Strategizing International Tax Best Practices – by Keith Brockman

On May 27th, a €750 billion entitled “Next Generation EU” has been proposed.  The plan would be made up of grants and loans for every EU Member State, to be repaid via a digital tax, carbon tax and/or a tax on recycled plastics.  However, the European Central Bank is not expected to be a player in this plan, due to Germany’s top court ruling earlier this month that it violated the German constitution.  The referenced link provides additional details.

On May 28th, as follow up,  the EU Commission said it is ready to act on a digital tax if the OECD fails to achieve a global consensus on taxation of the digital economy.  This statement, along with unilateral tax proposals, provides the impetus for OECD to act on this proposal by year-end, for which it has dedicated to fulfill this timeline.

The EU is committed to a global strategy for digital taxation and minimum corporate taxation, and will present their own plans  if the OECD fails by act by the end of 2020. 

https://www.bbc.com/news/world-europe-52819126

I have authored a DAC6 best practices article, published today by Bloomberg Tax in the Daily Tax Report.

Hope you find the content informative.

https://news.bloombergtax.com/daily-tax-report/insight-dac6-past-present-and-future

Additionally, NL is scheduled to publish DAC6 guidelines tomorrow on its website.

Bloomberg Tax hosted a webinar on May 21st, featuring Dr. Achim Pross, Head of OECD Centre for Tax Policy and Administration.

The interview PDF features a discussion of the OECD Work on the Digitalised Economy, Pillar 1 and 2, COVID-19 tax issues, and the International Compliance Assurance Program (ICAP).  Dr. Pross acknowledged Pillar 1’s timeline is still this year, whereas Pillar 2 still has some issues to address, including the global minimum tax and U.S. GILTI provisions.

The second attachment featured tax executives and outside advisors, discussing the challenges of the OECD approach in addition to challenges thereto.

Each attachment is a valuable read, illustrating the goals and challenges for everyone.

Bloomberg Tax_The Brave New World of Global Tax_Dissecting Pillar 1 and 2 – FINALBloomberg Tax_The Brave New World of Global Tax_Keynote Interview – FINAL

Effective July 1, 2020 Indonesia will impose a 10% VAT on digital products sold by non-resident internet companies with a significant presence in the Indonesian market, including streaming services, applications and digital games.  The increase attempts to recoup some revenues resulting from COVID-19.

The government expects a 10% drop in state revenue this year due to the impact of the coronavirus pandemic and weak commodity prices, forecasting that economic growth will more than halve to 2.3%, from 5% in 2019. It foresees a fiscal deficit of 5.07% of GDP for 2020, the biggest in more than a decade.

https://www.reuters.com/article/us-indonesia-tax-digital/indonesia-to-impose-vat-on-streaming-other-digital-services-from-july-idUSKBN22R23V

Tax Executives Institute (TEI) recently provided comments in response to OECD’s Consultation Document for potential changes to the Country-by-Country (CbC) reporting process.

Highlights of comments:

  • Current reports should remain unchanged, as tax administrations have not yet had the experience to transform the data into an effective risk assessment tool.  Additionally, report changes are not easy to implement by multinationals (MNEs)
  • Multiple local filings are still required, which was not the intent of the legislation
  • There should not be additional jurisdictional requirements for a Master File, such data should reside in a Local File.  Additional requirements are not efficient for MNEs to provide
  • The definition of “control” should be over 50% to have availability for data collection
  • The reporting threshold should not be lowered
  • Examples of “revenue” would be helpful
  • TEI does not support providing legal entity information in Table 1
  • Consolidated, vs. aggregate, reporting presents many challenges for MNEs
  • Requests for additional details of reported amounts should be delayed
  • The OECD is currently developing a CbC reporting “Tax Risk Evaluation & Assessment Tool” (TREAT) to support tax authorities in reading and interpreting CbC reports. TEI recommends the OECD publish the TREAT to help MNEs in identifying indicators triggering questions from tax authorities (if the OECD is not otherwise planning on doing so)

    What is not mentioned is the trend toward transparency of tax data, which introduces additional issues as data becomes more granular and subject to interpretation by non-tax readers of such information. 

 

Click to access TEI%20Comments%20-%20OECD%20County-by-Country%20Reporting%20Review%20-%20FINAL%20to%20OECD%205%20March%202020.pdf

The Italian parliament has proposed relief from IRAP for 2020 relating to companies with less than EUR 250 million of sales.  Other incentives, business and personal, are also being proposed to restore some fiscal growth due to COVID.

Saudi Arabia has tripled its 2-year old VAT law, from 5% to 15%, as of July 1, 2020.

Does this represent a new trend for countries hungry for revenues due to shortfalls from COVID-19?

https://www.bbc.com/news/business-52612785

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