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Global Tax News

Continued growth in Africa with Ugandan firm

Russell Bedford has expanded its presence in Africa with the appointment of TMK & Co. in Kampala, Uganda. Russell Bedford CEO Stephen Hamlet said: “After a phenomenal start to 2019, having already welcomed an incredible four new members in January, I am delighted to welcome TMK & Co. to the network. As a leading firm in Uganda, TMK & Co. is a great enhancement to our network, particularly in developing our African region where we have seen substantial growth in such a short and recent period of time.”

Russell Bedford

Stuttgart/Freiburg member merges

Stuttgart/Freiburg member LFK Limberger Fuchs Koch & Partner has announced its merger with Leisle GmbH, a Tuttlingen-based tax consultancy and auditing company founded by Pamela Leisle.

Russell Bedford

 

NORTH AMERICA

Tax cut gains prove smaller than thought

The Wall Street Journal reports that, with the earnings season in full swing, a number of U.S. companies are finding they were overly optimistic about the effect of the Tax Cuts and Jobs Act on their bottom lines. At work in the latest quarter’s tax charges are accounting rules that ask companies to outpace the new law. U.S. GAAP requires companies to book the costs and benefits of new legislation immediately. But rule writers at the Treasury and IRS typically take months, and sometimes years, to draft and finalize regulations. The details in those rules can make a big difference in a company’s analysis of the law. “As guidance comes out, they need to go back and look at what they originally estimated and determine whether or not it’s accurate,” said Jeffrey LeSage, Americas vice chairman of tax at KPMG.

Wall Street Journal

 

Former Fed officials, economists rally around carbon tax

A number of former Federal Reserve officials and White House economic advisers are backing proposals for a carbon tax on businesses. The plan advocates replacing many environmental regulations with a simplified tax on businesses that release carbon into the atmosphere, an incentive for them to use cleaner energy; it calls for an initial levy of $40 per ton of emissions, escalating each year until the country meets its emissions reduction goals. Proponents say the tax would generate approximately $200bn a year and send an estimated $2,000 to a family of four, with the money intended to offset the impact of higher energy costs likely passed down to consumers.

Wall Street Journal   Washington Examiner   Washington Post

 

Puerto Rico wins court approval for Cofinas deal

Puerto Rico has won court approval for a restructuring deal that wipes out one-third of its $18bn in sales-tax bond debt, a milestone in its quest to fix its broken finances. U.S. District Judge Laura Taylor Swain confirmed a debt adjustment plan covering the revenue bonds known as Cofinas, marking the largest renegotiation yet of the U.S. territory’s bond and pension obligations. The settlement is tied to a negotiated split of the sales taxes pledged to Cofina that releases 46% of the money back to the island’s government – providing $456m a year on average that otherwise was earmarked for bondholders. The settlement marks the first adjustment plan approved under the quasi-bankruptcy process created by Congress under a 2016 rescue law that also installed an oversight board to manage Puerto Rico’s spending and pilot the debt-restructuring process.

Wall Street Journal   CNBC

 

IRS will need at least a year to recover from government shutdown

The National Taxpayer Advocate says that it is likely take at least a year for the IRS to return to normal operations after the partial government shutdown ended. The NTA said the 35-day closure left the IRS with a backlog of 5m unanswered pieces of mail from taxpayers; it also warned that it delayed training for IRS employees, who must be taught how to implement changes to the tax code passed by Republicans in 2017. Additionally, about 2,000 recently hired IRS employees also need to be trained before they can start answering taxpayer questions over the phone.

Chicago Tribune   Forbes   Politico

 

Bernie Sanders proposes significant wealth tax expansion

Sen. Bernie Sanders (I-VT), widely expected to campaign to run for the presidency on a Democratic ticket, has unveiled legislation that would vastly expand the reach of the federal estate tax. The For the 99.8% Act would see an estate valued from $3.5m to $10m taxed at a rate of 45%, rising incrementally to 77% for estates valued in excess of $1bn. The plan would also end tax breaks for so-called dynasty trusts, which allow the wealthiest Americans to transfer their wealth from generation to generation for hundreds of years without paying estate or gift taxes. Democratic Sen. Elizabeth Warren has also proposed a wealth tax. She proposes an annual 2% federal tax on individual fortunes of more than $50m and 3% on those greater than $1bn.

