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Tag Archive for OECD

Tax Dodgers Beware!

In an effort to crack down on tax evasion the OECD developed what it calls a “New single global standard for the automatic exchange of information between key authorities worldwide.” The standard was approved by the OECD council on 15 July 2014 and is expected to result in an elimination of the secrecy surrounding some banking transactions as it relates to tax matters.
The new standard has been endorsed by more than 60 countries or jurisdictions including the United States, United Kingdom, European Union and Canada and other major jurisdictions already committed to implementation.

The standard requires detailed account information to be provided to governments by financial institutions. The information obtained from the financial institutions will be Read more

Transfer Pricing: 25% Rule of Thumb Not Applicable To Determining Royalty Rates

Attached please find a recent U.S. Court of Appeals for the Federal Circuit case (September 16, 2014 in VirnetX, Inc. v. Cisco Sys., Inc.) in which a U.S. court finds again the “25 percent rule of thumb” to determine royalty rates inadmissible:

“[W]e agree with the courts that have rejected invocations of the Nash theorem without sufficiently establishing that the premises of the theorem actually apply to the facts of the case at hand. The use here was just such an inappropriate “rule of thumb.” Previously, damages experts often relied on the “25 percent rule of thumb” in determining a reasonable royalty rate in a hypothetical negotiation. That rule hypothesized that 25% of the value of the infringing product would remain with the patentee, while the remaining 75% would go to the licensee. [W]e held the “25 percent rule of thumb” to be inadmissible Read more

47 Countries Declare GATCA Adoption

GATCA Declaration

47 countries and major financial centers on May 6, 2014 declared am automatic exchange of information between their jurisdictions, announced the OECD.  All 34 OECD member countries, as well as Argentina, Brazil, China, Colombia, Costa Rica, India, Indonesia, Latvia, Lithuania, Malaysia, Saudi Arabia, Singapore and South Africa endorsed the Declaration on Automatic Exchange of Information in Tax Matters that was released at the May 6-7, 2014 Meeting of the OECD at a Ministerial Level.

The Declaration commits countries to implement a new single global standard on automatic exchange of information (“GATCA”).  The OECD stated that it will deliver a Read more

Swiss Account Holders – Losing The Right To Be Informed About IRS Disclosure

The Swiss continue to cave in and erode any bastion of bank secrecy within its picture perfect borders. The Swiss Parliament voted on March 6, 2014 to turn over information to foreign governments on certain account holders with undeclared accounts in Swiss financial institutions without providing the holders any advance notice of the disclosure. The move was in reaction to the 2011 admonishment to Switzerland by the Global Forum on Transparency and Exchange of Information for Tax Purposes to take measures to increase its tax transparency. If Switzerland took no action, it risked being placed on a global blacklist. The Global Forum is a division of the Organization of Economic Co-operation and Development (commonly referred to as “OECD”). We understand that the amendment must be finally approved at the end of the current Swiss legislative Read more

Australian Tax Office Is Probing 86 Multinationals

Pat McGrath of Australia’s national broadcaster ABC News reports that “About 100 Tax Office staff have begun a four year investigation into the tax affairs of big companies global companies operating in Australia.” (sic)

In an interview with Pat McGrath, Mark Konza (ATO Deputy Commissioner) said: “At the moment – and I should say this process is ongoing, so other cases will be identified over time – these 86 cases where we felt that the structuring events that had taken place seem to have a very bad effect on a company’s Australian tax position…”. Deputy Commissioner Konza continued, “We will issue assessments on companies that we think weren’t applying the law correctly. If they’re involved in profit shifting, they’ll get an assessment; they’ll get penalties as well.” Read more

Senate Finance Committee Blank Slate Project 2013 – Senator Rockefeller’s Suggestions

Evaluation of Senator Suggestions for the Blank Slate Project

As noted in my 9/9/13 post, I’m going to summarize and analyze proposals senators offered to the Senate Finance Committee, and that the senator made public. Despite falling behind on my project, as tax reform likely heats up in 2014, I’m back at it as I’d like to look at and share what might be a broader array of proposals and issues. In no particular order, the second set of suggestions I’m commenting on are from Senator Rockefeller (D-WV) (7/26/13 letter). Senator Rockefeller is a member of the Senate Finance Committee.

Read more

OECD Releases New Global Common Reporting Standard for Exchange of Tax Info!

The Organization for Economic Cooperation and Development released a new single global common reporting standard for the automatic exchange of information between tax authorities worldwide, intended to help fight cross-border tax evasion.

This document was approved and declassified by the Committee on Fiscal Affairs (“CFA”) on 17 January, 2014 and contains the global standard for automatic exchange of financial account information. It has been developed by the OECD, working with G20 countries, and in close co-operation with the EU.

• Part I contains the introduction to the standard and

• Part II contains the text of the Model Competent Authority Agreement (CAA) and the Read more

OECD Releases Draft of Radical Country-by-Country Reporting Template

The OECD has just published its draft of “A Model Template of Country-by-Country Reporting” that would require companies for the first time to provide tax administrations with exhaustive details of how they allocate their income, taxes, and business activities on a country-by-country basis.

On July 19, 2013 BEPS Action Plan, the OECD was directed to “develop rules regarding transfer pricing documentation to enhance transparency for tax administration, taking into account the compliance costs for business.

The rules to be developed will include a requirement that MNE’s provide all relevant governments with needed information on their global allocation of the income, economic Read more

Australia’s G20 Presidency To Target Transnational Enterprise Profit Shifting

A spokeswoman for Australia’s Assistant Treasurer Arthur Sinodinos has indicated that tax-base erosion and profit shifting will be a key focus of the G20 during Australia’s Presidency.

In this connection, speaking before he left for this week’s Davos conference, Australian Prime Minister Tony Abbott said “We want to … try to ensure we have less leaky national taxation systems”.

Commentators have variously encouraged the Prime Minister to push for the publication of taxable incomes of transnational companies by local tax authorities, seek a global solution to the perceived problem and to work within the OECD tax treaty framework to Read more

The United States Controlled Foreign Corporation (CFC Rules): An Introduction

Commentators and practitioners often refer to the United States controlled foreign corporation statute (“CFC”) as extremely complex and Byzantine in their construction and application. I would agree with this assessment to a point; if someone is simply trying to learn the pure mechanics of the statute then, yes, it is very difficult to fathom. However, when one looks at the rules after understanding the underlying policy for their implementation and overall effect, the statutory scheme becomes easier to comprehend. So, let’s begin with an explanation of why the United States (and other developed, OECD countries) put these types of rules into place.

To begin we will need to know a few definitions from section 7701. A domestic corporation is Read more

The OECD v. Tax Havens: Part IV – The Digital Economy

The current tax rules underpinning practically every tax code around the globe are derived from a “bricks and mortar” or manufacturing based economy. What this means is the underlying concepts were developed when all world economies were based on building physical products that were bought and sold (think industrial revolution). For example, the tax treaty phrase “permanent establishment” was actually developed by League of Nation’s negotiators during their preliminary discussions to develop a working tax treaty framework. Compare this to today’s digital economy where “products” are actually multiple lines of computer code that exist in cyber-space (or a trademark or patented item) or where a “store front” (the old “permanent establishment”) is in fact a web site located halfway around the globe on a server in a tax haven. This mismatch between the underlying concepts of the old Read more

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