On March 8, 2016 Robert Kiggins moderated a panel discussion in New York City sponsored by The International Business Structuring Association based in London, England. The panel discussion focused on “How the Global Tax Environment is Changing the Way Companies Do Business.”
The program included:
- Recent developments in the OECD BEPS (base erosion and profit shifting) implementation, including country-by-country reporting,
- Washington, D.C. outlook, including treaty developments and the prospects for tax reform, and
- Tax controversy and related trends, including recent EU tax-related actions
- The recent Model US tax treaty adopts some of the BEPs notions but will need to be implemented on a bilateral basis, that is, between the US and one country at a time, with US Senate approval. There might be some willingness to adopt some of these Model Treaty provisions with a country or two as a trial balloon – especially since these Model Treaty provisions can be unilaterally revoked if the US feels the treaty partner is not living up to its end of the treaty. It should be kept in mind that “states” (here in the US sense like Texas or New York) are not bound by US federal tax treaties.
- Country by country reporting (only by “big” multi-national enterprises with at least $850 MM in annual global group revenues ) is being adopted in the United States because it does not require Congressional approval – as most feel Treasury can do this on its own. However, many details such as when companies will be required to report on this basis, what data will be shared by the US with other tax authorities, and the identity of those tax authorities remains to be worked out. Data security, cost of systems for compliance, fears of unfair competition, and worries over reputational risk may have a braking effect on Treasury implementation, as well.
- There will likely be no significant tax changes in the US until after the 2016 elections.
- BEPS will likely not be adopted by the US in the near term – except perhaps in the smallest of a la carte ways. This is in part because BEPS is perceived by some in the US as a European attack on US multinationals. The actions of the EU in unstringing favorable advance tax rulings or even tax laws to the detriment of large US companies with European revenues (e.g. Google, Amazon and Apple) with “state aid” (in Europe “state” means what we think of as a nation like France or Germany) attacks have especially unnerved US law makers.
- The EU faces severe infighting over taxes and has clearly alienated the Netherlands and Luxembourg with attacks on parts of their domestic tax systems as unfair “state aid.” Of perhaps more moment, the EU may well alienate the UK and Ireland in the near future with similar attacks.
All this has led to a heightened sense of uncertainty by multi-national businesses – as the global tax situation has, if nothing else, become more volatile.
Robert J. Kiggins is a member of Culhane Meadows’ Corporate & General Business and Taxation groups. After 30 years of practice, he has gained extensive experience in corporate finance and tax matters involving securities broker-dealers, investment advisors, investment companies, life insurance companies, hedge funds, medical practice purchases and sales, insurance agencies and bank expansion into insurance and securities fields.
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