New York Times   Politico   Fox Business   CNBC   Washington Post

 

Swiss bank closes DPA with DoJ

Swiss private bank Julius Baer has closed a 2016 deferred prosecution agreement (DPA) with the U.S. Department of Justice over helping Americans evade taxes. The agreement involved the bank’s legacy cross-border private banking business in the U.S. Specifically, the bank was accused of conspiracy to defraud the IRS, file false income tax returns and dodge federal income taxes. Under the agreement, the bank was required to pay an amount of $547.25m and abide by certain terms for the next three years. The bank admitted to the wrongdoings and agreed to cooperate with the authorities.

International Adviser

 

FedEx to settle on illegal deliveries of untaxed cigarettes

FedEx has agreed to pay New York City and state $35m to settle three lawsuits that claimed the delivery company « knowingly engaged in illegal and harmful behaviour » and transported hundreds of thousands of untaxed cigarettes over a decade. “Not only did FedEx violate laws created to protect the public from the serious health risks associated with cigarettes, but they also swindled New York City and State out of millions of dollars in tax revenue,” state Attorney General Letitia James said in a written statement.

Wall Street Journal

 

EUROPE

HMRC launches new clampdown on diverted profits

Multinational companies that shift profits abroad are being invited by HMRC to come forward and pay their taxes or face additional penalties. The UK tax authority will impose fines of up to 30% of tax owed but amnesty will be granted under a new “profit diversion compliance facility” if they stump up the cash without a fight. Dawn Register, a partner at BDO, said: “We understand HMRC has already undertaken a risk assessment process to identify approximately 2,000 businesses, which it considers may be affected.” Meanwhile, HMRC is seeking an extension to its powers that would enable it to investigate genuine mistakes in tax declarations on foreign assets for 12 years, up from four currently. Those found to have underpaid tax could face fines of up to 200% of the tax owed depending on the seriousness of the offence. Interest would also accrue on all tax debts.

Financial Times   The Times    Daily Mail    The Sunday Times

 

Britain’s richest man: Tax is driving a billionaire exodus

Gopichand Hinduja, Britain’s richest man, has warned that the country’s wealthiest business people are leaving for other financial centres due to the UK’s tax policies. He said there “used to be a lot of ease of doing business” in the UK, but: “Now, with changes in tax – doms, non-doms – they have made so many complications that people don’t even know what returns they have to file.” He added that a number of billionaires he knows “have left London and become residents either in Dubai or Singapore or Lebanon.”

The Sunday Telegraph

 

Polish PM attacks Ireland as tax haven

Irish premier Leo Varadkar has been forced to defend Ireland’s stance on corporation tax after the Polish prime minister Mateusz Morawiecki said some nations were abusing “their taxation systems to the detriment of other countries.” Mr Morawiecki was speaking in support of the EU’s digital tax plan which Ireland has opposed claiming it breaches international treaty obligations. Mr Morawiecki said he was in favour of “eliminating all tax havens from Europe because this would bring a level playing field. » But Mr Varadkar hit back saying Ireland was « forever closing tax loopholes » like the Double Irish. He added that Ireland was opposed to the digital tax because it was based on turnover rather than profit. « The principle has to be that taxes are paid where they are created, » he said.

Irish Times  Daily Express   The Daily Telegraph   Financial Times  

 

Apple strikes back-tax deal with France

Apple has reached a deal with France to pay an undeclared amount of back-dated tax, with French media putting the sum at around €500m ($571m). Apple is facing pressure from the French government as finance minister Bruno LeMaire tries to push through an EU-wide digital tax. The effort, which has been met with some opposition from other EU countries, would apply a 3% tax to the online revenues of tech giants like Apple, Google, Facebook and Amazon. The company has not itself disclosed how much it agreed to pay, noting only that “those details will be published in our public accounts.”

New York Times   CNBC   Deutsche Welle   France 24

 

Facebook should pay more tax, says Nick Clegg

In some of his first public comments since joining Facebook as Vice President of Global Affairs and Communications, Sir Nick Clegg has said that the social media network should pay more tax in Europe. The former UK deputy prime minister said it was « unbalanced » that most of Facebook’s tax bill is paid in the US, « even though the vast majority of Facebook’s users are outside the United States. »

The Daily Telegraph   The Times   The Daily Telegraph

 

Paris activists protest Google’s tax setup

Activists from anti-globalization group Attac have staged a protest at Google’s Paris headquarters, to criticize the firm’s French subsidiary for paying little tax on its sales – €14m ($16m) in income tax on revenue of €325m ($371m). The group says Google France shifts more than 85% of its French revenue to countries with more favourable tax regimes.

France 24   US News and World Report

 

Spain takes another step towards ‘Google tax’

The Spanish government has introduced a bill creating new taxes on digital services and financial transactions. The levies, which require parliamentary approval, are expected to bring in €2.05bn annually.

