Rick Minor Archives

IRS Sees Potential Problems with Surrogate Filings

Published on March 8, 2016

USCIB’s Carol Doran Klein spoke to Bloomberg BNA about the surrogate filing option of the country-by-country reporting template, recommended by the OECD’s action plan on base erosion and profit shifting (BEPS).

Tax experts cited the challenges created by differences in timing in the implementation of the country-by-country reporting requirements, part of the OECD’s plan to combat tax avoidance. Klein expressed skepticism about U.S. multinationals filing their country-by-country reporting in the UK.

Read the full Bloomberg BNA article. (Paywall)

Changes to US Model Tax Treaty “Very, Very Complicated”

Published on February 26, 2016

taxes-portLast year the U.S. Treasury department announced proposed changes to the U.S. Model Income Tax Treaty, which is the model text used by American officials when they negotiate tax treaties with other countries. According to a press release issued by Treasury in May 2015, “The revisions to the U.S. Model text are intended to ensure that the United States is able to maintain the balance of benefits negotiated under its treaty network as the tax laws of our treaty partners change over time, and to deny treaty benefits to companies that change their tax residence in an inversion transaction.”

USCIB and other business groups have expressed concern that the treaty provisions tilt too far in the direction of denying inappropriate claims of treaty benefits. Although Treasury recently narrowed some of the anti-tax evasion provisions to be more palatable to the U.S. business community, tax practitioners say that the model’s reception will be uncertain, especially among America’s treaty partners.

Speaking to Bloomber BNA, USCIB Vice President for Tax Carol Doran Klein noted that the treaty is complex and will be difficult to negotiate with other nations.

“It’s really, really complicated, which is not surprising,” Klein said. “I do think that some of the novel provisions have been modified, which is better. But it’s going to be really difficult to get this negotiated and also to apply it.”

Uncertainty also remains as to how the proposed changes to the U.S. model tax treaty might impact the OECD’s work on Base-Erosion and Profit-Shifting (BEPS).

USCIB sent a letter to the U.S. Treasury on September 14 expressing concern with proposed U.S. model tax treaty changes, which in part attempt to prevent double non-taxation of income between tax treaty partners. While acknowledging that the treaty provisions address legitimate concerns, USCIB said that the draft provisions “tilt too far in their attempt to prevent inappropriate claims of treaty benefits.”

The OECD’s Tax Agenda: Building a Coherent and Predictable Tax Regime

Published on February 9, 2016

taxes-portFor global business, the leading role of the OECD in international tax policy is of great importance and value. With the G20 mandate for the project on Base Erosion and Profit Shifting (BEPS), the reach of OECD tax work and policy guidance has increased considerably. All OECD/G20 countries, along with Latvia and Colombia, have pledged to follow the BEPS minimum standards, but any country could join the efforts to address BEPS. For this, the inclusive framework for the monitoring and implementation of BEPS will be essential.

At the same time, the OECD has developed Multilateral Competent Authority Agreement on Country-by-Country reporting. This agreement, signed on January 27 by 31 countries, including four non-OECD/G20 countries, is a first major step in the BEPS implementation and should facilitate a more coherent and predictable tax regime for investors. Through the Business and Industry Advisory Committee (BIAC) to the OECD, the business community will be actively involved in the further implementation process of BEPS.

But the OECD work on taxation is not only about BEPS. There are multiple streams of work with great significance for business, including International Guidelines on VAT/GST, the Global Forum on Transparency and Exchange of Information for Tax Purposes with currently 130 parties undertaking peer reviews, as well as tax and development.

To better understand the complexities of the OECD work and role in international taxation, BIAC has prepared a brief on the Tax Agenda of the OECD. We hope this brief will provide good guidance even to members who do not participate in this work on an expert level.

With valuable support and input from our members, USCIB and BIAC will continue to offer structured advice to the OECD to help develop a more coherent international tax regime that will support – and not hinder – cross border trade and investment, and growth. USCIB is the U.S. affiliate of BIAC.

Visit USCIB’s Membership page for more information on how to become a member and get involved in our Taxation Committee, which promotes sound and consistent international tax policy and advocates against government actions that result in double taxation. USCIB co-organizes an annual tax conference with BIAC and the OECD in Washington, D.C. This year’s OECD International Tax Conference will take place on June 6 and 7.

