ICC Tackles the Application of Anti-Avoidance Rules in the Field of Taxation

Published on April 2, 2012

ICC upholds that the use of anti-avoidance rules of taxation that establish barriers to cross-border business transactions is counterproductive and should be stopped

The International Chamber of Commerce (ICC) has recently adopted a policy statement, produced by the ICC Commission on Taxation, on the application of anti-avoidance rules in the field of taxation.

It is critical that tax authorities understand that in order for businesses to be competitive, they must seek out the most efficient ways of carrying out business transactions. This is especially crucial in the context of the increasing globalization of businesses and the world economy.

In recent observations, there is a growing trend for tax authorities to disregard transactions relating to tax assessment based on their interpretations of anti-avoidance rules, which are at times quite extensive.
ICC upholds that the use of anti-avoidance rules of taxation that establish barriers to cross-border business transactions is counterproductive and should be stopped.

“These anti-avoidance rules are destructive to countries themselves, when other countries impose them on a home country multinational in a way that diminishes the home country tax base and produces a bilateral controversy,” said ICC Commission on Taxation Vice-Chair Cym Lowell.

Read the policy statement on anti-avoidance
rules

Staff Contact: Carol Doran Klein

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India’s Retroactive Tax Proposal Assailed by Business

Published on April 2, 2012

Faced with an Indian proposal to retroactively tax mergers and acquisitions as far back as a half-century, USCIB joined with other top business groups from North America, Europe and Japan in a letter to Indian Prime Minister Manmohan Singh protesting the move.

The proposal, contained in India’s 2012 finance bill, could upend numerous previously decided, could have a major dampening effect on foreign investment in the country. In their letter, the business groups wrote: “The sudden and unprecedented move in the Bill has undermined confidence in the policies of the Government of India toward foreign investment and taxation and has called into question the very rule of law, due process, and fair treatment in India. This is now prompting a widespread reconsideration of the costs and benefits of investing in India.”

The letter was timed to coincide with the visit to India by U.K. Chancellor of the Exchequer George Osborne, who was expected to raise the issue with his Indian hosts. In addition to USCIB, the letter was signed by the Business Roundtable, Canadian Manufacturers & Exporters, Capital Markets Tax Committee of Asia, the Confederation of British Industry, the Japan Foreign Trade Council and the National Foreign Trade Council.

Staff contact: Carol Doran Klein

More on USCIB’s annual tax conference (June 4-5, 2012, Washington, D.C.)

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Case Study 2: Uncertainty in International Tax Policy

Published on March 30, 2012

The Problem

Uncertainty in the application of international tax rules can act as a barrier to the expansion of cross-border trade and investment. When the OECD Guidelines on Multinational Enterprises were being revised, the chapter on tax contained vague language on “complying with the spirit of the law” that few people had focused on. USCIB alerted its members to the risks associated with language that created an environment without transparency or certainty which would place companies at the mercy of government’s interpretation of what constituted a violation of the “spirit” without regard to the intention of their legislatures.

USCIB Speaks Out

At the OECD

USCIB, working with its tax committee, organized a campaign to raise the issue inside the OECD on the need to revise the language in the tax chapter. They drafted new language to define the “spirit of the law” and advocated their position directly to the OECD as to why the language must be revised.

At the U.S. Department of State

USCIB brought the U.S. Department of State into the discussion and urged them to stand their ground based on the negative impact the original language could have on U.S. companies. USCIB continued to coordinate with the OECD and the State Department to press for new language and ensure approval.

Outcome

As a direct result of USCIB’s efforts, the final language adopted stated that complying with the “spirit of the law” means discerning and following the intention of the legislature. And that the intention of the legislature is determined based on the statutory language and relevant, contemporaneous legislative history. This prevents tax authorities from asserting that legitimate tax planning violates the “spirit of the law” and is viewed as a major victory for U.S. companies.

*(The Guidelines are recommendations addressed by governments to multinational enterprises operating in or from adhering countries. They provide voluntary principles and standards for responsible business conduct in areas such as employment and industrial relations, human rights, environment, information disclosure, combating bribery, consumer interests, science and technology, competition, and taxation)

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Cym Lowell appointed as Vice Chair of ICC Commission on Taxation

Published on March 30, 2012

ICC has appointed Cym Lowell as the vice-chair of the Taxation Commission — ICC has appointed Cym Lowell as the
vice-chair of the Taxation Commission

The International Chamber of Commerce (ICC) has appointed Cym Lowell of Gardere Wynne Sewell LLP as the vice-chair of the Taxation Commission.

