Home Global Tax News – April 2019

Global Tax News – April 2019


Enhancing our footprint in Latin America

Russell Bedford CEO Stephen Hamlet has visited several member firms on a tour of Latin America, starting in Argentina and moving on to Peru, Ecuador, and finally Colombia, where the Latin American meeting took place. All 18 countries from the region were represented and Stephen discussed new initiatives, business development and marketing strategies, as well as the network’s latest achievements.

Russell Bedford 

Joint members are appointed in Cali, Colombia

Russell Bedford has announced the appointment of MC Montes S.A.S. and Ascendis S.A. as the network’s joint members in Cali, Colombia. The appointment completes the national network in Colombia along with Russell Bedford members in Bogotá, Cartagena and Medellín.

Russell Bedford



Tax changes hit overseas profits of some U.S. companies

A number of U.S.-based multinational companies have warned that the country’s international tax system could put them at a disadvantage globally, and reduce their incentive to invest at home. The Alliance for Competitive Taxation, which represents such businesses as Bank of America, Google, United Technologies, and Verizon, says that at least 60% of its 40 members have foreign tax rates above 13.125%, the level many of them thought would exempt them from U.S. taxes on foreign earnings, with over 25% having foreign tax rates at or above the new U.S. tax rate of 21%; yet nearly all are paying the minimum tax, known as the Global Intangible Low-Taxed Income tax, or GILTI. Procter & Gamble says the tax rules could hurt the company’s ability to compete for acquisitions. Chief financial officer Jon Moeller said: “It’s kind of dawning on everybody at about the same time that this is going to be an issue. On the margin, it disincents local job creation.”

Wall Street Journal


Ways and Means assesses impact of Tax Cuts and Jobs Act

The House Ways and Means Committee has held its first hearing under Democratic control on the impact of the Tax Cuts and Jobs Act (TCJA) since its introduction in December 2017. Douglas Holtz-Eakin, president of the American Action Forum and a former director of the Congressional Budget Office, said it is “premature” to fully assess the “imperfect” legislation’s impact; he said, however, that its introduction “addressed many of the most anti-growth elements of the old Tax Code, and U.S. economic performance has improved meaningfully since the passage of the TCJA, including objectives like top-line economic growth, business investment and wage growth. This is promising, but not definitive.” Similarly, Rep. Kevin Brady (R-TX), the ranking Republican on the committee who helped birth the legislation, said “the early signs are extremely encouraging, ones that both parties should welcome.” Democratic lawmakers communicated several issues with the legislation, including problems with the new Form 1040, and the $10,000 SALT cap.

Accounting Today   Benefits Pro   Bloomberg


New bills in Congress aim to curb tax havens

Rep. Lloyd Doggett (D-TX), a member of the House Ways and Means Committee, and Sen. Sheldon Whitehouse (D-RI), a member of the Senate Finance Committee, have introduced a pair of bills aimed at stopping corporations from using offshore tax havens and outsourcing jobs to other countries. The No Tax Breaks for Outsourcing Act aims to level the playing field for domestic companies by ensuring multinational corporations pay the same tax rate on profits earned abroad as they do in the U.S. It would also prevent multinationals from disproportionately loading up their U.S. subsidiaries with debt to shrink their tax bill. The Stop Tax Haven Abuse Act would prohibit U.S. companies from electing to be treated as “foreign” for tax purposes and deeming corporations that are managed and controlled in the U.S. as domestic companies. It would give investors information about risky tax avoidance strategies by requiring corporations to disclose their country-by-country revenue, profits and employee count to the SEC.

Accounting Today


Senators investigate abuses of conservation easement tax break

Senate Finance Committee chairman Chuck Grassley (R-IA) and Sen. Ron Wyden (D-OR), the top ranking Democrat on the committee, have opened an investigation into potential abuse of the conservation easement tax break to siphon billions of dollars away from the federal government. Property owners who agree to give up certain ownership rights to preserve their land or buildings for future generations; however, the IRS has noted numerous instances of the provision being abused. The scams often involve promoters selling interests in tracts of land to taxpayers looking for large tax deductions. In turn, the taxpayers receive inflated appraisals of those tracts of land and grant conservation easements on that land, with the resulting inflated charitable deductions then split among the taxpayers.

Accounting Today   Forbes


SFC urges IRS to probe those involved in college admissions scandal

Senate Finance Committee Chairman Chuck Grassley (R-IA) and ranking member Ron Wyden (D-OR) have written to IRS Commissioner Chuck Rettig urging him to enforce any tax laws that have been violated by individuals and organizations involved in the college admissions scandal. Dozens of parents have been charged over payments for fraudulent test scores, and bribing college administrators and coaches to get their children into selective colleges. The scheme often involved payments to a nonprofit group which was recognized as a tax-exempt 501(c)(3) organization, meaning the bribes were deductible as charitable contributions. “If these allegations are true, such payments to KWF obviously should not be treated as legitimate charitable deductions, and we expect the IRS will enforce the law accordingly in this regard,” they wrote.

