Int'l Tax News

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Sanders introduces bill to end some corporate tax preferences

Senate Budget Committee Member Bernard Sanders, I-Vt., introduced legislation on February 7 to close offshore tax havens and end tax preferences that allow corporations to avoid paying taxes on profits earned overseas.

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Working paper on tax reform options

  • By Citizens for Tax Justice
Citizens for Tax Justice has released aworking paper outlining three categories of revenue-raising options for tax reform, one ofwhich is "ending breaks and loopholes that allow large, profitable corporations to shift their profits offshore to avoid U.S. taxes."

This category of reforms "would target U.S. multinational corporations that engage in
convoluted transactions and accounting schemes to makewhat are truly U.S. profits appear to be generated in a countrywith no corporate tax or a very low corporate tax (a tax haven) in order to avoid the U.S. corporate tax. JCT has already estimated that the very strongest reform possible in this category (endingdeferral of U.S. taxes on the offshore profits of U.S. corporations and reforming the foreign tax credit)would raise around $600 billion over a decade."

The other reforms in this category are more modest reforms proposed by President Obama to limit theworst abuses of deferral (andwould be unnecessary if deferralwas eliminated).

For the report, go here.

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Group urges states to take lead in offshore tax crackdown

A consumer advocacy group is urging states to get ahead of Congress in cracking down on offshore tax avoidance that costs states an estimated $40 billion in annual revenue.

State governments can take several steps to collect revenue fromwealthy individuals and corporations, even if those actions are not matched on the federal level, the United States Public Interest Research Group says in a report released Tuesday.

For the article, go here.

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'Tobin tax' push causes dismay

The European Commission appears determined to press aheadwith a Europe-wide financial transaction tax in spite ofwarnings that it threatens the existence of Europe's $1tn money market funds industry.

Trade bodies representing MMFs have been left dismayed at the emergence of revised and strengthened plans from Brussels for a so-called "Tobin tax on equity, bond and derivative transactions, reported by the Financial Times lastweek.

The plans are expected to be publishedwithinweeks and to be signed off by mid-March.

For the article, go here.

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Political offshoring squabble doesnt address job insecurity

In an editorial, thewashington Post comments on the squabble between candidates Barack Obama and Mitt Romney regarding "offshoring" of jobs.

For the article, go here.

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IRS moves to curtail tax-free repatriation of foreign earnings

The IRS continues to police schemes that are designed to enable U.S. shareholders of foreign corporations to extract undistributed earnings without U.S. tax consequences. The latest strategywas implemented through an outbound all-cash "D" reorganization inwhich the transferred property consisted primarily of intangible assets. Aswas the casewith the strategy's predecessor, the "Killer B" transaction, the IRS eliminated the viability of the technique.

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"Territorial" tax reform: homeless income is the achilles heel

In an article published in the Houston Business and Tax Law Journal, Prof. Bretwells discusses the draft legislation released by the Houseways & Means Committee thatwould reform the US international tax regime by adopting a foreign dividends received deduction as the means to effectively adopt a territorial tax regime for the United States.

For the article, go here.

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Cant and the inconvenient truth about corporate inversions

Prof. Bretwells of the University of Houston Law Centerwrites that inversion transactions and inversion benefits are still available and are being pursued evenwith the enactment of section 7874.

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Walking the walk on international taxation

  • By Financial Times

Wolfgang SchÔøΩuble and George Osborne, finance ministers of Germany and the UK, call for "concerted international co-operation" to make corporate taxation more effective. The sentiment cannot be faulted. But they need to prove this is not all talk and no action.

For the Financial Times editorial, go here.

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The hidden cost of offshore tax havens

  • By U.S. PIRG Education Fund
When U.S. corporations andwealthyindividuals use offshore tax havensto avoid paying taxes to the federal government, it is an abuse of our taxsystem. Tax haven abusers benefit fromour markets, infrastructure, educatedworkforce, and security, but they pay nextto nothing for these benefits. Ultimately,taxpayers must pick up the tab, either in theform of higher taxes, cuts to public spending priorities, or increased national debt.

Tax havens are countries or jurisdictionswith minimal or no taxes. Corporationsand individuals shift earnings to financialinstitutions in these countries to reducetheir U.S. income tax liability - costingthe federal government $150 billion in lostrevenues each year.
Federal taxpayers are not the only victims of offshore tax havens. Tax havensdeprive state governments of billions ofdollars in badly needed revenues aswell.Based how much income is federally reported in each state, and on state tax rates,it is possible to calculate how much eachof the state governments lose as a result ofoffshore tax dodging.

