Int'l Tax News

Switzerlandwants to see the introduction of an internationally applicable standard for the taxation of the digital economy.

The Tax Cuts and Jobs Act (TCJA) is the most eagerly-awaited tax bill in a generation,with implications for trillions of dollarsworldwide. International Tax Review looks at the trends since tax reform came into force.

The Brazilian tax system is broadly recognised as complex a result of several different taxes levied on similar tax bases, different levels of taxation and legislations imposed at national, state and municipal level, and high rates affecting products and corporate transactions.

By: Joshwhite

Facebook expects to take a tax hit after the Internal Revenue Service (IRS)won a landmark case against Intel Corporation's subsidiary Altera.

The United States must nominate "a strong advocate" as ambassador to the OECD to address the EU's digital services tax proposal and defend the Tax Cuts and Jobs Act, Republican lawmakers urged the Trump administration.

The Internal Revenue Service said in a legal memorandum dated Thursday that itwon't rebate any such overpayments or credit them toward tax bills not tied to repatriation, such as annual bills for corporate income.

This issueof PwC's International Tax Newsaddresses, among other topics, implementation of the EU anti-tax avoidance directive in Denmark, potential tightening of Germany's real estate transfer tax rules upon transfers of shares; BEPS implementation in New Zealand, and U.S. tax reform implementation.

Facebook, Google, and many other U.S. companieswill need to adjust their financial statements after an unanticipated federal court ruling that backed IRS policy. The decision in Altera Corp. v. Commissioner has major implications for companies that share costs for developing intangible assetswith their related entities.

Apple Inc.will share the expenses of stock-based compensationwith its foreign subsidiaries following a federal court decision that backed IRS cost-sharing regulations, the company said.

One year after India introduced a consumption tax, the results have been mixed. Hailed as one of the biggest reforms by Prime Minister Narendra Modi, the goods-and-services levy has helped increase tax collections in a countrywhere compliance is historically low.while monthly receipts have picked up after a chaotic rollout, they are still not strong enough to meet the government's annual tax target.

Inquiries that fell into the scope of the U.K.'s "Google tax" have resulted in a 388-million pound ($509 million) clawback for the Treasury, up 38 percent from the previous year. The amountwas collected from just 22 businesses, indicating the size of the charges levied.

The German Cabinet adopted a bill Aug. 1 thatwould make e-commerce platforms like Amazon.com Inc. and eBay Inc. liable for users' unpaid value-added tax,while setting stringent new registration requirements for new traders.

Asset managers that are negatively affected by the European Union's moves to tax financial transactions are likely to relocate to the U.K. after Brexit, analysts say.

The Canadian government has proposed limiting the amount holding companies can recover from value-added and sales tax they pay on goods and services purchased for an operating subsidiary. The measure, if adopted,will hit industries like the mining industry,which commonly uses input tax credits. The changewould also make subsidiaries more expensive to operate and could ultimately affect companies' investment decisions, tax lawyers told Bloomberg Tax.

The Australian tax authoritywants to review intragroup company payments involving cross-border related parties against risk indicators that include the tax deductibility of payments aswell as liability forwithholding tax. The approachwas set out in guidance issued Aug. 1 by the Australian Tax Office, detailing how it plans to assess compliance for related party derivative transactions,with effect from July 1, 2017, for existing and newly created financing arrangements.

The introduction of value-added tax in the United Arab Emirates on Jan. 1 forced many companies to overhaul their invoicing and accounting systems and re-appraise their business operations. For the first time, businesses must check their supply-chain documentation for procurement and sales. They must also assess their supply chains for tax efficiency. Those tasks are complicated by the country's 23 "designated zones,"which are subject to special VAT rules. According to a practitioner, "a lot of people are confused about their supply chains running through free zones and designated zones. . . ."

A U.K. proposal requiring the platform economy to pay employment tax for theirworkerswould likely raise costs andworkloads for the companies,which include Uber Technologies Inc., practitionerswarn.

