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Competitiveness Index

International Tax News Blog

  • Merger Rush for Offshore Tax Break Bets on U.S. Stalemate

    by Richard Rubin (Bloomberg)

    U.S. companies are racing to complete tax-reducing offshore mergers before a credible threat to stop them emerges from Congress.

    AbbVie Inc., maker of the arthritis medicine Humira, announced the largest such inversion deal July 18 with a plan to move its tax home to the U.K. in a $55 billion purchase of Shire Plc. It joins seven other companies, including Medtronic Inc., with pending deals that would be unwound, renegotiated or penalized under plans from the Obama administration and Congress to make tax changes retroactive to May.

    For the story, go here.

    By Richard Rubin , posted on Monday July 21, 2014
  • IRS Taking a Fresh Look at Double Dips in Light of BEPS

    by Lee A. Sheppard (Tax Analysts)

    European sensibilities are offended when checked entities, disregarded for U.S. tax purposes, deduct outbound payments that are not taken into income by their U.S. parents. So the hybrid discussion draft  recently released as part of the OECD base erosion and profit-shifting initiative calls for the checked entity's country of residence to disallow a deduction.
    On July 17 the International Tax Institute discussed the OECD BEPS recommendations for treatment of hybrid payments in light of the U.S. dual consolidated loss (DCL) rules. John Merrick, special counsel to the IRS associate chief counsel (international), added his thoughts to the discussion. He is a veteran of the development of the 2007 DCL regulations (T.D. 9315).
    For the story, go here. (subscription required)

    By Lee A. Sheppard, posted on Monday July 21, 2014
  • Give U.S. multinationals an incentive to not dodge taxes

    by The Times Editorial Board (Los Angeles Times)

    When is a U.S.-based company not considered a U.S. company by the IRS? When it buys a smaller firm in a foreign country and — presto chango! — deems that company to be its parent, escaping the obligation to pay taxes to the U.S. Treasury on its foreign earnings. This process, called "inversion," is becoming increasingly popular among U.S. multinationals, drawing howls from lawmakers and the Obama administration. But a quick legislative fix won't last long. That's because the larger problem is a uniquely flawed U.S. tax code that encourages multinationals to engage in all sorts of accounting gimmickry.

    For the editorial, go here.

    By The Times Editorial Board, posted on Monday July 21, 2014
  • Tax avoidance and the rise of creative M+A

    by Daniel Palmer (Business Spectator)

    Over the past two years, ‘tax inversion’ deals have been leading the global M&A sector out of the doldrums while drawing attention to the creative side of accountants and investment bankers.

    It’s just the latest battlefield in the world of corporate tax avoidance and provides a note of caution to what would otherwise appear to be an M&A boom.

    The controversial process involves a company buying a rival firm in another region of the world, reincorporating in that region and consequently exposing itself to a lower tax rate. It has proven especially popular in the US pharmaceutical sector as American firms seek out the comparatively kind tax regimes of Ireland, the Netherlands and the UK.

    For the story, go here.

    By Daniel Palmer , posted on Friday July 18, 2014
  • Are U.S. Corporate Tax Inversions a Necessary Crisis?

    by Robert E. Litan ( Brookings)

    Suddenly, the hottest tax arbitrage game is the “tax inversion,” where U.S. companies seek to lower its tax rate by buying a foreign rival. The latest deal came Friday when U.S. drug maker AbbieVie announced it would buy Dublin-based Shire. The $54 billion deal follows Mylan’s move to buy assets from Abbott Laboratories earlier this week in a deal that will create a new Netherlands-based holding company. In May, U.S. pharmaceutical giant Pfizer tried to relocate in the U.K., but a deal to buy AstraZeneca fell through.
    One of the best cries of outrage appeared in Allan Sloan’s piece in Fortune earlier this month. The patriotism angle I get, but then again, why blame corporate chiefs for taking advantage of tax games that are perfectly legal, especially in a rapidly globalizing economy?
    For the article, go here.

    By Robert E. Litan, posted on Monday July 21, 2014
  • Review of Conference on What the United States Can Learn From the Experience of Countries with Territorial Tax Systems

    by Eric Toder (Urban Institute)

    Eric Toder of the Urban-Brookings Tax Policy Center in a June 18 report summarized the discussion at a February 28 conference hosted by the Urban Institute on what U.S. policymakers can learn from the experience of other countries with territorial systems for taxing the income of their multinational corporations.

    For the report, go here.

    By Toder, Eric, posted on Wednesday July 2, 2014
  • Foreign Base Company Sales Versus Services

    by Lee A. Sheppard (Tax Notes Today)

    Marjorie Rollinson, IRS deputy associate chief counsel (international), spoke to the International Fiscal Association USA New York chapter on July 16, expressing her desire to have the IRS clarify the overlap between foreign base company sales income and foreign base company services income. Guidance on this question is an item on the IRS 2013-2014 business plan.
    For the story, go here. (subscription required)

    By Sheppard, Lee A., posted on Thursday July 17, 2014
  • OECD: Update to OECD Model Tax Convention Won't Include BEPS, PE Discussion Draft Changes

    by OECD (Bloomberg)

    The 2014 update to the Organization for Economic Cooperation and Development's Model Tax Convention won't include material from the ongoing base erosion and profit shifting project (BEPS) or from a 2012 discussion draft on permanent establishment, the OECD said.
    The 2014 update reflects only work carried out between 2010 and the end of 2013, the OECD said. Therefore, no results will be included from the ongoing efforts on the BEPS action plan, first unveiled in July 2013.
    For the story, go here. (subscription required)

    By OECD, posted on Thursday July 17, 2014
  • Obamas economic patriotism cash grab

    by John Hayward (Human Events)

    It’s wise to be on your guard when the Obama Administration trots out a new catch phrase.  Today that catch phrase is “economic patriotism,” which has been re-defined to mean “preventing corporations from doing the smart thing and fleeing from the grasping hands of greedy politicians.”  Obama’s not big on securing the southern border against waves of illegal immigrants, but he’s very keen on building fences to keep people in.

    For the story, go here.

    By Hayward, John, posted on Thursday July 17, 2014
  • Corporate Tax: Is It All About Patriotism And Morality?

    by Christopher Bergin (Forbes)

    Well, it was only a matter of time before the tax and morality debate that has been brewing in Europe invaded the shores of the United States. And there is an unlikely commander helping to establish a beachhead in the attack on U.S. multinationals – then again, maybe not so unlikely.
    In a blistering piece in last Sunday’s Washington Post, Allan Sloan assails U.S. multinationals that invert, often by merging with a foreign corporation in a low-tax jurisdiction to avoid the high U.S. corporate tax rate. In most cases, the only thing that really happens in an inversion is that the U.S. corporate tax base shrinks.
    For the story, go here.

    By Christopher Bergin , posted on Thursday July 17, 2014