USCIB’s Klein Tells Media Dispute Resolution is Crucial for BEPS

Published on October 16, 2015

taxes-portIn a Bloomberg BNA article, Carol Doran Klein, USCIB’s vice president and international tax counsel, explained that effective dispute resolution will be necessary for the success of the Organization for Economic Cooperation and Development’s (OECD) project on base erosion and profit shifting (BEPS), designed to rewrite the rules of the international tax system. The OECD released its final BEPS recommendations on October 5.

At an international tax conference on October 15 in Toronto, Klein told attendees that BEPS’s new rules on profit attribution and allocation of risk will lead to more controversy, because there is no guarantee that governments will interpret these rules consistently. Effective dispute resolution is therefore key for the successful implementation of the BEPS recommendations.

“I think that the arm’s-length standard, as set out in the guidelines, can work—but only with real functioning dispute resolution,” Klein told Bloomberg BNA. “It is going to be key to resolve disputes early, for this process to have success,” she said. “You could have real transfer pricing reform, but only in my view if the dispute resolution is implemented as indicated in the guidance.”

Klein also said that questions risk analysis about risk analysis were likely to cause dispute, and the implementation could be subjective.

“It is clear that the risk-adjusted return depends on the credit-worthiness of the borrower and the riskiness of the investment, but there’s very little guidance on how these factors should be determined and weighted,” Klein told Bloomberg. “Tax administrations may also be examining the riskiness of a transaction after that risk has played out, so reaching agreement on a risk-adjusted return may be challenging.”

Read more: “Companies See Dispute Resolution as Crucial in BEPS” (Paywall)

 

 

Business Commends the OECD, G20 on the 2015 BEPS Package

Published on October 5, 2015

The Organization for Economic Cooperation and Development (OECD) released its long-awaited 2015 BEPS recommendations on October 5, concluding the two-year Base-Erosion and Profit Shifting (BEPS) project designed to rewrite global tax rules.

“The BEPS project needed to happen, and the OECD and G20 should be congratulated both for their hard work and for achieving high-level consensus across many issues,” said Will Morris, chair of the tax committee of the Business and Industry Advisory Committee (BIAC) to the OECD. “Moreover this high-level consensus was achieved while working to an exceptionally ambitious timetable.”

Morris added that the business community still has concerns that some of the BEPS recommendations may lead to double taxation of income, and “many important details remain to be worked out.”

For many years, the OECD has successfully promoted cross-border trade and investment by removing barriers – including significant tax barriers – to growth.  The task of the last two years has been to respond to legitimate public concern about double non-taxation.  In spite of the reservations raised, BIAC acknowledged that the BEPS process and the recommendations released today appropriately respond to those concerns.

Carol Doran Klein, USCIB’s vice president and international tax counsel, has worked closely with members, the U.S. government, BIAC and the OECD secretariat throughout the BEPS process.

In a statement released today about the 2015 BEPS package, BIAC noted two recent develops:

  • The growing acceptance among countries that mechanisms for resolving tax disputes need to be significantly improved: changes to the treaty-based Mutual Agreement Procedure will be important, but the moves of some key countries towards Mandatory Binding Arbitration will bring even more substantial benefits, as the risk of double taxation would be greatly reduced.
  • A potential monitoring mechanism on implementation of the BEPS recommendations to be overseen by the OECD: BIAC believes this is an important development that can help to ensure consistent application of the BEPS recommendations by countries, and we hope that business will be able to play a significant and constructive role in this monitoring process.

BIAC also welcomed the intention of G20 countries to remain part of this process for the foreseeable future, and we appreciate the commitment to ensure that the distinctive needs of developing countries will be also appropriately addressed.

The International Chamber of Commerce also released a statement today welcoming the conclusion of the BEPS project but underscoring significant implementation challenges in the near future.

 

USCIB “Very Concerned” with Proposed Changes to US Model Income Tax Treaty

Published on September 15, 2015

USCIB sent a letter to the U.S. Treasury on September 14 expressing concern with proposed U.S. model tax treaty changes, which in part attempt to prevent double non-taxation of income between tax treaty partners.

While acknowledging that the treaty provisions address legitimate concerns, USCIB said that the draft provisions “tilt too far in their attempt to prevent inappropriate claims of treaty benefits.”

USCIB argued that because tax treaties are designed to promote cross-border trade and investment, if treaty benefits aren’t granted to legitimate claimants, then the treaty will fail in its fundamental purpose.