A new international tax thatwas supposed to deter U.S. technology and pharmaceutical companies from shifting their profits offshore could instead catchwall Street banks in its crosshairs. The levy on international profits -- called Gilti -- is only supposed to kick in if a company is paying an especially low tax rate in foreign countries. But quirks in theway the tax is calculated mean itwill likely hit big bankswith offshore operations, evenwhen they already pay effective foreign tax rates above the threshold.

European Union member nations are divided over a plan to add company beneficial ownership transparency standards to the criteria used to draw up the bloc's tax haven blacklist.

China on July 20 released a tax reform plan aimed at creating a more unified taxation system across the country. Reforms include integrating "national and local taxation offices at and below the provincial level to enable the taxation system to better play its supportive role in state governance," and easing "collection procedures for taxes and fees, lower collection costs and improve the business environment."

Canada's Liberal government is scaling back elements of its planned carbon-tax regime to addressworries from the business community about global competition.

Amazon's main UK subsidiary paid £1.7m rather than £13.9m after a massive deduction from share-based awards that offer a legalway for companies to reduce payments to the exchequer.

The US Treasury has set out details of tax reforms to tackle $3tnworth of corporate earnings hoarded overseas, as it introduces a regime it hopeswill boost investment in the country.

Instead of following other jurisdictions, African countries must take charge by initiating changes in the international tax agenda to influence thework on topics like digital taxation and ensure their needs are met, officials urged.

Canada's impending federal carbon tax is facing new legal challenges despite the government's effort to decrease the tax's potential impact by increasing carbon tax subsidy rates.

The government of South Korea is reportedly preparing legislation thatwould make Amazon, Apple, Google, and other digital companieswithout a permanent establishment in the country subject to tax.

The Australian government has released draft legislation thatwould restrict multinationals' flexibility in determining assets and liabilities under the country's thin capitalization regime, including by requiring consistencywith values used for financial reporting purposes.

Lengthy transition tax regs may offer practitioners some reassurance in fleshing out more details, but they don't venture much outside the original scope of previous guidance.

Congress, by the Tax Cuts and Jobs Act of 2017, amended the Internal Revenue Code so that patents and inventions created by the personal efforts of a taxpayer disposing of them are not capital assets, and therefore generate ordinary gain or loss. In and of itself, the action seems straightforward enough. It represents a policy choice aboutwhich reasonable minds can certainly differ, but it is a clear policy choice.
Congress, however, did not repeal or amend another, pre-existing, provision specifically granting capital gain treatment to specifically the same class of assets.what is the effect of Congress's action under the circumstances? It is possible to reconcile the provisions as a matter of pure textual analysis. That reconciliation, however, seems quite contrary to the desire or intent of thosewho initiated the amendment because it leaves most gain from the disposition of the assets in question taxed at capital rather than ordinary rates.

In this installment,which is Chapter 5 of a book published by Michael C. Durst, the author considers five kinds of policy instruments that might offer significant protections against base erosion for lower-income countries.

Thisarticleexamines some of the factual assumptions and economic arguments presented in the European Commission staff's ''Commission Staffworking Document ÔøΩ Impact Assessment,'' issued on March 21, 2018, to accompany two draft Directives the EC released relating to taxation of the digital economy.

PwC summarizes guidance put forward by the EU's inter-governmental Code of Conduct Group (Business Taxation) (CoCG)recentlyfor determining substancewhen consideringwhether a tax measure is harmful or 'fair'. Theguidance includes elements of behaviour that Member States must meet and requirements that nonmember States must adopt in order to avoid being included on the so-called blacklist of non-cooperative non-EU, third countries.

This paper reviews the empirical literature on international tax avoidance by multinational corporations, includingevidence on main channels of corporate tax avoidancesuch astransfer mispricing, international debt shifting, treaty shopping, tax deferral and corporate inversions.It performs a meta analysis of the extensive literature that estimates the overall size of profit shifting, andextends earlier literature reviews by Dharmapala (2014), Hines (2014) and OECD (2015). Theresults suggestthat a 1 percentage point larger tax rate differential reduces reported pre-tax profits of an affiliate by 1 percent. The authors alsoillustrate the revenue impact of tax avoidance for 81 countries.

