International Tax News Blog

Archives: November 2019

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  • International Tax Review logo

    Early responses to the OECD set dividing lines

    By Josh White 

    The first responses to the OECD on its public consultation on the digital economy show divisions continue, with some calling for an expansion of the FAR analysis or reverting to the G24 plan.The Paris-based organisation held a public consultation on the October report on its pillar one proposals. Sources close to the OECD hope the consultation will demonstrate that there is support for the proposals. This could be crucial for the OECD to push ahead with its ambitious project. So far, the signs have been mixed, but not necessarily bad for policymakers.

    By Josh White, posted on Thursday November 14, 2019
  • Law 360 logo

    Global Minimum Tax Faces Coordination, Income Base Hurdles

    By Alex M. Parker

    Officials around the globe hope that a minimum corporate tax is the best approach to tackling avoidance and complex tax planning, but developing a universal standard to measure tax payments could be a daunting technical challenge.

    By Alex M. Parker, posted on Thursday November 14, 2019
  • GILTI: The Co-operative Potential of a Unilateral Minimum Tax

    Logo SSRNBy Susan C. Morse

    Prior to the Tax Cuts and Jobs Act of 2017 (TCJA), the US allowed US parented multinationals to delay indefinitely their payment of US corporate income tax on non-US income earned by non-US corporate subsidiaries (CFCs). The TCJA revoked this permission through the enactment of a unilateral, current minimum tax on the “global intangible low-taxed income” (GILTI) of CFCs. The post-TCJA US international tax law generally imposes current US tax on CFC income subject to reductions for foreign income taxes paid or accrued. This US regime supports the continued existence of a corporate income tax and presents an opportunity to co-ordinate the details of corporate income tax systems globally. The author argues that similarity among systems, for instance with respect to rate, timing and base, would further strengthen the corporate income tax and perhaps support innovations such as formulary apportionment. US tax administrators, non-US governments and taxpayers will each play a role in negotiating the details of international corporate income tax law going forward and in determining whether and on what terms these details converge.

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    By Susan C. Morse, posted on Tuesday November 19, 2019
  • Negotiated Tax Havens

    Logo SSRNBy Kevin Markle and Leslie A. Robinson

    The intersection of state aid and international tax has acquired a high profile in Europe. In response, disclosure policies are being proposed. With no empirical evidence, these policies are predicated on rhetoric that pervasive practices by host country governments unfairly benefit foreign-owned companies. Using several novel data sources on tax relief granted in the EU, the authors find that both domestic- and foreign-owned companies benefit from tax concessions. Their evidence that tax avoidance is a joint production function of business and government suggests that any jurisdiction can operate as a tax haven for a company willing to negotiate.

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    By Kevin Markle and Leslie A. Robinson, posted on Tuesday November 19, 2019
  • The Effect of Intellectual Property Boxes on Innovative Activity & Effective Tax Rates

    Logo SSRNBy Tobias Bornemann, Stacie K. Laplante and Benjamin Osswald

    The authors investigate whether and to what extent the adoption of an intellectual property box increases innovative activity and the extent to which different types of firms benefit financially. We examine the adoption of the intellectual property box in Belgium because it allows us to cleanly identify the impact on innovative activity and effective tax rates. Their results indicate an overall increase in innovative activity as proxied by patent applications, grants, and highly-skilled employment, at the expense of patent quality. They also provide evidence that firms with patents on average enjoy 7.2% to 7.9% lower effective tax rates, with the greatest financial benefits accruing to multinational firms compared to domestic firms.

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    By Tobias Bornemann, Stacie K. Laplante and Benjamin Osswald, posted on Tuesday November 19, 2019
  • The Arm's Length Standard Is Not the Problem

    Logo SSRNBy Lorraine Eden

    The historical approach to taxing intrafirm transactions of multinational enterprises — the arm’s-length standard (ALS) — has been criticized as unworkable, out of date and on death’s door. Criticisms of the ALS fall into two broad categories. First are concerns that MNEs have been deliberately engaging in abusive transfer pricing that is extensive, unfair and draining development. Second is that the transfer pricing rules are too difficult to implement for various reasons, of which the two most important reasons are the lack of arm’s-length comparables (e.g., for hard-to-value intangibles) and that MNE have synergies not available to unrelated parties. As a result, many academics and policy makers advocate getting rid of the ALS and shifting to global formulary apportionment (GFA). Even the OECD, long a supporter of the ALS and opponent of GFA, now includes fractional apportionment as a possible method for attributing income among countries under its Pillar 1 proposals for taxing the digital economy. The author argues instead that the arm’s-length standard remains the appropriate international norm for taxing MNEs, but that new thinking, particularly for the digital business models that are now starting to dominate international production, is probably needed, and that fine tuning the ALS for the 21st century is the appropriate solution.

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    By Lorraine Eden, posted on Tuesday November 19, 2019
  • Boris Johnson Cancels 2020 Tax Cut for Businesses: U.K. Votes

    BloombergBy Greg Ritchie and Joe Mayes

    U.K. Prime Minister Boris Johnson announced his Conservatives are canceling plans to cut corporation tax next April so the government can save money to spend more on voters’ priorities, including the state-funded National Health Service.

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    By Greg Ritchie and Joe Mayes, posted on Tuesday November 19, 2019
  • Labour to Fund Broadband With Google, Facebook Tax: U.K. Votes

    BloombergBy Greg Ritchie, Joe Mayes, and Tim Ross

    Labour leader Jeremy Corbyn pledged free high-speed broadband for all with a 20 billion pound ($26 billion) plan to nationalize BT Group Plc’s Openreach unit. The party’s most striking move of the election campaign will be partly paid for with taxes on tech companies including Facebook and Google. BT shares fell.

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    By Greg Ritchie, Joe Mayes, and Tim Ross, posted on Tuesday November 19, 2019
  • Yang Proposes Tax on Digital Ads in Swipe at Facebook, Google

    BloombergBy Ben Brody

    Democratic presidential candidate Andrew Yang proposed a tax on digital ads that takes aim at the revenue models of companies such as Facebook Inc. and Alphabet Inc.’s Google.

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    By Ben Brody, posted on Tuesday November 19, 2019
  • IRS Limits Ownership Rules for Controlled Foreign Corporations

    BloombergBy Sony Kassam

    Final IRS tax rules limit application of attribution rules for determining whether U.S. individuals who have ownership in certain foreign companies are related to each other.

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    By Sony Kassam, posted on Tuesday November 19, 2019


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