Wednesday, April 05, 2017

Black Economy: destination-based corporate taxes


 If Neil Gorsuch becomes the next Supreme Court justice, is that proof bullying works? [Guile is Good]

Tips for surviving work when you’re exhausted. [Corporette]
Criminal records and airport security are not a good mix

The Turnbull government is expected to announce some interim measures in the May federal budget aimed at beginning a long journey to claw back up to an estimated $15 billion in lost federal tax revenue and illegitimate welfare payments due to widespread cash economy activity.
The man heading the federal government's "Black Economy Taskforce", Board of Tax chairman Michael Andrew, told Fairfax Media he was shocked by the scale of the problem, with exploitation of vulnerable workers such as students and temporary visa holders rife. Exclusive: Federal budget to tackle illegal cash economy costing up to $15b in lost revenue 


Company directors call on AICD to reveal CEO John Brogden's pay

NSW branch of RSL facing fresh claims of fraud, cover-up

Surf Life Saving NSW manager embezzled $3 million



By the numbers: Men still run venture capital

White House explores two new tax ideas — a value-added tax and carbon tax — as leading proposal to raise revenue ...

Accountants may have to start making annual reports on their anti-money laundering programs Banks point finger at accountants on money laundering fight


Kay Bell, IRS bringing in more tax money despite budget cuts. “The Internal Revenue Service collected more than $3.3 trillion during the 2016 fiscal year.”

This should give those of us who think the IRS needs more funding pause. Yes, the IRS needs a bigger budget, but it needs much more than that. Without better management and systematic administrative reform, it will just be sending moneydown a big hole



The number of Australians caught up in the global Credit Suisse investigation continues to rise as the Australian Taxation Office confirmed on Monday that it had obtained details of more than 1000 of the bank's accounts linked to local clients.
"Not all of the accounts have a name, some of them are just an address," Deputy Commissioner Michael Cranston told The Australian Financial Review, as the investigation into suspected tax avoidance widens. Revenue and Financial Services Minister Kelly O'Dwyer revealed on Friday that 346 Australians had been identified so far in the leak of Credit Suisse documents, which the Dutch tax authority obtained from a whistleblower last April.


Credit Suisse (CS) Faces Tax Fraud & Money Laundering Probes



 Trade Group: IRS Wastes 22% Of Its Budget ($2.76 Billion) On Information Technology


IRS Data BookIR-2017-69 (Mar. 30, 2017), IRS Releases FY 2016 Data Book:

The Internal Revenue Service today released the 2016 IRS Data Book, a snapshot of agency activities for the fiscal year.

The 2016 IRS Data Book describes activities conducted by the IRS from Oct. 1, 2015, to Sept. 30, 2016, and includes information about returns filed, taxes collected, enforcement, taxpayer assistance, the IRS budget and workforce as well as other data.




As ever growing numbers of individuals seek economic and political refuge in Europe and North America, and as increasing numbers of individuals and businesses seek refuge from the tax burdens of their home jurisdictions in lower tax jurisdictions, the resulting immigration and emigration strain the national economies of affected countries causing them to modify their taxation rules and structures. This conference explores the effects of taxation on migration and the effects of migration on taxation.

Panel #1:  Migrant Tax Plight, Human Rights, and Hidden Wealth


Panel #2:  Combatting Expatriation


Panel #3:  Tax System Design and Migration:


Panel #4:  Corporate Expatriation:




This week, Erin Scharff (Arizona State) reviews a new working paper by Ben Meiselman (Michigan), Ghostbusting in Detroit:  Evidence on NonFilers from a Controlled Field Experiment.

Scharff (2017)As Ben Meiselman notes in the introduction to his new study of taxpayer compliance, there’s no marginal cost to making a tax authority’s written communication to a taxpayer more persuasive. In an era of likely increasing austerity in tax enforcement budgets at all levels of government, finding low-costs methods to increase compliance will become all the more important.  Field experiments have produced some information about effective messages, and Meiselman’s study adds to this research, but as I discuss after reviewing the paper’s findings, Meiselman’s account also raises questions about Detroit’s capacity to operate an income tax.
In the spring and early summer of 2016, Detroit sent both a postcard and a certified letter to 7,142 suspected “ghosts,” 2014 federal taxpayers with Detroit addresses who had failed to file a Detroit income tax return for that tax year.  A control postcard informed taxpayers that they would receive a letter in a few days about filing a tax return, and the subsequent letter informed the taxpayer that Detroit’s records indicated that she was a resident of Detroit and did not file a city tax return in 2014.





  This recent paper "Problems with destination-based corporate taxes and the Ryan blueprint" by Reuven S. Avi-Yonah and Kimberly Clausing has content throughout, but this struck me as the most interesting section:


1. A U.S. pharmaceutical with foreign subsidiaries could develop its intellectual property in the United States (claiming deductions for wages, overhead and R&D), and then sell (i.e., export) the foreign rights to its Irish subsidiary (at the highest price possible). The proceeds would not be taxable. Ireland would allow that subsidiary to amortize its purchase price. This creates tax benefits in each jurisdiction by reason of the different regimes. If the Irish subsidiary manufactures drugs, the profits could be distributed up to the U.S. parent tax-free under a territorial system. If the Irish subsidiary is in danger of becoming profitable for Irish tax purposes, the U.S. parent would just sell it more IP.
2. If an Irish parent owns a U.S. subsidiary, the Irish parent can issue debt to fund the purchases of the IP. The U.S. subsidiary then invests the cash to generate more IP (expensing all equipment and deducting all salaries) and sells the IP to its parent.
3. If an Irish parent has purchased the U.S. IP rights, it would not want to license the rights to the U.S. subsidiary (income for Irish parent under Irish tax law and no deduction for U.S. subsidiary). So it just contributes the rights to another U.S. subsidiary. Could the U.S. subsidiary amortize the parent’s basis under the Blueprint? When one U.S. subsidiary licenses to another, no net tax would be paid. Any royalties would be taxable to the licensor but deductible for the payor.
4. How does the Blueprint work for services? If a U.S. hedge fund manager provides services to an offshore hedge fund, is that considered an export that is tax exempt? What if the U.S. manager develops a trading algorithm and sells it (or licenses) it to an offshore hedge fund? Are the proceeds and royalties exempt? If so, then the hedge fund becomes a giant tax shelter to the manager, because he would not pay 25% on this income–he would pay zero, with no further tax. This is much better than the current carried interest provision, which has attracted bipartisan condemnation because it enables individuals with income of many millions to pay a reduced rate. The Blueprint result is much worse.
Via Staffer of Tim F 
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