In this article, the authors examine a new set of model rules from the OECD that seek to prevent common reporting standard avoidance arrangements and the use of opaque offshore structures by imposing reporting obligations on intermediaries. After conducting a thorough review of the rules, the authors consider how theywill function in practice and note concerns that intermediaries may have about the scope and breadth of the new requirements.

The Tax Cuts and Jobs Act caused a sharp reversal in U.S. net foreign direct investment (FDI) in early 2018 and may cause a significant long-term structural shift in U.S. multinationals' reinvestment of foreign earnings.

The German government's plan to make online platforms such as Amazon and eBay liable for VAT that is not paid by merchants selling on theirwebsites may be unworkable, according to one observer.

As China remains locked in a tariff battlewith the United States, China's executive branch on July 23 announced tax incentives and a bond program intended to boost domestic demand and support the economy.

In this foreword to International Tax Policy in a Disruptive Environment: A Special Issue, the authors provide an overview of the two-day interdisciplinary conference that took place in Munich on 14-15 December 2017, and offer a synopsis of the articles in this special edition of the Bulletin for International Taxation. The authors offer preliminary observations based on the conference and papers, including that despite its successes the BEPS Project has left unfinished business. In the face of reduced residence-based taxation of direct investment and tax competition for mobile activity and real investment, countries have yet to reach consensus on a residence-source or destination-based division of taxation rights. The international tax regime remains at away station in copingwith the disruptive forces of change.

Tax compliance in the United States has long relied on information from centralized intermediaries ÔøΩ the financial institutions, employers, and brokers that help ensure income is reported and taxes are paid. Yetwhile the IRS remains tied to these centralized entities, consumers and businesses are not. New technologies, such as the "sharing" economy (companies such as Airbnb, Uber, and Instacart) and the blockchain (the platform onwhich Bitcoin is based) are providing new, decentralized options for exchanging goods and services.without legislative and agency intervention, these technologies pose a critical threat to the reporting system underlying domestic and international tax compliance.

An initial outline listing discussion points for House Republicans' "tax reform 2.0" legislation offers a hodgepodge of recycled retirement proposals, promises to make temporary provisions permanent, and a plan to help start-up businesses.

In holding that Congress authorized "purely internal" approaches to allocating income among related parties, the Ninth Circuit's reversal of Altera departs from prior decisions' insistence that IRS authority is confined to the comparables-based arm's-length standard.

The OECD has joined the growing contingent of stakeholders urging Canada to assess the competitiveness of its corporate tax regime following the passage of the U.S. Tax Cuts and Jobs Act.

Jurisdictionswould need to demonstratethat they are activelyworking to implement OECD tax transparency standards to avoid being labeled noncooperative under a proposal agreed on by the OECD and G-20.

The OECD is poised to identify a clear path in the global debate on taxing digitalization after a key meeting among countriesworking on solutions to the problem, the organization's chief told G-20 finance ministers.

Danny Beeton examines the OECD's discussion draft on financial transactions and concludes that the draft confirmswhat international case law has made clear, namely that longstanding treasury policies need to be reviewed in the light of the accelerating changes in the international transfer pricing conventions.

Gross domestic product rose at a seasonally and inflation-adjusted annual rate of 4.1% in the second quarter, the Commerce Department said Friday. Here'swhat's behind the number: heftiest growth rate in nearly four years partly due to the Trump administration's 2017 tax cuts, climbing capital expenditures, spend-happy consumers, and exporters are ramping up sales.

British MPs have called for a new tax on Facebook and other social media companies to pay for the costs of policing data misuse, following scandals over Cambridge Analytica and Russian electoral interference.

The pre-Brexit tax bill that British companies may face from a European Union investigation is approaching $1 billion amid escalating tension between the U.K. and the trading bloc.

Belgian lawmakers are likely to introduce changes to a recently adopted law towiden the pool of related companies that can qualify for a beneficial tax regime. If adopted, the changewould allow companieswith indirect ownership of other entities to offset their profits and losses against each other, resulting in significant tax and cash flow benefits.