Mr. Lowell is an experienced international tax lawyer who has specialized in transfer pricing and related qualified authority matters for a career spanning almost 40 years.

His specialty has been the resolution of bilateral disputes that other advisors have not been able to achieve. Mr. Lowell has enjoyed a collegial practice, working with colleagues in every country who have transfer pricing examination or APA capability.

Mr. Lowell, who is originally from Dallas, Texas, draws on extensive experience from his career as a private lawyer. This provides him with distinct views on current and future dispute resolution, the pros and cons of tax authority approaches in principal countries, and styles of the small community of professionals who handle such matters.

He graduated from Indiana University with a Bachelors of Science and then continued his legal studies at Duke University. Mr. Lowell is a published author of many books and articles relating to transfer pricing issues, as well as to US international taxation issues.

He is currently an active member of many prestigious organizations, including the Business and Industry Advisory Council (BIAC) and the Organization for Economic Cooperation and Development (OECD). In addition, Mr. Lowell has served as a consultant for many legislative bodies, counseled OECD member countries, and has lead workshops on the conduct of transfer pricing examinations for national tax authority officials.

In his role as vice-chair, Mr. Lowell is set to advance the committee’s work while also supporting the Commission Chair, Theo Keijer. The Commission’s work focuses on analyzing developments in international fiscal policy as well as on providing business views on government projects affecting taxation.

The Commission on Taxation is composed of international tax experts from areas of business and private practice and represents the world’s major companies and tax consultancy firms. Its mission is to promote a tax system that eliminates difficulties in cross border trade and investment activities.

The Commission announced at its meeting in March that it had elected Mr. Lowell, who will help the chair represent consensus viewpoints of the Commission. These viewpoints include those of governmental decision makers and the media. He will also be called upon to lead meetings of the Commission when the chair is unable to do so.

Staff Contact: Carol Doran Klein

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USCIB Statement on President Obamas International Tax Proposals

Published on February 23, 2012

New York, N.Y., February 23, 2012 – The United States Council for International Business (USCIB) is pleased to see that President Obama’s proposals on business tax reform advocate lower rates and a more efficient corporate tax system. USCIB appreciates the recognition by the President and the Treasury Department that tax reform will take time, require work on a bipartisan basis, and benefit from additional feedback from stakeholders and experts. We and our members hope to make a positive contribution to that debate.

USCIB is, however, disappointed by the international aspects of the president’s proposals on business tax reform. USCIB President and CEO Peter M. Robinson stated: “The international provisions fail to recognize that U.S. business competes for customers in the global marketplace. While most countries have adopted territorial systems seeking to facilitate the competitiveness of their multinationals by taxing income only where it is earned, the U.S. is going in the opposite direction. By proposing a minimum tax on foreign earnings, a tax on so called ‘excess profits’ and the disallowance of interest expense, the administration proposes a step backwards.”

Mr. Robinson continued: “A minimum tax on foreign earnings will simply make American firms less competitive than foreign based multi-national enterprises. Further, the likely response in the marketplace is to make the U.S. a less favored jurisdiction for establishing the headquarters of a multi-national business. Who would choose to set up their business in the U.S. knowing that global expansion would result in a minimum tax? Companies currently headquartered here may not have many options, but anyone advising a new entity would certainly suggest establishing foreign control from the outset. These tax policies could have a role in the acquisition of American companies by foreign competitors. When companies are successful in global markets, it means new jobs in their home countries to support those global business opportunities. Discouraging U.S. headquarters will result in fewer American jobs.”

About USCIB:
USCIB promotes open markets, competitiveness and innovation, sustainable development and corporate responsibility, supported by international engagement and prudent regulation. Its members include top U.S.-based global companies and professional services firms from every sector of our economy, with operations in every region of the world. With a unique global network encompassing leading international business organizations, USCIB provides business views to policy makers and regulatory authorities worldwide, and works to facilitate international trade and investment. More information is available at www.uscib.org.

Contact:
Jonathan Huneke, VP communications, USCIB
(212) 703-5043 or jhuneke@uscib.org

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Business Welcomes Joint Action on FATCA

Published on February 9, 2012

BIAC, the Business and Industry Advisory Committee to the OECD, part of USCIB’s global network, welcomed yesterday’s joint statement by the United States, France, Germany, Italy, Spain and the United Kingdom to develop an intergovernmental approach to the implementation of the U.S. Foreign Account Tax Compliance Act (FATCA).