The letter also said that the draft provisions aren’t clear, raising questions about how the changes will be interpreted, and noted that clarity is important to taxpayers, tax authorities and treaty negotiators and legislatures.

USCIB also raised concerns about how the proposed changes will be implemented, and said that “these rules may be unacceptable to a substantial number of existing U.S. treaty partners.”

Read USCIB’s letter.

The letter concludes that the proposed changes to U.S. model income tax treaties are not a good way to address concerns about double non-taxation, and the changes may also have the unintended consequence of making tax treaties more difficult to negotiate.

USCIB’s Klein to Speak in Canada as OECD Plans Release of BEPS Deliverables

Published on August 10, 2015
Carol Doran Klein (USCIB) at the 2015 OECD International Tax Conference.
Carol Doran Klein (USCIB) at the 2015 OECD International Tax Conference.

As governments and the business community get ready for the release of the OECD’s proposed national actions in its controversial Base Erosion and Profit-Shifting (BEPS) initiative, USCIB Vice President and International Tax Counsel Carol Doran Klein has agreed to be a keynote speaker at a October 15-16 conference in Toronto on global transfer pricing and related tax issues, including BEPS.

The conference is being organized by Bloomberg BNA and Baker & McKenzie. Klein is expected to provide a business insider’s assessment of the BEPS deliverables.

The OECD has announced that it plans to unveil the proposed BEPS deliverables at this October’s G20 finance ministers meeting in Lima, Peru. Last month, USCIB and two other associations sent a letter to letter to U.S. Treasury Secretary Jacob Lew citing concerns with BEPS and noting the threat of double taxation to global trade and investment. The BEPS project was a primary focus of USCIB’s annual tax conference with the OECD in June.

BIAC, the Business and Industry Advisory Committee to the OECD, said its member organizations fully appreciated that this is only the end of the “first half,” of the BEPS project, with national implementation constituting the “second half.”

“It is crucial that recommendations not only protect countries’ tax bases, and the ability of governments to raise revenue, but also protect and encourage cross border trade and investment by providing a predictable fiscal environment, that will help create jobs and growth,” BIAC said.

USCIB Adds Its Voice to Concerns with BEPS

Published on July 10, 2015

taxes-portUSCIB joined the Software Finance & Tax Executives Council and the National Foreign Trade Council in signing a letter to U.S. Treasury Secretary Jacob Lew citing concerns with the OECD’s Base Erosion and Profit Shifting (BEPS) project. The letter notes that the threat of double taxation will have a negative impact on global trade and investment.

The BEPS project is an effort by the OECD to rewrite global rules that tax profits where economic activity is generated, without imposing undue compliance costs on taxpayers.

“Throughout the BEPS process, U.S. business has been pressing for clarity,” the letter states. “The lack of clarity and threat of double taxation will create uncertainty which will have a negative impact on global trade and investment.”

Read the letter.

L-R: Grace Perez-Navarro (OECD), Carol Doran Klein (USCIB), David Camp (PwC), Pascal Saint-Amans (OECD)
L-R: Grace Perez-Navarro (OECD), Carol Doran Klein (USCIB), David Camp (PwC), Pascal Saint-Amans (OECD)

Last month, USCIB hosted its tenth annual OECD International Tax Conference in Washington, D.C., which took stock of BEPS and its impact on international trade and investment.

 

 

USCIB Conference Assesses Status of Controversial BEPS Project

Published on June 12, 2015
L-R: Grace Perez-Navarro (OECD), Carol Doran Klein (USCIB), David Camp (PwC), Pascal Saint-Amans (OECD)
L-R: Grace Perez-Navarro (OECD), Carol Doran Klein (USCIB), David Camp (PwC), Pascal Saint-Amans (OECD)

This week, USCIB convened the tenth annual OECD International Tax Conference, in Washington, D.C. June 10-11, for a timely discussion of global tax policies and their impact on international trade and investment.  The sold-out event, produced with the OECD and BIAC, has become a huge draw for global companies and those involved in crafting international tax policies.

As the OECD’s Base Erosion and Profit-Shifting (BEPS) project draws to a close, policymakers, business representatives and tax practitioners gathered to take stock of the OECD’s efforts to rewrite global tax rules. The BEPS project’s goal is to craft new rules that tax profits where economic activity is generated, without imposing undue compliance costs on taxpayers.