The Hill


SCOTUS upholds Yakama Nation’s state fuel tax exemption

The Supreme Court has ruled 5-4 that a Yakama Nation fuel distributor cannot be assessed state fuel taxes on wholesale fuel he brings onto the reservation, finding that the 1855 Yakama Treaty protects tribal members from state fuel taxes, even when bringing out-of-state fuel onto the reservation for retail purposes. The issue centered on the Yakama Indian Nation and one of its members who owns a wholesale fuel company, Cougar Den Inc., that imports large amounts of gasoline from Oregon to gas stations on the Yakama reservation in Washington state. The state had assessed taxes of more $3.6m on Cougar Den. The company and the tribe objected, contending that the taxes were barred by the 1855 treaty.

The Columbian   NPR


Canada caps stock option tax break

Canada is capping a tax break on employee stock options. At present, stock options receive preferential tax treatment, with only half the benefit taxed as income, similar to capital gains. The government intends to cap the annual use of that benefit at C$200,000 ($150,000) for employees of “large, long-established, mature firms,’’ exempting start-ups, and designed to have no impact on the vast majority of people receiving stock options. Canada had 2,330 people with incomes over C$1 million who claimed stock option deductions in 2017, with an average claim of C$577,000, costing the government C$1.3bn in revenue.

Accounting Today


IRS reform bill heads to House floor

The House Ways and Means Committee has advanced a bipartisan bill aimed at modernizing the IRS. The legislation includes provisions to reform  services to low-income taxpayers, taxpayer rights during the enforcement process, identity theft protection, information technology and electronic systems. In past years, the House and Senate tax committees have produced IRS reform bills with some similarities and some differences. This year, however, the same legislation has been put forward by the top tax-writers in both chambers.

The Hill   Fox Business   Law 360   Bloomberg Tax


WTO rules US failed to stop unfair tax break to Boeing

The World Trade Organization has ruled that Washington state failed to comply with an order in 2012 to halt tax breaks to Boeing that hurt European competitor Airbus. The European plane-maker claims it lost sales worth at least $15bn because of the support Boeing received. A reduced Business & Occupation Tax was set in 2003 to encourage Boeing to build the 787 Dreamliner in the state. State filings show that from 2004 through 2017, the reduction — which applies to all Boeing airplanes — saved the jet maker about $900m in state taxes.

Wall Street Journal   Seattle Times   Washington Post



‘Europe must take the lead’ on a digital tax

EU competition commissioner Margrethe Vestager says Europe must lead the way on a digital tax if a global consensus can’t be found. “We are becoming an increasingly digital world and it will be a huge problem if we do not find a way to raise (digital) taxes,” Vestager told France Inter radio, adding “The best thing is a global solution. But if we want to obtain results in a reasonable period of time, Europe must take the lead.” Meanwhile, France’s Finance Minister has dismissed criticism from the U.S. government of its plans to tax tech giants such as Facebook and Apple. France last month unveiled draft legislation to set a 3% tax on digital advertising, the sale of personal data and other revenue from any technology company that earns more than €750m ($841m) worldwide annually. U.S. Secretary of State Mike Pompeo had urged the country not to approve the tax, saying that it would hurt both the companies, and the French citizens who use them. In response, Bruno Le Maire said: “We are determined to implement a tax on the largest digital companies to bring more justice and efficiency to the international tax system.”

Irish Times   Politico   Reuters   The Daily Telegraph   France 24  


Switzerland to approve tax reform

A poll suggests that nearly two-thirds of voters in Switzerland are set to approve an overhaul of the corporate tax system in a move that Finance Minister Ueli Maurer says will be vital to prevent the country being branded a low-tax pariah. “For Switzerland’s position as a business location, the tax proposal is existential. If we say ‘no’ for a second time we can’t correct that again,” he said. Two years ago voters rejected an attempt to reform the tax system. The Swiss government is bending to external pressure and plans to eliminate special low tax rates benefiting around 24,000 overseas companies based in Switzerland.