Chris Lenon, chair of the BIAC Committee on Taxation and Fiscal Affairs, commented on the multilateral approach taken by the signatory countries towards improving international tax compliance.

“We believe that by working together, rather than unilaterally, governments can achieve the goal of addressing international tax compliance but in a way that minimizes compliance burdens for business and reduces the risk of a proliferation of multiple and different reporting requirements emerging around the world,” Mr. Lenon stated. “In particular, we welcome the commitment to develop common reporting standards and BIAC will work closely with governments and the OECD on these issues.”

USCIB Comments on OECD Tax Treaty

USCIB has provided comments on the draft revised OECD Model Tax Convention, specifically the chapter on permanent establishment. To read the comments, please click here. USCIB works directly with the OECD secretariat on tax policy and a range of other issues by virtue of our affiliation with the Business and Industry Advisory Committee to the OECD.

Staff contact: Carol Doran Klein

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Business Groups Seek Reporting Relief for Employees at Worldwide Firms

Published on November 29, 2011

Earlier this month, USCIB joined several leading business groups in sending a letter to the U.S. Treasury Department, requesting less burdensome rules for Foreign Bank and Financial Accounts (FBAR) filings required by employees of worldwide American companies involved in global finance.

In the letter to James H. Freis, Jr., the director of the Treasury’s Financial Crimes Enforcement Network (FinCEN), the business groups sought a reduced burden on employees of companies which report to the Securities and Exchange Commission. The associations wrote: “Multinational companies are increasingly frustrated by changing rules that unnecessarily expand the FBAR filing requirements for their employees, create traps for innocent violations and potentially impose costly penalties.”

The letter stated that current FBAR rules are burdensome, complex and “create the potential for inadvertent errors by corporate finance employees.” It said companies do not want to subject their employees to tax penalties for inadvertent failure to follow the “confusing” FBAR rules.

The primary objective of FBAR filings is to help the government detect money laundering or other criminal activity through the use of foreign financial accounts. The associations emphasized in the letter that their members do not pose a meaningful risk of such activities, and their employees should not be exposed to penalties for not making individual filings in any case.

Signing the letter in addition to USCIB were the National Foreign Trade Council, Financial Executives International Committee on Taxation, Software Finance and Tax Executives Council, U.S. Chamber of Commerce, TechAmerica and Information Technology Industry Council.

Staff contact: Carol Doran Klein

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USCIB Welcomes Rep. Camp’s Tax Proposal

Published on October 31, 2011

Washington, D.C., October 31, 2011– The United States Council for International Business (USCIB), a pro-trade group which represents America’s top global companies before the U.S. government and in major international forums, welcomed proposed tax reform measures put forward by Rep. David Camp (R – Mi.), chairman of the House Ways and Means Committee.

“We are pleased to see Chairman Camp’s proposal on tax reform,” said USCIB President and CEO Peter M. Robinson. “The high rates and worldwide system of taxation of the United States are out of step with the rest of the world. U.S. business supports efforts to achieve reform of these rules. Chairman Camp’s proposal represents an important first step.”

Mr. Robinson underscored the importance of maintaining a level playing field for all companies in the context of U.S. tax reform. “We must ensure that legislative alternatives intended to protect the tax base do not disfavor U.S. companies versus their competitors,” he said. “We look forward to working with Chairman Camp and other members of Congress and the administration to achieve bipartisan business tax reform.”

Through its affiliation with the Business and Industry Advisory Committee to the OECD, USCIB works closely with the U.S. and other governments to provide business input and promote closer international cooperation on tax matters, including the OECD Model Tax Treaty and the OECD Transfer Pricing Guidelines.

USCIB promotes open markets, competitiveness and innovation, sustainable development and corporate responsibility, supported by international engagement and prudent regulation. Its members include top U.S.-based global companies and professional services firms from every sector of our economy, with operations in every region of the world. With a unique global network encompassing leading international business organizations, including BIAC, USCIB provides business views to policy makers and regulatory authorities worldwide, and works to facilitate international trade and investment. More information is available at www.uscib.org.

Contact:
Jonathan Huneke, USCIB
+1 212.703.5043, jhuneke@uscib.org

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USCIB Taxation Update

Published on September 27, 2011

USCIB’s Taxation Committee has undertaken a number of recent initiatives to advance our overarching objective of enhancing U.S. competitiveness by promoting sound, appropriate, and consistent international tax policy at home and abroad.