“As we enter the home stretch in the BEPS exercise, global companies and national tax authorities are naturally thinking about implementation as well as next steps,” said Carol Doran Klein, vice president and international tax counsel with USCIB. “Our conference is more valuable than ever as a resource to learn about and discuss transfer pricing, prospects for U.S. tax reform, and many other topics. The OECD is of course a critical resource in this area.”

Discussions on the first day of the tax conference included sessions on “BEPS: Current State of Play,” “U.S. Tax Reform and BEPS,” “Transfer Pricing in Line with Value Creation,” and a keynote address by former U.S. Congressman David Camp (PwC).

camp_lo-res
Former Congressman David Camp (PwC) stresses the importance of U.S. tax reform at the 2015 OECD International Tax Conference in D.C.

Former Congressman David Camp (PwC) stresses the importance of U.S. tax reform at the 2015 OECD International Tax Conference in D.C.During Camp’s speech, he stressed the need for the United States to reform its tax code, explaining that the U.S.’s high statutory corporate tax rate makes it difficult for American companies to remain competitive, and it incentivizes those companies to reinvest their profits abroad rather than at home. On the BEPS process, Camp noted that concerns about double taxation on cross-border investment continue to be serious issues for the United States. He urged attendees to address these concerns before the BEPS process is over without rushing to a hasty conclusion.

“From a business standpoint, we really must have tax reform,” Camp said.

Read Camp’s full remarks

During the conference, speakers from governments involved in the BEPS negotiations, including Robert Stack, deputy assistant U.S. Treasury secretary for international tax, provided their assessments of the overall success of the project.

“It is clear that the BEPS has been very challenging, we hope the OECD and countries will commit to continue to improve the process and outcomes,” said Bill Sample (Microsoft), chair of USCIB’s Taxation Committee.

Legislators weighing the impact on domestic tax reform

The conference takes place as American policymakers consider how to make U.S. tax law more internationally competitive. On June 10, Rep.  Paul Ryan (R-WI) said in an interview with Bloomberg BNA: “The question is: Can we take a couple of steps in the right direction, particularly with international tax laws and international tax rules? Ours are really anti-competitive. Can we do some things to fix that so we can make American businesses more competitive?”

As the BEPS process comes to a close at the end of this year, the U.S. business community will be looking to its government to make the U.S. tax code more conducive to international trade and investment.

“BEPS is going to change the landscape of international tax. If Congress wants to shape that landscape, they should be paying attention, following the discussions and making their views known. Congress staking out a position soon would be helpful” USCIB’s Klein told CQ News.

On June 10, the Business and Industry Advisory Committee to the OECD released a position paper that identifies the business community’s primary concerns with the BEPS process.

Read BIAC’s Position Paper.

On the second day of the OECD tax conference, participants covered “Interest Deductibility and CFC Rules,” “Permanent Establishments and Profit Attribution to Permanent Establishments,” “Treaty Abuse,” “Dispute Resolution,” looked ahead to “BEPS: Post-2015,” and listened to a keynote address by Sunita Manik of the South African Revenue Service. 

USCIB and BIAC will continue to provide constructive input into the BEPS process as the project reaches its final stages at the end of this year.

View photos from the OECD International Tax Conference (Flickr)

Business Emphasizes Dispute Resolution at OECD Tax Consultations

Published on February 3, 2015

OECD public consultation meetings on the Base Erosion and Profit Shifting (BEPS) Project took place in Paris from January 21-23, 2015, where a number of key issues for business including Permanent Establishment (PE) Status (BEPS Action 7), Treaty Abuse (BEPS Action 6), Low Value-Adding Services (BEPS Action 10), and Dispute Resolution (BEPS Action 14), were addressed among business governments and NGOs.

BEPS refers to the G20/OECD initiative designed to rewrite global tax rules to prevent incidences of perceived under- or non-taxation of international companies.

At the consultations, BIAC Tax Committee Chair Will Morris emphasized the absolute importance of effective dispute resolution to a successful outcome for the BEPS Project. He also underlined the need for clarity in guidance regarding all BEPS outcomes. February consultations will address Interest Deductions (Action 4) and VAT B2C Guidelines (Action 1).

Carol Doran Klein, USCIB’s vice president for international tax counsel, participated in the OECD Public Consultation, representing U.S. business interests in BIAC’s work.

In support of its strategy to deepen developing countries’ engagement in the BEPS Project, OECD will also be organizing regional consultations during February and March in Peru, Korea, Turkey, Gabon and South Africa.  BIAC is submitting written responses to all BEPS Discussion Drafts.