subject to tax once at the rate derived from the benefits principle, i.e. active income at a minimum source tax rate and passive at the residence state rate). This represents a triumph for the G20/OECD and is incongruentwith the generally held view that the United Stateswill never adopt BEPS.
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Energy Company Seeks Withdrawal of Debt-Equity Regs
Direct Energy has requested thewithdrawal or indefinite suspension of the section 385 recharacterization regulations (T.D 9790) to allow taxpayers to focus their resources on implementing the base erosion and inversion provisions of the Tax Cuts and Jobs Act (P.L. 115-97) and to reduce duplicative efforts, compliance cost and burden, complexity, uncertainty, and unintended consequences.
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Group Seeks Regulatory Relief for Multinational Financial Institutions
The Investment Industry Association of Canada has requested guidance for some financial institutions clarifying that as result of the repeal of section 958(b)(4) by the Tax Cuts and Jobs Act (P.L. 115-97), controlled foreign corporationswon't be considered U.S. payers for reporting and backupwithholding purposes andwon't be disqualified from the portfolio interest exemption because of their CFC status.
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The Cameco Transfer Pricing Decision: A Victory for the Rule of Law and the Canadian Taxpayer
In this article, the author discusses Cameco, a long-awaited transfer pricing decision from the Tax Court of Canada that criticizes the Canada Revenue Agency's aggressive use of the sham doctrine and its strained interpretation of Canada's transfer pricing rules. The court opts to focus on the parties' actual actions and commercial realities, rather than advance a hypothetical alternative. The ruling is also consistentwith Canadian precedent,which takes a notably different approach to transfer pricing than the OECD.
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Irish Finance Minister Paschal Donohoe Discusses Digital Tax Challenges
In an address, Irish Finance Minister Paschal Donohoe discussed the current international tax environment and Ireland'sworkwith the OECD and U.S. government to attain a global solution for digital tax challenges, noting that "it is in everyone's interest that the ongoingwork results in an international tax framework that is sustainable into the long run."
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Ireland, U.S. Seeking Global Tax Fix for Digital Economy
Officials on both sides of the Atlantic agree that a global solution for taxation in the digital era is best achieved through the OECD.
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Interpreting the MLI: A Guide to Analyzing the Treaty and Its Capital Gains Article
In this article, the author examines the structure of the OECD's multilateral instrument, including the compatibility clauses and the use of opt-in, opt-out, and alternative provisions,with a focus on the capital gains provisions in article 9.
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E-Commerce, Digital Audits Net $723 Million for Australia
The compliance efforts of an Australian Taxation Office (ATO) task force targeting e-commerce and the digital economy have resulted in over AUD 1 billion (around $723 million) in additional cash collections through June 30, 2018.
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Transition Tax FAQs Clarify Status of 2018 Overpayments
The IRS has released a new set of frequently asked questions on the transition tax,which includes a clarification that some overpayments for the 2018 tax year can be refunded.
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Netflix is now the UK tax regulator's new target
The US digital streaming company Netflix (NFLX) is the latest tech giant to be scrutinised by the UK tax regulator HM Revenue and Customs (HMRC).
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OECD Reports Outline Tax Revenue Increases
Tax revenues in developed economies have continued to rise,with corporate and personal consumption taxes accounting for a growing proportion of countries' total tax revenues, according to two new reports released by the OECD, "Revenue Statistics 2018" and "Consumption Tax Trends 2018."
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Argentina's Comprehensive 2018 Tax Reform
In this article, the author takes an in-depth look at Argentine Law 27,430, a major tax reform package that seeks to increase foreign investment by improving Argentina's tax attractiveness and align the country's tax systemwith the OECD's base erosion and profit-shifting project.
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Facing EU Pressure, Hong Kong to Exempt Onshore Investment Funds
To prevent Hong Kong's blacklisting by the EU for offering incentives that ring-fence the domestic economy, the Executive Council has proposed expanding the current exemption for offshore private investment funds to cover their onshore counterparts.