Financial Times   El Pais

 

EU takes UK to court over tax on commodities trading

The European Commission has referred the UK to the EU Court of Justice accusing it of failing to tax commodities traders in line with EU rules. A Commission spokesman said the UK had extended “the scope of a VAT derogation that applies a zero-rate to transactions carried out on certain commodity markets” since the derogation was notified to the Commission in 1977, “meaning that it is no longer limited to trading in the commodities as originally covered by the derogation.” The UK insists its approach is in line with EU rules.

The Daily Telegraph   The Times   Financial Times

 

No-deal Brexit could stymie $1.5bn EU tax bill

The European Commission is running out of time to issue the UK with a demand to recoup $1.5bn from British companies deemed to have benefitted from illegal tax breaks. Raymond Luja, a tax professor at Maastricht University in the Netherlands, questions whether the EU could enforce any decision taken just before Brexit. In the event of a no-deal Brexit, Howard Liebman, a tax partner at Jones Day in Brussels, says the UK “might indeed just ignore the whole thing.”

Bloomberg

 

EU opens probe into Nike’s Dutch tax arrangements

EU regulators have launched a probe into whether Nike benefited from a tax arrangement in the Netherlands that breached curbs on state support. The investigation relates to five tax rulings issued by the Netherlands regarding Nike group companies that develop, market and record sales for its products in Europe, the Middle East and Africa. The European Commission’s concerns primarily relate to method used to calculate royalty payments within the Nike corporate structure, which were endorsed by the Netherlands in the tax rulings, two of which are still in force today.

Financial Times   Washington Post   France 24

 

Kering faces €1.4bn Italian tax claim

Luxury group Kering has received a €1.4bn tax bill from Italy’s audit office, claiming the French group’s Swiss subsidiary avoided taxes on business conducted in the country. Italian authorities have been probing Kering since 2017; investigators have focused on an apparent disconnect between the material amount of income tax paid in Switzerland and the material amount of value added activity carried out in Italy. Kering, parent company of Gucci, Saint Laurent and Bottega Veneta, said it disputes “the outcome of the audit report both on the grounds and the amount.” It added that the Swiss subsidiary is a substantial firm in its own right, with 600 employees handling inventory, billing and supply chain logistics, with a business model “known to French and other competent tax authorities.” Separately, the European arm of US credit card group Visa has paid €13.2m to settle a dispute in Italy over alleged tax evasion.

Financial Times   Wall Street Journal   Reuters   Finanzen.net

 

Romania’s government wants to end ‘greed tax’

Romania’s government is urging the country’s central bank to help it effectively eliminate a so-called ‘greed tax’ on banks after the levy prompted the country’s worst market rout since the global financial crisis. The tax was introduced to help keep the budget deficit within EU limits and curb interest rates on loans.

Bloomberg

 

Tax waived for mothers of four in Hungary

Hungary’s leader Viktor Orbán has announced new tax and loan benefits for families as he seeks to encourage a higher birth rate in the country. The benefits include a lifetime personal income tax exemption for women who give birth and raise at least four children; a subsidy of 2.5 million forints ($8,825) toward the purchase of a seven-seat vehicle for families with three or more children; and a low-interest loan of 10 million forints ($35,300) for women under age 40 who are marrying for the first time.

Washington Post   Sky News

 

AFRICA

Zambia will enforce copper import tax, says minister

Zambia is to introduce a new 5% copper import duty as the country seeks to retain a greater share of mineral resource profits and tackle debt, said mining minister Richard Musukwa.

Reuters   Ships & Ports (Nigeria)

 

 LATIN AMERICA

 Chile wants blockchain to support tax collection

Chile’s government is weighing how to incorporate blockchain to improve tax collection. A planned conceptual model would use the technology to monitor payments received from banks and other private entities and then inform the corresponding government service.

Bloomberg Tax

 

GM and Sao Paulo discuss tax breaks

US car maker General Motors is considering investing 9bn reais ($2.5bn) in the Brazilian state of Sao Paulo over the next three years in return for tax incentives, according to a report in newspaper Valor Economico.

Reuters   The Globe and Mail (Canada)

 

Petrobras loses tax case

Brazilian state-owned oil company Petrobras has lost a tax court appeal and will have to pay an additional 1.5bn reais ($398.10m) in income tax, according to a securities filing. Petrobras has said it will appeal to the Superior Chamber of the  Administrative Board of Tax Appeals (CARF).