Brexit sees £1trn in assets shifted

EY analysis suggests banks, asset managers and insurers are opening or expanding their European centres to avoid disruption ahead of Brexit, with this likely to affect 7,000 jobs. The research shows that 23 companies have announced the transfer of £1trn in assets – an increase from £800bn in the last quarter. Of the 222 companies tracked by EY, 87 businesses have either confirmed or are considering plans to move jobs or operations away from Britain. Omar Ali, head of financial services at EY, said: “The relocation of 7,000 high-paid finance jobs will inevitably hit the UK tax base.” He continued: “Even using a conservative estimate . . . the direct loss to the Exchequer from employment taxes would be around £600m. In reality, the average salary and therefore tax loss is likely to be much higher.”

The Times   Financial Times  


HMRC wins battle over £1bn Lehman tax bill

PwC has lost an appeal against a £1bn tax bill levied on interest payments made to the creditors of the European arm of Lehman Brothers, the investment bank that collapsed in 2008. Creditors were repaid in full as the business had a large surplus when it was wound down but HMRC and administrators from PwC have been fighting a three-year legal battle over whether the interest payment is subject to withholding tax of 20%. A spokesman for PwC said: “We are pleased that the Supreme Court has handed down this important decision on a technical tax issue. Consideration must now be given by HMRC as to how much of the £1bn is repayable to creditors because of double taxation treaty claims or other reasons … A large number of double taxation treaty claims have already been made.”

The Times


Google’s tax bill hits £66m

Google UK reported a corporation tax bill of £66m for last year, up on the £47m it paid the previous year. The firm reported a 10% rise in UK revenues to £1.4bn, with pre-tax profit up to £246m. The figures do not include Google’s advertising revenues – which make up the lion’s share of its income. City AM, which says tech firms have faced criticism for paying low levels of tax in the UK, notes that Google’s tax figures are significantly higher than those at Amazon, which handed HMRC just over £4.5m last year. Paul Monaghan, of campaign group Fair Tax Mark, commented: “The accounts make little or no effort to shed light on whether Google is paying a fair amount of tax on UK earnings, in all likelihood because it is not.”

The Daily Telegraph   Daily Mail


EU: Britain gave illegal tax breaks to multinational firms

The European Commission has ruled that a tax scheme introduced in 2012 by then-UK chancellor George Osborne gave illegal tax breaks to some multinational companies. Officials say the scheme “unduly exempted certain multinational groups from . . . UK rules targeting tax avoidance.” Margrethe Vestager, competition and policy boss for the European Commission, said a probe into the Group Financing Exemption found that the UK “gave certain multinationals a selective advantage by granting them an unjustified exemption from UK anti–tax avoidance rules. This is illegal under EU State aid rules. The UK must now recover the undue tax benefits.”

City AM   Financial Times


Spain may make Gibraltar a tax haven

Spain is to decide whether Gibraltar will be a tax haven after Brexit. Jose Manuel Lizanda Cuevas of the Tax Agency and Treasury inspector said: “Gibraltar would be considered as a tax haven for all purposes, without the possibility of benefiting from the exceptions provided for tax havens that are members of the European Union in certain articles of the Corporate Tax Law.” Gibraltar opted out of the EU customs union in 1972, meaning it has much lower taxes than Spain. The British overseas territory has a corporate tax rate of 10%, while Spain’s is 25%.

Daily Express


Sweden proposes greater powers for tax authority

Sweden is proposing a bill that will give the country’s tax authority greater powers to investigate suspected money laundering. “Money laundering is often closely linked to tax offences and therefore it is important that the tax authority be given the ability to conduct independent intelligence efforts regarding such crimes,” Finance Minister Magdalena Andersson said in a statement.

Reuters   Bloomberg


Danish tax agencies seeks Panama Papers clawback

Denmark could recover over 300 million kroner in cases resulting from the Panama Papers. A statement from the Danish Ministry for Taxation said that Tax Agency (Skattestyrelsen) work based on the 2016 dump of financial and client-attorney information could yield as much as 315 million kroner for the state.

The Local (Denmark)


Italy to cut income tax rates

A draft reform plan indicates that Italy proposes to gradually reduce individual income tax rates from a current five to two and to set a company tax rate at 20%. Tax rates will be set at 15% and 20% for all tax-payers, with the lower rate reserved for annual incomes of below €30,000.



Freshfields sued over role in German bank’s tax scandal

The liquidator of failed lender Maple Bank is suing law firm Freshfields Bruckhaus Deringer for €95m in relation to share-swapping schemes that allegedly allowed investors to reclaim tax they never paid.

Financial Times



Nigeria wants to raise $2.45bn from tax defaulters

Nigeria’s tax chief says he expects the country to raise $2.45bn from defaulters by end H1 2019. “We believe we should be able to go through 55,000 (tax defaulters) before the middle of this year, June 30th,” Federal Inland Revenue Service (FIRS) Chairman Babatunde Fowler told the committee in the House of Representatives, parliament’s lower chamber.