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France Beats Denmark as Highest-Taxed Country in 2017, OECD Says
Tax revenues as a percentage of GDP continue to rise in OECD countries,with France overtaking Denmark as the jurisdictionwith the highest tax-to-GDP ratio in 2017, according to a new report.
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News Analysis: Permanent Establishment Italiano
Lee A. Sheppard discusses new PE standards articulated by the OECD as part of the BEPS project and low adoption rate by European countries.
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BEAT Justifies Revisiting Arm's-Length Norm, Indian Official Says
The United States' adoption of the base erosion and antiabuse tax is a signal to theworld that the time has come to reconsider the relevance of the arm's-length standard, an Indian official said.
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Circuit Court Resurrects Starr International's Tax Refund Claim
A U.S. circuit court has reversed a lower court's dismissal of Starr International Co. Inc.'s multimillion-dollar tax refund claim and said the company can't pursue an action under the Administrative Procedure Act (APA).
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Business Group to Propose New Tax Framework for Digital Economy
A major global trade groupwill soon present a tax policy framework for countries to consider as theywork to find agreement on long-term answers for how to tax the digital economy.
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OECD Digital Economy Update Coming January 2019, Saint-Amans Says
The OECD expects to release a significant update regarding itswork on taxation of the digital economy in January 2019, according to Pascal Saint-Amans, director of the OECD's Centre for Tax Policy and Administration.
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News Analysis: Post-Midterms: A Progressive Tax Agenda?
In January Democrats retake the House and Republicans remain in control of the Senate, making it unlikely that major tax legislationwill be passed in the next two years. President Trump has said hewould like to see a middle-income tax reduction passed, but it's unclearwhether his policy goalswill alignwith those of House Democrats, some ofwhom mightwant more relief for low-incomeworkers, and many ofwhom successfully campaigned on providing relief from the rollback of the state and local tax deduction in the Tax Cuts and Jobs Act (P.L. 115-97).
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Sherrod Brown's tax math on GM moving to Mexico
"I said the first thing you can do is you can take away that tax ÔøΩ that provision in his tax bill that gives a company a 50 percent-off coupon in their taxes. If you're producing in Lordstown, you pay a 21 percent tax rate. If you move to Mexico, you pay a 10.5 percent tax rate."
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Japan Firms See Trade War, Sales Tax Pressuring Economy in 2019-Reuters Poll
Most Japanese firms expect flat orweaker domestic growth next year and are even more pessimistic about global growth amid concerns over the impact of the U.S.-China tradewar and a planned sales tax hike at home, a Reuters poll showed. "There's no doubt the sales tax increasewill put a damper on private consumption," a manager of a manufacturing companywrote in the survey.
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Europe Floats a Finance Tax
Negotiations for the European Union's next budget grind on, and alas: One old idea getting a new hearing concerns a financial-transactions tax. Berlin and Paris think now is finally the time for this idea,which embodies so much of Europe's fiscal problems. German Finance Minister Olaf Scholz and French counterpart Bruno Le Maire areworking toward a proposal to expand France's existing finance tax to more corners of the EU, the Suddeutsche Zeitung newspaper reported Monday.
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EU States Seek Broad-Based Digital Tax: Estonian Official
Most European Union countries, particularly smaller ones, favor a sustainable method for taxing all companies' digital activity over the proposed tech-industry revenue tax that bloc leaders Germany and France have abandoned, a senior Estonian official said at a recent conference.
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Digital tax ball 'back in the OECD court'
Member states have killed off the EU's digital services tax (DST) proposal, but companies fear thiswill make unilateral action more likely.
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GILTI Regs Would Create Immense Compliance Burdens, TEI Says
The Tax Executives Institute has urged the IRS to eliminate the so-called 12-month presumption rule in proposed regulations (REG-104390-18) on global investment low-taxed income and has asserted that Treasury and the IRS lack the authority to create the broad antiabuse rule that is found in proposed regulation section 1.951A-2(c)(5). The group offers additional comments on other aspects of the proposed regs.
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Practitioners Fear Arm's-Length Principle May Be in Jeopardy
The United States' strengthened rules on aggregation and realistic alternatives and a growing international skepticism of one-sided transfer pricing methods have led some practitioners to question the future viability of the traditional arm's-length principle.