USCIB’s working groups on the transfer pricing of intangibles finalized an initial paper on the definition of intangible property and submitted it to the OECD and the U.S. Treasury. The OECD’s Center for Tax Policy and Administration, Working Party 6, will hold a meeting, attended by USCIB and other business representatives, to consider issues relating to the definition of intangibles in November. The appropriate treatment of income from intangible property is critical to global companies, making this project perhaps the most important on our tax agenda at the moment.

Carol Doran Klein, USCIB’s vice president for tax policy, attended the September 19 meeting of the Transfer Pricing Subgroup of the OECD Task Force on Tax and Development. The meeting focused on implementation strategies for capacity-building for developing countries, in particular what kind of assistance is necessary and how that assistance can best be provided. Helping developing countries effectively implement the arm’s-length standard is important if business is going to discourage countries from moving to formulary apportionment. Business representatives volunteered to assemble a database of experts willing to provide assistance, along with their areas of expertise and special skills (including language capabilities).

With US Tax Reform Looming Global Experts Meet in Washington

Published on June 22, 2011

L-R: Steven Miller, deputy commissioner for services and enforcement at the Internal Revenue Service, and Bill Sample, corporate vice president of worldwide tax at Microsoft Corp. and chair of USCIB’s Taxation Committee. Mr. Miller told the conference the IRS would move “in the next month or so” against foreign banks that refused to hand over details on American clients suspected of tax evasion.

With tax reform high on the agenda in Washington, what are the implications for multinational companies? To help executives and policy makers keep up in this fast-moving area, USCIB convened its fifth annual tax conference earlier this month in Washington, D.C., focusing again on the work of the 34-nation Organization for Economic Cooperation and Development (OECD).

This 2011 OECD International Tax Conference, which took place June 6 and 7 at the Four Seasons Hotel, provided a unique opportunity for the U.S. business community to interact with key representatives from the OECD Center for Tax Policy and Administration, as well as senior tax officials from the U.S. and other OECD countries. The OECD and itsBusiness and Industry Advisory Committee
(BIAC), part of USCIB’s global network, joined in organizing the event.

“As the volume, speed and complexity of international business continues to grow, global firms need clear, consistent and stable tax rules more than ever,” said Bill Sample, corporate vice president for worldwide taxation with Microsoft Corp. and chair of USCIB’s Taxation Committee. “The OECD is the recognized leader in promoting a tax system to facilitate multinational business and dispute resolution.”

Key topics addressed at the sold-out event included: the latest developments affecting permanent establishments, transfer pricing and intangibles; how countries are working together to improve tax compliance and cooperation; the relevance of the recent revision of the OECD’s Guidelines for Multinational Enterprises for tax planning; and how the OECD works with new members and non-members on tax matters.

Carol Doran Klein, USCIB’s vice president and international tax counsel, and Jeffrey Owens, director of the OECD’s Center for Tax Policy Administration.

Speakers at the event included:

Jeffrey Owens, head of the OECD’s Center for Tax Policy and Administration
Steven Miller, deputy commissioner of the IRS for services and enforcement
Pamela Olson, a partner with Skadden Arps and former assistant secretary of the Treasury for tax policy
Thomas Barthold, chief of staff of the Joint Congressional Committee on Taxation
Manal Corwin, deputy assistant secretary of the Treasury for international tax affairs
Masatsugu Asakawa of the Japanese finance ministry, incoming chair of the OECD Committee on Fiscal Affairs

“Informed, ongoing dialogue with the OECD secretariat and with OECD member states is crucial for global companies,” according to Carol Doran Klein, USCIB’s vice president and international tax counsel. “The fact that this year’s conference took place against the backdrop of potentially far-reaching tax reform in the United States only adds to its importance.”

Attendees applauded the substance and organization of this year’s tax conference. “As always, the event was interesting, well-organized and flawlessly executed,” said Linda H. Fernandez of Eli Lilly.

The conference agenda is available at www.uscibtax.org. Photos from the event can be accessed by clicking here.

Conference supporting organizations included the International Fiscal Association – USA Branch, the International Tax Policy Forum, the National Foreign Trade Council, the Organization for International Investment, the Tax Council Policy Institute, the Tax Executives Institute and the Tax Foundation.

Staff contact: Carol Doran Klein