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The ITPF News Blog is managed by the students at the University of Florida Levin College of Law International Tax LLM Program.
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Archives: 2019
SubscribeHidden Treasures: The Impact of Automatic Exchange of Information on Cross-Border Tax Evasion
By: Sebastian Beer, Maria Coelho, and Sébastien Leduc
The authors analyze the impact of the exchange of information in tax matters in reducing international tax evasion between 1995 and 2018. Based on bilateral deposit data for 39 reporting countries and more than 200 counterparty jurisdictions, they find that recent automatic exchange of information frameworks reduced foreign-owned deposits in offshore jurisdictions by an average of 25 percent. This effect is statistically significant and, as expected, much larger than the effect of information exchange upon request, which is not significant. To test the sensitivity of their findings, they estimated countries’ offshore status and the impact of information exchange simultaneously using a finite mixture model. The results confirmed that automatic (and not upon request) exchange of information impacts cross-border deposits in offshore jurisdictions, which are characterized by low-income tax rates and strong financial secrecy.
To read more go hereThe Impact of Profit Shifting on Economic Activity and Tax Competition
A growing empirical literature has documented significant profit shifting activities by multinationals. This paper looks at the impact of such profit shifting on real activity and tax competition. Real activity can be affected as profit shifting changes—and theoretically most likely reduces—the cost of capital. Tax competition, even over real capital, is affected, because a permissive attitude toward profit shifting can be seen as a selective tax reduction for multinationals. Tightening profit shifting rules, in turn, can affect tax competition through the main rate. This paper discusses these issues theoretically and with the help of a simulation to assess the impact of profit-shifting on investment, revenues, and government behavior. Using the theoretical framework, it also provides a brief overview of the related empirical literature.
To read more go hereBrazil to Gradually Align Transfer Pricing Rules with OECD
By: Ryan Finley
After a 15-month OECD review of Brazil’s unorthodox transfer pricing system identified significant double taxation and base erosion risks, Brazilian officials have announced plans to gradually align the country’s regime fully with OECD standards.
To read more go here Subscription RequiredU.S. Calls for Broader Scope, Narrower Nexus for Global Tax Deal
The United States wants an OECD global tax overhaul proposal to apply to “scale without mass” digital companies and to restrict the number of countries that can collect taxes paid on those companies’ residual profits.
To read more go here Subscription RequiredA Critical Reassessment of the Role of Neutrality in International Taxation
By David Elkins
Neutrality plays a central role in the literature on international taxation. In its most prevalent form, the concept of neutrality posits that in order to maximize aggregate global welfare, capital needs to flow to where it would produce the highest pretax return. The thesis of this Article is that neutrality is ordinarily inapplicable in the field of international taxation.
To read more go here Subscription RequiredDouble Counting Accounting: How Much Profit of Multinational Enterprises Is Really in Tax Havens?
Putting an end to the base erosion and profit shifting (BEPS) activity of multinational enterprises (MNEs) is on the national agenda of nearly every country in the world. While many influential papers suggest that the scope and magnitude of the BEPS problem is quite large, we show that these magnitudes are likely overstated due to the accounting treatment of indirectly-owned foreign affiliates in the BEA’s U.S. international economic accounts data. We explain how this accounting treatment leads to double counting of foreign income and to misallocations to the incorrect jurisdiction. We demonstrate an appropriate correction, and show that the correction significantly reduces the magnitude of the BEPS estimates. For instance, our correction reduces an estimate of the U.S. fiscal effects of BEPS from 30-45% to 4-15% of corporate tax revenues lost to BEPS activity of MNEs (Clausing 2016). Our work has far-reaching implications, as the U.S.’ national statistics have a unique accounting convention that can make comparisons of the U.S. national statistics to those of other countries difficult to interpret.
To read more go here Subscription RequiredU.S. Companies’ Repatriated Cash Hits $1 Trillion Under Tax Law
By Reade Pickert
Corporations have brought back more than $1 trillion of overseas profits to the U.S. since Congress overhauled the international tax system and prodded companies to repatriate offshore funds, a report showed Thursday.
To read more go here Subscription RequiredIRS Wants to Help Companies Bring Intangible Assets Back to U.S.
By Allyson Versprille
The IRS wants to know how it can help companies that are looking to unwind pre-tax law transactions to bring intangible property back to the U.S., according to a top agency official.
To read more go here Subscription RequiredU.S. Weighs Limits on Taxable Presence in Global Tax Rewrite
The U.S. wants the OECD’s plan to revamp global tax rules to apply to more companies, but limit the countries that can tax them, a Treasury official said.
To read more go here Subscription RequiredINSIGHT: The OECD Unified Approach—an Indian Perspective
Suranjali Tandon of the National Institute of Public Finance and Policy, New Delhi, looks at the OECD Secretariat’s “unified approach,” with a focus on the stance which has been taken by India so far, and the potential elements of the approach which may not be acceptable to India.
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