For the report, go here.

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News analysis: the challenges of taxing cloud computing

Cloud computing involves several functions. Some of its more popular iterations are software as a service (SaaS),which provides an application to customers through the Internet; platform as a service,which provides away for customers to develop their own applications to run on the provider's infrastructure and deliver them online from the provider's servers; utility computing, essentially on-demand storage and virtual servers; managed service, an application used by information technology providers; and service commerce platforms,which are a services hub, such as an expense management system.

Cross-border tax rules are poorly suited to emerging cloud services and content provision mechanisms. Treasury is starting to look forways to reduce the uncertainty.

For the article, go here. (Subscription required.)

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Gephardt sees tax reform as part of larger economic package

Congresswill stand a better chance of enacting corporate tax reform if it can frame the debate as forming an essential element of improving the overall economy, former House Majority Leader Richard A. Gephardt said September 27 inwashington.

For the story, go here. (Subscription required.)

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Officials outline OECD intangibles and base erosion initiatives

The OECD's base erosion and profit shifting (BEPS) initiativewill not be a "business-bashing exercise," but itwill address how the lack of coordination in international tax laws permits multinationals to legally take advantage of profit shifting, Joseph Andrus, head of the transfer pricing unit of the OECD's Centre for Tax Policy and Administration, said December 6 inwashington.

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OECD releases revised treaty discussion drafts

The OECD on October 19 released revised discussion drafts on proposed changes to the OECD model tax treaty commentary regarding permanent establishments, beneficial ownership, and cross-border trading of emissions permits.

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Accountancy's Big Four are laughing all the way to the bank

Westminster is rarely a palace of pleasure, but Thursday brought the magnificent spectacle of Margaret Hodgewalloping the big four accountancy firms for their role in helping companies deprive the Treasury of taxes everyone else has to pay. Four heads of tax at PWC, Ernst & Young, Deloitte and KPMGwriggled and obfuscated, hiding behind the polite euphemisms of their trade. Never say avoidance or, God forbid, evasion but call it "tax planning" and "tax efficiency".

For the article, go here.

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OECD calls for US tax reform to curb income inequality

The OECD has urged the United States to curb income inequality and boost longer-term economic growth by cutting tax expenditures that disproportionately favor high-income earners, harmonizing tax rates across asset classes, and lowering the corporate tax rate.

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OECD announces new anti-tax-evasion project

The OECD Forum on Tax Administrationwill undertake a new anti-tax-evasion project underwhich datawill be collected from member nations about their observations on corporate structures, entities, and territories that are being used in offshore tax evasion.

The initiativewas announced in a report titled "Tackling Offshore Tax Evasion" thatwas issued by OECD Secretary-General Angel Gurría and submitted on June 19 to G-20 leaders meeting in Los Cabos, Mexico.

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Multinationals want tax stability in emerging markets

Tax policy in developing countries is playing a larger role in corporate investment decisions as more companies look to tap into the potential of high-growth emerging economies, panelists at the 2012 OECD International Tax Conference inwashington said June 5.

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News analysis: evaluating base erosion options

Transfer pricing of intangibles has been the source of much political frustration lately, but if international tax reform takes the path proposed by Houseways and Means Committee Chair Dave Camp, R-Mich., the best choice to address base erosion may be one that doesn't focus on intangibles.

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Ending base erosion necessary for tax reform, staffers say

Erosion of the tax base is a problem that must be addressed as part of an overhaul of the tax code, two congressional tax staffers said June 6.

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A global perspective on territorial taxation

Catherine the Great is supposed to have said,A greatwind is blowing, and that gives you either imagination or a headache. In Washington,winds are stirring for corporate tax reform. Butwhile there is broad bipartisan agreement that tax rates should be reduced, there is less consensus regardingwhat the tax rate should be, how to pay for a tax cut, or generally how to treat international business income. These considerations are inextricably intertwined because the U.S. assesses its corporations onworldwide income.

For the report, go here.

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UK Treasury committee could grill US companies over 'tax evasion'

The Commons committee, headed by Andrew Tyrie MP, is consideringwhether to lend itsweight to the escalating furore over the UK tax affairs of large foreign-based businesseswith UK arms and could call companies to account by early next year.

For the article, go here.