Reuters   BN Americas

 

Argentina tax revenue surges

Argentina collected 363.927bn pesos ($9.74bn) in January tax revenue, the government’s Indec statistics agency has said – an increase of 38.9% over the tax take in January 2018. Meanwhile, Brazil’s federal tax revenue reached 1.457trn reais ($385.34bn) in 2018, up 4.74% compared to 2017 and the highest since 2014, the federal tax service has said.

Reuters

 

MIDDLE EAST

Tax in Kuwait ‘only possible’ with proper laws

Kuwait’s finance minister has said that if a tax law is introduced it would be “no different” than other legislation requiring it to pass through Parliament as stipulated by the constitution. “A prospective tax law in Kuwait has been a recurring topic of discussion among our partners in the region,” noted Nayef Al-Hajraf.

Arab Times

 

GCC could impose a levy on sweetened beverages

Gulf Cooperation Council members are weighing plans to levy a selective tax on sweetened beverages – that is, drinks with added sugar, according to a report in Akhbaar24. « Discussions are underway to expand the excise tax to include more goods which are deemed harmful, » said Saudi Finance Minister Mohammed Al Jada’an.

Gulf Daily News

 

 ASIA-PACIFIC

 China tax cut package to stimulate economy

China will cut value-added tax rates for selected industries and provide tax rebates for others as part of its efforts to boost a slowing economy. Government officials said they would cut taxes “on a larger scale” in order to boost business activity. JPMorgan Chase & Co. economists estimate the total impact of the tax cuts will be around 2trn yuan ($300bn), or 1.2% of GDP. Tax cuts for graduates and low-income workers have also been announced in a stimulus drive to fend off the effects of the economic slowdown. Companies which hire people designated as “needy” will also qualify for a tax deduction of 6,000 yuan per person per year for three years.

Financial Times   Bloomberg   Reuters   China Daily

 

Pakistan announces tax cuts to boost growth

Pakistan has announced measures to boost growth, including lower taxes for small and medium-sized businesses and cutting taxes on imports of industrial raw materials. Finance minister Asad Umar also said tax measures would be introduced to help the stock market, reports Saudi Gazette. Meanwhile, the High Court in Lahore has ordered the collection of an entertainment tax from all cinemas houses in Pakistan, and has directed the Excise and Taxation Department to implement the order within six weeks.

Saudi Gazette   The Nation

 

South Korea to step up tax evasion probe

South Korea’s tax agency proposes to intensify its probe into corporate tax evasion. Hong Nam-ki, the government’s minister of economy and finance who is also deputy prime minister for economic affairs, said that justice must be achieved by taking robust action against tax evasion.

Xinhua.net

 

Japan plans tax break for insider buyouts and reverse mergers

Japan is proposing legislation designed to encourage corporate restructuring that will see businesses gain a broader range of tax-saving options for mergers and acquisitions. The change in the law will also apply to management buyouts.

Nikkei Asian Review

 

Modi’s government unveils budget giveaways ahead of India election

Indian Prime Minister Narendra Modi’s government has unveiled $2.8bn in direct payments to India’s small farmers over the next two months and $2.6bn in fresh tax breaks for the middle class ahead of upcoming elections.

Hindustan Times   Times of India    Financial Times

 

Bali weighs tourist tax

Bali’s regional government has drafted a bylaw imposing a $10 tax on foreign tourists to be charged upon leaving the country. « Tourists come to enjoy our environment and culture. Why not contribute to preserving it? » says I Nyoman Adi Wiryatama, who is the head of Bali’s provincial parliament.

Jakarta Post   CNN

 

GLOBAL

Global tax advisory services revenue hits $20bn

Tax advisory revenue at professional services firms expanded 8.6% to $20.3bn in 2017, and grew by around $5bn in the three years from 2014 to 2017, according to a new report from Source Global Research, which estimated the total market to grow to $24bn this year and $27bn next year. The main tax advisory services are business tax management (estimated to total $9.27bn globally), transfer pricing (totaling $5.18bn), and international tax (amounting to $1.58bn.) The Big Four accountancy firs dominate the market, with an 87% share, with EY ahead of the rest with a 35% share of global revenues.

Accounting Today

 

OECD pushes ideas for global corporate tax overhaul

OECD members have agreed to “address the tax challenges of the digitalisation of the economy.” Proposed reform will see the organisation review what some call the ten commandments of tax law. “The implications of these proposals may reach into fundamental aspects of international tax architecture,” the Paris-based institute said. Plans will be published in June, with an agreement hopefully in place by October 2020.

Financial Times   The Times of London