Monday, July 11, 2016

The Luxembourg Effect: Tax Research Can Be Dangerous

In this era, in which tax has become a social media topic, multinationals are advised to develop a communication strategy on tax. The days when tax was the private playground of tax lawyers are over, whether mandatory tax transparency regulations are issued or not. To come to a consistent approach, the Commission’s proposal, therefore, deserves serious attention.
Czech out Michael West aka Westy at

The “Big Four” global accounting firms – PwC, Deloitte, KPMG and Ernst & Young – are the masterminds of multinational tax avoidance, the architects of tax schemes which cost governments and their taxpayers more than $US1 trillion a year. Although presenting as “the guardians of commerce” they are unregulated and unaccountable; they have infiltrated governments at every level and should be broken up.
This is the view of George Rozvany, Australia’s most published expert on transfer pricing, which is one of the principal ways large corporations pursue cross-border tax avoidance. Rozvany stepped down last year as head of tax in Australia for the world’s biggest insurance company, Allianz. Formerly, he was an insider at Ernst & Young, PwC and Arthur Andersen Michael West's Maiden Coverage of Oligarchs of the Treasure Islands
Thomson Reuters has released its 2016 BEPS Survey Report [(2016 BEPS SURVEY REPORT: CORPORATIONS BETTER PREPARED, BUT STILL WORK TO DO)] . This year's survey collected responses from 207 corporate tax executives in multinational corporations around the world

UN rights expert deplores conviction of tax whistleblowers in LuxLeaks trial

French billionaire Serge Dassault on trial for tax fraud through Luxembourg Luxemburger Wort
"His trial ... relates to charges he stashed some 31 million euros from French tax authorities in Luxembourg, Liechtenstein and the Virgin Islands."

The EU Parliament agreed to recommendations [EU PARLIAMENT AGREES RECOMMENDATIONS FOR TAX HAVEN BLACKLIST, PATENT BOX RULES, CODE OF CONDUCT FOR TAX ADVISERS, ETC] made in a report by Parliament's Special Committee on Tax Rulings II

The European Parliament's Special Committee on Tax Rulings and Other Measures Similar in Nature or Effect (TAXE 2) has now published on its website a study titled: " Tax Challenges in the Digital Economy [Digital Media Dragon Economy] ".

A Canberra man who committed tax fraud from within prison has indicated he is willing to spend more time in jail as he continues his rehabilitation. James Thorn, 28, pleaded guilty to nine counts of filing tax returns with false information Tax Fraud Prison Ring

TaxGrrrl, Soccer Star Lionel Messi Found Guilty Of Tax Evasion, Sentenced To 21 Months In Prison. The FBI obviously wasn’t involved

Facebook (2016)Bloomberg: IRS Takes Facebook to Court, Signaling Start of Tougher Approach, by Lynnley Browning & Kartikay Mehrotra:

Signaling a shift in enforcement tactics against big companies that make money from intellectual property, federal tax officials have sought a court order demanding internal corporate records related to one of Facebook Inc.’s offshore tax strategies.

America's Offshore Tax Cheats Are Feeling the Heat Once Again

Wall Street Journal op-ed:  What Life Was Like in 1776, by Thomas Fleming (Former President, Society of American Historians; Author, What America Was Really Like in 1776 (2012)):
Americans [in 1776] had the highest per capita income in the civilized world, paid the lowest taxes—and were determined to keep it that way. ...
In the northern colonies, according to historical research, the top 10% of the population owned about 45% of the wealth. In some parts of the South, 10% owned 75% of the wealth. But unlike most other countries, America in 1776 had a thriving middle class.
Tax Policy Blog:  Independence Day: Taxes Then and Now, by John Olson

Community Tax:
In honor of July 4, we thought we’d look at a longstanding mainstay of the American way—taxes. A lot has changed since our forefathers signed that Declaration of Independence, but one thing has remained the same—owing money to the government.

New Study Claims Corporate Executives Intentionally Mislead Investors for Personal Gain Bloomberg - This is news?

Related: Robert Wood, Will Hillary’s ‘Careless Not Criminal’ Excuse Work With IRS? “Actually, the tax law draws a line between non-willful and willful. Big penalties or even prosecution can hang in the balance.”

Democracy: A Journal of Ideas, Taxes: Fund the IRS!, by David Cay Johnston:
Will anyone remember the dramatic turnabout in tax policy that began when Barack Obama took office? Considering the awful economic conditions that prevailed, and the announced intention of Republican Congressional leaders to make his presidency fail, Obama’s successes in tax policy are nothing short of astonishing. They are also little known because of the generally poor quality of mainstream news coverage about his actions as well as Obama’s failure to toot his own horn.

ll British passport holders should pay full UK tax regardless of where they live in the world, in a move that would slash tax-dodging scandals and make the system fairer, according to the Chartered Institute for Securities and Investment (CISI). Such a move would follow the US system where all citizens pay tax globally, in exchange for the other benefits of the country’s citizenship. CISI seeks to improve behaviour and cultural standards in finance, for instance by setting examinations and offering qualifications in professional standards for financiers.

