According to a recent ruling by Estonia’s Supreme Court, the country’s tax agency can no longer chase up tax debts that are owed five years after enforcement proceedings are initiated. Well, it’s a good job that tax debts aren’t waived so quickly in many other jurisdictions, given the often protracted nature of tax audits and investigations.
It emerged just last week that the average length of tax inquiries into large businesses in the United Kingdom are now taking more than three years to settle, with each case taking around 39 months to resolve in 2017/18, up from 34 months in 2016/17, according to Pinsent Masons, the law firm. Of course, this isn’t just hard luck for the tax authority. It’s very unfortunate for the businesses facing these interminably long investigative proceedings too.
As Pinsent Masons pointed out, these matters are not only … Read More »
A few years ago, the Swiss Government put many of its eggs into a corporate tax reform basket called Corporate Tax Reform III (incidentally, does anyone remember Corporate Tax Reform I or II? Is this a rare case of a sequel being more memorable than the original?). These are intended to remove a series of “harmful” tax regimes and generally bring Switzerland’s tax regime into line with international tax standards, while also ensuring the country remains competitive on tax. However, the proposals were somewhat cruelly struck down at the very last legislative hurdle as the people voted against them in a referendum.
Fearing the wrath of the European Union and yet another reputational battering, the Swiss Government had little choice but to almost immediately pick itself up, dust itself down, and start writing the script for CTR IV, which eventually became … Read More »
Profound changes are afoot generally, both politically and technologically. However, it’s good to know that beneath the quaking and shaking, it’s business as usual. And there’s nothing like a good transfer pricing development to distract you from the turbulence and turmoil generated at government level in various places.
In Italy, for example, we can forget for a moment the uncertainty caused by the recent election of the most unlikeliest of coalition arrangements and instead get our teeth into “Provvedimento 108954/2018,” setting out how Italian companies can request a “downward adjustment” to their taxable income in Italy following a transfer pricing adjustment in another territory, to avoid double taxation. If that doesn’t take your fancy, then there’s always the Ministry of Finance’s consultation on whether to support the EU’s digital tax plans, and in particular, its proposal for an “interim tax” on … Read More »
US tax reforms are causing a certain amount of competitive anxiety in some of world’s major economies, especially in Canada, given that its geographical proximity to the US makes it doubly vulnerable to such competitive pressures. And the results of the International Monetary Fund’s latest assessment of the Canadian economy will have done nothing to assuage these concerns.
Often, the IMF’s messages get lost behind a thick fog of economic jargon. But in this case its conclusions were quite clear. Its staffers wrote of “economic anxiety,” of Canada as “a less attractive destination for investment,” of substantial “shifting of real activity and profit,” and of the need for a “careful rethink of Canadian tax policy.”
Surveys suggest that businesses on the ground in Canada are growing increasingly worried about the future too, due largely to the tax and trade policies of the US. … Read More »
The Australia Institute recently urged the Government to resist partaking in the ”race to the bottom” on corporate tax rates. Instead, it recommended that Australia tackle tax loopholes and avoidance schemes, arguing that the priority is to ensure enough revenue is raised to fund public services and infrastructure. But if you look around the world, you’ll find that parliaments are voting through tax reforms that do both – cut corporate tax while shoring up the corporate tax base.
It’s no coincidence that in recent times a succession of governments have announced, are legislating for, or have completed, tax reforms which reduce the rate of corporate tax while restricting interest deductions and strengthening controlled foreign company regimes, among other anti-avoidance measures. These moves are largely a response to base erosion and profit shifting (BEPS), but they also show that tax competition is far from … Read More »
In the bizarre and esoteric world of taxation, something good – say a 14 percent corporate tax cut – can also be something bad. Just ask the string of companies which have reported multi-billion-dollar hits to their fourth-quarter and full-year 2017 results because of the accounting effects of the United States Tax Cuts and Jobs Act. AIG and GM, for example, reported one-off accounting charges totaling approximately USD14bn last week, taking both companies into the red.
Indeed, in this topsy-turvy world, something you’d think under normal circumstances would be undesirable, like a financial loss, actually becomes an asset. In this case, the ability to use past losses to offset future income, thus enabling the taxpayer to pay less tax. And, as if to underline the point that there’s rarely anything straightforward where taxation is concerned, the value of these deferred tax … Read More »
It seems the good times are about to roll for taxpayers after the enactment of the Tax Cuts and Jobs Act. And not only has the tax reform feel-good factor driven US stocks to their highest values, companies have announced pay rises and other tax perks for employees as a result, such as with the recent announcement from Walmart.
But even here, some companies are seeing short-term fallout. As a result of the cut to the corporate income tax rate to 21 percent, many large multinationals have adjusted the value of their deferred tax assets, resulting in a write down in their profits, typically by billions of dollars. And elements of the TCJA could also prove particularly problematic for banks, many of which have expressed concern about the “BEAT” interest deduction limitation provisions.
What’s more, while taxes might be getting lower for many … Read More »
Despite plunging corporate tax rates across the world, the jury’s still out on whether there’s truly a corporate tax rate to the bottom occurring. Many have predicted the death of corporate tax in the not-too-distant-future. As I surmised on this subject recently, such claims feel somewhat exaggerated and a tad hysterical. Surely, public opinion would be so hostile to such an eventuality that governments simply wouldn’t allow it? It’s a safe argument for me; an argument that can only be settled after the next decade or three.
Nevertheless, there can be little doubt that robust competition is taking place between jurisdictions on corporate tax at present, and the recently completed tax reform legislation in the United States, which slashed corporate tax to 21 percent, has probably intensified it. It can’t be a complete coincidence that China kicked off 2018 by announcing … Read More »
2017 saved the best until last.The end of the year saw a series of breakthroughs, with the EU-UK Brexit negotiations moving forward, and the approval in the US of a law to comprehensively reform the US tax code, having ping-ponged back and forth between House and Senate.
And so,the United States has managed its first major tax code shake-up since the 1980s, and one of the largest tax cuts in its history, givingTrump the best Christmas present he could have hoped for, after a year of legislative frustrations – a gift that will keep on giving you might say, especially if it results in the economic growth that Republicans are expecting and the boost in tax revenues.
While much commentary on the subject has focused on the domestic impact of the plan, US tax reform has triggered a wave of soul-searching by government ministers … Read More »
Diageo’s recently published annual report was revealing for a couple of reasons. First, it showed how large multinational companies are more often than not embroiled in at least one tax dispute across the many jurisdictions in which they operate.
Second, in Diageo’s case, one of these tax disputes concerned the United Kingdom’s Diverted Profits Tax (DPT). And this development was interesting because this was one of the first times that the UK tax authority, HMRC, has assessed DPT against a company.
The next development of interest will be what happens next in this dispute. And doubtless other multinationals with potential exposure to this charge will be keenly watching how it unfolds, with a view to strengthening their own defences against the tax. However, they’ll need a long attention span. Because under the DPT legislation, after a taxpayer is issued with a DPT payment notice … Read More »