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France Vows to Tax Digital Giants With or Without EU Directive
Large digital companieswill be taxed next year even if the EU can't reach agreement on a digital services tax (DST), Finance Minister Bruno Le Maire said.
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Final U.S. Transition Tax Regs Reach OIRA Review
Final regs on the transition tax have reached the Office of Management and Budget, potentially setting the stage for publication of the first major finalized guidance sprouting from the U.S. Tax Cuts and Jobs Act.
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UK Retail Needs Internet Tax 'Shock', Says Sports Direct Boss
The British government should levy a tax on retailerswith online sales accounting for more than 20 percent of revenue to save traditional shopping districts, the billionaire boss of Sports Direct told lawmakers on Monday. Mike Ashley said the movewould be "a massive electric shock" for the sector, encouraging retailers to invest in physical stores.
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Ireland Collects Even More Corporate Tax Than Anticipated
Ireland collected even more corporate tax by the end of November than expectedwhen it flagged an anticipated one-off boost, pushing the state's tax take by 2.4 percent, or 1.2 billion euros (1.07 billion pounds), ahead of target for 2018.
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Ireland Still Concerned About EU Digital Tax Despite New Proposal: Minister
Ireland's finance minister poured coldwater Tuesday on a new Franco-German proposal for a European tax on companies' digital revenues, saying it failed to address his concerns.
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New OECD Tax Proposal Would Hit Trademarks, Copyrights
The OECD is considering an approach to taxing the digital economy similar to proposals in the 2017 U.S. tax overhaul, including giving countries more leverage to tax foreign entities that use valuable branding trademarks and copyrights to sell into their jurisdiction, a top Treasury official said Monday.
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Lessons From the Tax Overhaul, a Year In
Nearly a year after the federal government rewrote the corporate tax code, big U.S. companies are still movingwarily. Much has changed: Smaller tax bills have boosted quarterly earnings. Stock buybacks are soaring, capital spending has risen, and hundreds of billions of dollars have flowed from foreign subsidiaries to their U.S. parent companies. But much remains in flux, too.
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The Global Carbon Tax Revolt
France's violent Yellow Vest protests are now about many domestic concerns, but it's no accident that the triggerwas a fuel-tax hike. Nothing reveals the disconnect between ordinary voters and an aloof political class more than carbon taxation.
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European Businesses Call for New Economic Study of EU Digital Tax
The European Union's leading business lobby called for new economic analysis before EU member nations vote on a 3 percent digital services tax targeted at large internet companies such as Google Inc. and Facebook Inc.
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Germany, France Try to Jump-Start EU Financial-Transaction Tax
Germany and France renewed their bid to unlock talks on a new European financial-transaction tax based on an existing French levy on stock trades.
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Airbnb Is Said to Refuse Mexican Government's Pilot Tax Program
Airbnb Inc. has stepped away from negotiationswith Mexico thatwould have required the home-sharingwebsite to collect income tax from its hosts and send the money to the government, according to a person familiarwith the talks.
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Canada's Business Investment Could Use That Tax Break: Chart
Canada's business investment remains spotty, showingwhy Prime Minister Justin Trudeau introduced corporate tax breaks this month to ease the economy's dependence on indebted consumers. Spending on non-residential capital projects fell at a 7.1 percent annualized pace in the third quarter, the most in almost two years, Statistics Canada reported Nov. 30. The contribution to gross domestic product of C$191 billion ($143 billion) remains below a peak of C$230 billion set four years ago, veryweak compared to household consumption gains that have triggeredwarnings about record consumer debts.
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Chaos Threat May Spur Global Effort on Digital Tax: OECD Official
The specter of chaos could prompt countries to collaborate on digital taxes, an OECD official suggests; companies now have a challenging time moving assets outside of the U.S.without paying tax; Treasury Department aims to release guidance on ordering of different types of previously taxed income in U.S. tax calculation; a Treasury official says companies arewanting to record Subpart F income to achieve a better tax result; and top congressional tax aides see next year's committee agendas driven by oversight of the tax overhaul and of how the tax system isworking overall.