Reuters   The Guardian (Nigeria)


South African tax agency staff end strike

Employees at South Africa’s tax collection agency returned to work after a union representing about half of them agreed to a 8% wage increase in 2019 and a CPI-plus-2% rise for 2020-21. Reuters notes that the strike action took place at a time when the government wants to boost lagging revenue collection.

Reuters Africa



Tax cuts encourage investments in Colombia

The governor of Colombia’s central bank says government tax cuts at the end of 2018 have spurred investment. Juan José Echavarría said: “The fiscal reform gave a very large incentive for the private sector to operate . . . Investment is growing at 9% now.” Corporate income tax is to be reduced to 30% from 37% over four years and a one-year amnesty will be offered for tax evasion, among other measures.

Latin Finance


Brazil weighs lower corporate taxes

Brazilian President Jair Bolsonaro says his economic team is looking at lowering corporate taxes on companies. He made his remarks on a visit to Israel. Mr Bolsonaro told the World Economic Forum in January that he would work to reduce and simplify taxes to make it easier to do business in Brazil.




Israeli bank to pay $195m for US tax-avoidance scheme

Mizrahi-Tefahot, one of Israel’s largest banks, has agreed to pay $195m for helping U.S. citizens avoid paying taxes by placing their assets in offshore accounts. The penalty includes $53m in restitution, plus the $24m in fees it earned from the transactions and a $118m fine. The investigations have caused Israeli banks to decrease their activities abroad, and there has been a dramatic drop in the number of deposits held by foreign residents in Israeli banks, the Bank of Israel has said.

The Times of Israel


Bank Hapoalim Q4 profit sinks on U.S. tax probe provision

Israel’s Bank Hapoalim has reported sharply lower quarterly net profit, weighed down by a large provision for an ongoing U.S. tax evasion investigation. Hapoalim earned 97m shekels ($27m) in the fourth quarter, down from 612m a year earlier. Hapoalim said this month it would set aside an additional $246m in the quarter to cover a possible future settlement regarding a U.S. Department of Justice investigation of the bank’s business with American clients, bringing its total provisions to $611m.

Globes   Reuters


New ‘sin tax’ in Oman

A new ‘sin tax’ on cigarettes, alcohol, energy and soft drinks is to be applied in Oman from June after His Majesty Sultan Qaboos bin Said issued a Royal Decree approving the new levy.

Gulf Times   Muscat Daily


New rules set to increase Islamic tax for some lenders

New rules set by Saudi Arabia for the calculation of an Islamic tax on banks will result in them paying between 10% and 20% of net profit.

Daily Star (Lebanon)   Bloomberg



BJP pledges to revise income tax brackets if re-elected

India’s ruling BJP party says it will revise income tax brackets if re-elected in the seven-phase general election, starting on April 11th. “We are committed to further revise the tax slabs and the tax benefits to ensure more cash and greater purchasing power in the hands of our middle income families,” the BJP said in its election manifesto.

Times of India   


China launches tax reduction campaign

China has launched a 50 day campaign to promote the implementation of tax reduction policies. The government in Beijing wants to reduce the tax burdens and social insurance contributions of enterprises by nearly 2 trillion yuan ($298bn) this year, according to a recently-published government work report.

China Daily


Japan must proceed with sales tax increase, says Abe

Japan must implement a planned sales tax increase later this year to meet the cost of a rapidly ageing population. “Japan must proceed with fiscal reform,” Japanese Prime Minister Shinzo Abe told parliament. “On the other hand, the government is ready to deploy fiscal spending flexibly as needed,” he added.




IMF: Corruption costs $1tn in tax revenue globally

Curbing corruption could generate about $1tn in tax revenues annually across the world, according to research from the International Monetary Fund. “Among advanced economies, a country in the top 25% in terms of control of corruption collects 4.5% of GDP more in revenues, on average, than a country in the lowest 25%. The gap in revenue collection is 2.75% of GDP among emerging market economies and 4% of GDP among low-income countries,” said the report.

Reuters   Global News (Canada)

Lagarde: Corporate tax system is outdated

International Monetary Fund chief Christine Lagarde has called for businesses to pay higher taxes, hitting out at firms that exploit loopholes to avoid taxes and cuts to corporation tax. She said: “The ease with which multinationals seem able to avoid tax, and the three-decade decline in corporate tax rates, undermines faith in the fairness of the overall tax system . . . The international corporate tax architecture is fundamentally out of date.”

Daily Mail

People are in favour of taxing the rich more – OECD poll

An OECD poll of 22,000 people in 21 countries shows that two-thirds want their governments to tax the rich more so as to deliver better pensions and healthcare and provide greater support for lower income groups.

The Guardian   Financial Times

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