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Tory MP asks FTSE 100 companies to back country-by-country reporting

A Conservative MP haswritten to the chief executives of all FTSE 100 companies seeking their support for corporate tax transparency and a new international accounting standard requiring country-by-country reporting of profits and taxes paid.

For the article, go here.

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Eggert reiterates US opposition to services PE provisions

The United States continues to oppose services permanent establishment provisions because of the burden they impose on taxpayers, even though it has entered into themwith other countries, a Treasury official said December 7.

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Territorial taxation discussed at annual NTA meeting

Speakers at the National Tax Association's annual meeting on November 18 discussed the idea of the US moving to a territorial system, including the beneficiaries and the effects of such a move.

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Economic analysis: should the Camp territorial plan include a 5% haircut?

The character of any proposal to move the United States to a territorial system depends heavily on how it treats interest expense. The discussion draft territorial plan from Houseways and Means Committee Chair Dave Camp, R-Mich., addresses interest expense in two contexts: the potential allocation of interest expense to exempt foreign-source income (the allocation rule) and a thin capitalization rule that limits domestic interest expense (the cap).

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Economic analysis: the economic case for unlocking foreign profits

Martin A. Sullivan examines the two key obstacles to a second repatriation holiday -- the large upward revision of the estimated revenue cost of the provision since itwas first enacted in 2004 and thewell-documented failure of the 2004 holiday to achieve the intended economic objectives -- and offers suggestions for structuring a new and improved repatriation holiday.

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Opinion: tax reform 2.0

In an opinion piece based on a speech he presented to the Tulane Tax Institute in New Orleans on November 1, Martin A. Sullivan examines some key issues that must be addressed for comprehensive tax reform to occur.

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Economic analysis: an automatic brake on profit-shifting in a territorial system

One often overlooked benefit of including an interest allocation rule in a territorial system is that itwould obviate the need for separate, base-preserving thin capitalization rules. An interest allocation rule takes the debt of a multinational group held by third parties and assigns it to different jurisdictions in proportion to some measurable factors, most often assets.

This article is about allocatingworldwide interest using gross profits as the allocation factor. The term "gross profits" means profits before interest or taxes. In addition to the salutary effects on artificial profit shifting that it shareswith other interest allocation methods -- in particular, allocation of interest by assets -- interest allocation using gross profitswould reduce the incentive to shift profits by adjusting transfer prices. It does this by narrowing the difference between domestic and foreign effective tax rates.

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Corporate inversions: a symptom of larger tax system problems

In a Tax Notes viewpoint, Eric Solomon examineswhy U.S. corporations engage in inversions and continue to consider them. Inversion activity is a symptom of problems in the U.S. international tax system that need to be addressed.

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transparency in our corporate tax system

  • By American Sustainable Business Council; Business for Shared Prosperity; Main Street Alliance
A group of business owners and executives haswritten to President Obama and members of Congress, requesting awant a tax system that is fair and provides sufficient revenue for the public services and infrastructure that underpin our economy.

For the letter, go here.

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News analysis: why do we need treaties?

Individual provisions of the OECD model treaty have been called into question in recent years, but questioning the point of bilateral treaties per se is rare outside South America. Usually, the questioners approach the matter from the vantage point of developing countries,whose revenue interests are undermined by treaties.

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News analysis: treaty countries' right to use domestic law

Some 63 percent of Indian households have phone service, usually in the form of cellphones. India has a billion people,which makes for a lot of households and a lot of cellphones. American and Scandinavian suppliers are doing quitewell in this market, and that has not gone unnoticed by the Indian Revenue Department.

Oh, but India signed a bunch of OECD model treaties that restrain source country taxation! That doesn't always stop a determined interpretation of fuzzy treaty terms. There is no requirement that the document be interpreted in favor of the foreign business.

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News analysis: services PE upsets presumptions

The OECD has put out a new draft on permanent establishment, the most contentious issuewithinwhich is treatment of services.

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News analysis: the downside of patent boxes

Lee A. Sheppard discusses some of the negatives of patent box regimes, such as that enacted in the Netherlands.

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Sen. Levin eyes corporate tax breaks, tax evasion in sequestration proposal

Sen. Carl M. Levin's push to close tax loopholes as away to soften federal budget cuts and trim the deficitwill also target corporate tax deductions for stock options and stiffen penalties for tax evasion, his office revealed Feb. 1.

In a memo to Democratic Senate committee leaders, Levin (D-Mich.) described proposals to endwhat he called excessive corporate tax deductions, end the blended tax rate for derivatives such as commodity futures, and strengthen enforcement of the tax code.

