If you are friends with any corporate tax attorneys, kindly forgive them their grumpiness. They get a pass right now. That’s because the government recently dropped an abnormally dense set of income tax regulations on their desks – the ones dealing with debt recharacterization under Internal Revenue Code section 385
Tax Analysts Blog
Robert Goulder is senior tax policy counsel with Tax Analysts. He previously served as editor in chief of Tax Analysts’ international publications. He coordinated coverage of international tax issues for Tax Analysts' Tax Notes International, Worldwide Tax Daily, and Worldwide Tax Treaties publications. Goulder practiced law in Virginia and the District of Columbia before joining Tax Analysts in 1999. During that time, he worked at the law firms Jones Day and Bayh Connaughton & Malone. He holds a BBA from the University of Michigan and a JD from George Washington University. He also worked at the U.S. Tax Court and did postgraduate course work in the tax LLM program at Georgetown University Law Center.
The European Union has ordered the government of Ireland to collect €13 billion in corporate taxes from Apple Inc. That’s roughly $14.5 billion given current exchange rates; one of the largest tax bills in human history. The determination comes as part of Brussels’ ongoing investigation of state subsidies that take the form of advance tax rulings.There are several aspects to this story that leave Americans scratching their head. Let’s review them.
You can feel it in the air. The college football season is just around the corner and we are plenty excited. But there’s another high-stakes drama that is almost as captivating to aficionados of tax policy. In case you missed it, the U.S. Chamber of Commerce has filed suit in federal court challenging the Treasury Department and the IRS over their latest anti-inversion regulations.
That Donald Trump revised his tax reform plan came as no surprise. His campaign had been hinting for several weeks that a partial rewrite was in the works. The presumed objectives of the revision were threefold, and it’s useful to keep these goals in mind when evaluating the details of his plan.
People often ask me the same question: When will Congress get serious about fundamental tax reform? My response is predictable You’ll know that we’re making genuine progress when lawmakers get over their knee-jerk opposition to discussing a broad-based federal consumption tax.
Evolutionary changes typically occur at a glacial place. In the tax world, however, we are witnessing a paradigm shift that’s occurring far more rapidly. I’m referring to the rise of automatic information exchange between national revenue bodies. This was unthinkable just a few short years ago.
Certain tenets of tax policy are so thoroughly ingrained in our thinking that to question them seems almost sacrilegious. Among these is the doctrine that corporate income should be taxed once and only once. Typically that singular occurrence of corporate tax is imposed by the country with the strongest jurisdictional claim over the relevant corporate entity (residence-based taxation) or the economic activity that gave rise to the income (source-based taxation). It naturally follows that double taxation is an abomination that must be eliminated at all costs. This reflexive aversion to double taxation heavily influences our nation’s tax laws. It also features prominently in the international norms set by multilateral bodies such as the OECD.
In case you missed it, U.S.-based Terex Corp. has substantially altered its proposed merger with Finland’s Konecranes PLC. The original all-stock deal would have resulted in current Terex shareholders acquiring roughly 60 percent of the newly formed firm, which would have been based overseas. Instead, the two companies are now eyeing a much smaller cash and stock transaction that would be limited to an acquisition of two of Konecranes’ business units. Terex’s explanation for the change of plans is straightforward: The anticipated tax benefits are no longer available.
Conventional wisdom tells us the OECD’s base erosion and profit-shifting initiative is the most significant development in tax policy in decades. Not so, says Reuven Avi-Yonah, a law professor at the University of Michigan and one of the leading critical thinkers in global taxation.
Bodacious fantasy was in ample supply on Capitol Hill earlier this month, at a House Ways and Means Committee hearing on corporate tax reform. As important as tax reform is, we really don’t need further congressional hearings on it. Talk therapy won’t help. Everyone in Washington already knows what grown-up tax reform will look like. It looks like the Dave Camp bill.
What if someone waved a magic wand and suddenly increased your take-home pay? No, you wouldn’t need to put in longer hours. You’d simply be allowed to retain a larger slice of the paycheck you already earn. Who wouldn’t enjoy that?
A wise person once observed that it’s difficult to fix something if you can’t measure the extent of the problem. I was reminded of this when I read Kimberly Clausing’s excellent Tax Notes article, “The Effect of Profit Shifting on the Corporate Tax Base,” in which she quantifies the revenue losses attributable to corporate profit shifting.
One of our favorite discussion topics is the VAT -- more specifically, whether the United States will ever adopt a federal consumption tax. In that regard, much can be learned from looking at the experiences of other countries. What’s happening in India – the world’s largest democracy -- is noteworthy because it underscores some of the difficulties in harmonizing a federal VAT with preexisting taxes at the state and local levels.