Join a special "fanzone" in Paris for the match between multinationals and whistleblowers PFJ (In French)
Calling on supporters of LuxLeaks whistleblowers Antoine Deltour and Raphaël Halet, and journalist Édouard Perrin, for the trial on 29 June. See also our blog Luxembourg on trial as Luxleaks whistleblowers await tomorrow’s verdict   

Richard Krever (Monash) & Borbala Kolozs (Corvinus), Hungary, GAARs – An Emerging Trend in the Tax Landscape

The 10th Annual Academic Tax Symposium concludes today at the Oxford University Centre for Business Taxation

Lilian V. Faulhaber (Georgetown), The Luxembourg Effect: Patent Boxes and the Limits of International Cooperation:
This article uses patent boxes, which reduce taxes on income from patents and other IP assets, to illustrate the fact that the jurisprudence of the European Court of Justice has a longer reach than has previously been recognized. This article argues that, along with having effects within the European Union, the ECJ’s decisions can also have effects on countries outside of the EU. In the direct tax context, the ECJ’s jurisprudence has hampered the ability of both EU and non-EU countries to police international tax avoidance.
John Gallemore (Chicago), Brandon Gipper (Chicago) & Edward Maydew (North Carolina), Banks As Tax Planning Intermediaries

New York Times, San Francisco Considers Tax on Tech Companies to Pay for Boom’s Downside:
Maria Poblet, who leads an organization that assists Latino families facing eviction in San Francisco, says she appreciates the philanthropy that the city’s technology companies do in far-flung places to address global poverty and the environment. But what she really wants to see them do is pay more taxes to help with homelessness and lower-cost housing in San Francisco.

Who Benefits Most From Housing Subsidies? The Wealthy. Nation (resilc)

6th Annual IRS-TPC Joint Research Conference on Tax Administration
23/6/16.  The IRS annual joint conference was recently held – topics are focused around taxpayer behaviour.  Presentations are available here.  The webcasts are available here.  

Tax haven route won't work for post-Brexit UK, OECD says

Tax efficiency no longer primary driver for offshore investment
Money Management, 24/6/16. Access to greater or better range of investment options has become a primary driver for the high net worth (HNW) offshore investment, rather than the commonly believed tax efficiency, according to Verdict Financial.
*Media release

Exposed: The tax avoidance schemes luring landlords hit by new 3pc stamp duty

Tax reform expert calls for register of owners of corporate trusts

Private Equity Funds Balk at Disclosure, and Public Risk Grows Gretchen Morgenson, New York Times 

It’s probably true that in some parts of the country, wealthy lawyers have monopolized the elite social networks that are helpful for launching successful Congressional campaigns. But it’s also not obvious that making more money available to non-lawyers, in and of itself, would solve this problem. The empirical evidence that higher expenditures actually increase a candidate’s chances of winning a Congressional race is still equivocal at best.
Rule of Lawyers

The cheats who are poisoning Britain

Luxleaks: Grand dodgy 

There are occasions when the case for tax transparency and country-by-country reporting gets support from unexpected quarters. PWC was not one where I expected to find arguments in favour of tax disclosure, but in June Eelco van der Enden, a partner in PwC in the Netherlands published an article with the International Federation of Accountants in which he argued that there are eleven reasons  for tax transparency. Some of the logic takes a moment to follow, but I think the list worth sharing as indication of at least one Big 4 partner’s thinking right now ...

But I’m sure it was great for economic development! Horizon Entertainment reported inflated and bogus expenses to get tax credits, OIG says (Greater Baton Rouge Business Report). Funny how this keeps happening with film credits. It’s almost as if governments were funding a fundamentally dishonest industry at the expense of their honest taxpayers.

Joseph Henchman, Ohio’s Kasich Boosts Film Subsidies; Trump to Sue Over Taxes in DC; Spain Raids Google (Tax Policy Blog). “Gov. John Kasich (R) approves raising Ohio tax dollars going to big Hollywood studios from $20 million to $40 million.”

The Imploding Cabal To Criminalize Dissent. “Inspired by the 1990s victory against tobacco companies, the Schneiderman cabal thought it could score big-time by threatening a RICO case against fossil-fuel companies. How fitting if the same threat brings them to heel.”

Elizabeth Warren Opens Broad Attack Against Rent-Seeking Oligopolists Like Amazon, Apple, Google, Walmart, Comcast 

Spain: Russian Money Laundering Ring Dismantled

Kay Bell, Boris Johnson, who lost his tax fight with the IRS last year, now loses his chance to lead post-Brexit Britain

Eire-exit! Firms urged to register in Ireland amid VAT chaos at the Revenue and Customs Department

SEC Allows Big Banks to Fudge the Numbers, Underreport Tax Haven Subsidiaries

The Cost of Being Associated with Tax Havens INSEAD

New Zealand poised to toughen rules for offshore trusts? The Washington Post

Annette Nellen, Tax Issues for High Tech – a video!

Edward D. Kleinbard (USC), The Trojan Horse of Corporate Integration:
The U.S. Senate Finance Committee has invested significant resources, including hearings and staff reports, to make the case for an unusual form of corporate dividend integration – a corporate dividends-paid deduction, combined with a universal shareholder dividend withholding tax collected from the firm.

Fred B. Brown (Baltimore), Permitting Abused Spouses to Claim the Earned Income Tax Credit in Separate Returns, 22 Wm. & Mary J. Women & L. 453 (2016)