Sen. Levin said corporations pay an effective tax rate of 15 percent due to various deductions and loopholes even though the top marginal rate set in the tax code is 35 percent.

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News analysis: economists increase their tax-cutting demands

Lee Sheppard comments on various tax reform issues, include how to locate a multinational corporation's income.

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Say no to a corporate territorial tax

A San Francisco Chronicle editorial argues against a territorial tax system for the US.

For the editorial, go here.

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Say no to the tax status quo

An opinion piece in the San Francisco Chronicle makes the case for a territorial tax system for the US.

For the article, go here.

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UK announces additonal corporate rate reduction

George Osborne, the UK Chancellor of the Exchequer, recently delivered his 'Autumn Statement'. He focused on reducing the budget deficit, restoring stability to the economy and equipping the United Kingdom to compete globally.while therewere relatively few new announcements, the overall themewas positive given the difficult economic conditions. The statement also reinforced the governments message that the United Kingdom is open for business.

For the article, go here

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Update on OECD tax projects

This issue of the Tax Policy Bulletin provides an update on some of the key tax projects currently being undertaken by the Organisation for Economic Cooperation and Development (OECD).

For this edition, go here.

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Update on OECD work on tax and development

This edition of the Tax Policy Bulletin provides an update on thework currently being undertaken by the Organisation for Economic Cooperation and Development (OECD) on developing countries.

For the article, go here.

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Wall Street tells Washington: Cut corporate taxes in 2013

Corporate CEOs have released theirwish list forwhat Washington should do to energize an economy they expectwill grow just 2% this year. High on the list: reforming the corporate tax code.

John Engler, president of the Business Roundtable,which represents the CEOs of more than 200 U.S. companies, tells The Daily Ticker that the 35% top marginal corporate tax rate in the U.S.—the highest in the developedworld—is too high and creates difficulties for U.S. corporations competing in the global market.

“This is just a numbers game, andwere losing at it," says Engler. “Even Canada has a 15% corporate tax rate. Engler says the relatively high U.S. corporate tax rate affects corporate decisions on location, investment and jobs.

For the article, go here.

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Can publicity curb corporate tax avoidance

Bruce Bartlett examines the argument that public shaming could result in mulitnational corporations paying more income tax.

For the article, go here.

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Corporate tax posturing should stop

When David Cameron flew to Davos lastweek to tell companies that reduce their tax bills by dividing activities among countries towake up and smell the coffee, his targetwas clear. Starbucks now faces a consumer boycott and has been publicly accused of acting unethically.

The only problem is that it is not true.

For the article, go here.

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The fiscal and economic risks of territorial taxation

Many policymakers say theywant to reform the U.S. system of taxing multinational corporations so that it better promotes growth and helps reduce budget deficits. Unfortunately, according to a new report from the Center on Budget and Policy Priorities (CBPP), one proposal that has received significant attentionwould take the tax code in an ill-advised direction, creating serious economic and fiscal risks.

For the CBPP report, go here.

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Next US model treaty may include revised discretionary competent authority provision

The revised discretionary competent authority relief provision in the new protocol to the Spain-U.S. tax treaty may appear in the next U.S. model treaty, Henry Louie, deputy to the Treasury international tax counsel for tax treaty affairs, said January 15.

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Globalization poses new challenges for tax reform

The effects of globalization and international competition on the U.S. economy and the government's fiscal conditionwill require any tax reform effort made in the coming months to be much different from past efforts, panelists said January 18 during a conference cosponsored by Pepperdine University and Tax Analysts.

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Financial transactions levy tops EU tax agenda for 2013

Adopting a financial transactions tax in at least 12 European Union member states in 2013will top the EU tax agenda in 2013, while at the same timework in the EU Council of Ministerswill continue to help finalize pending legislation to amend EU energy and savings tax laws, key EU tax officials said in interviewswith BNA.

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Recent Budget laws pile' tax increases on large firms in France, practitioners say

Large companies in France need to adoptnew reflexes to contendwith apiling on of recent tax measures that have significantly complicated their tax arrangements, according to a Jan. 24 session by the country's largest law firm, Fidal Direction Internationale.

The two-hour conference,which featured four attorneys from Fidal's international tax department, assessed the impact of several major tax increases that have hit businesses in France since 2011 as a succession of governments have attempted to dealwith the country's ballooning budget deficit.

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