Multinational profit-shifting costs countries up to $240bn
Multinational companies shift about 40% of the profits they earn outside their home countries into tax havens, eluding tax collection efforts, according to an analysis that points to persistent gaps in government revenue collection. The study, by economists Thomas Torslov and Ludvig Wier of the University of Copenhagen and Gabriel Zucman of the University of California, Berkeley, found that U.S. companies are among the most aggressive users of profit-shifting techniques, which often relocate paper profits without bringing jobs and wages. Mr. Zucman also said the research suggests the global trend toward lower corporate tax rates in major countries - including the recent U.S. reduction to 21% from 35% - won’t by itself cause companies to alter their tax avoidance moves. The OECD estimates that such practices reduce global corporate tax revenue by between $100bn and $240bn.
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Expat Americans given one-year reprieve on U.S. repatriation tax
Expatriate Americans have been granted a one-year reprieve from an unexpected levy on their overseas business interests, raising their hopes of Congress amending the tax reforms signed into law by President Donald Trump six months ago. Under Section 965 of the Tax Code, foreign earnings held in the form of cash and cash equivalents are taxed at a 15.5% rate, and the remaining earnings are taxed at an 8% rate. The transition tax generally may be paid in instalments over an eight-year period when a taxpayer files a timely election under section 965(h). Individuals who have already filed a 2017 return without electing to pay the transition tax in eight annual instalments can still make the election by filing a 2017 Form 1040X with the IRS.
IRS warns states on SALT workarounds
The IRS has released a notice advising that new rules will be introduced soon to stop states such as New York, New Jersey, California and Texas seeking loopholes regarding a new limit on the state and local tax deduction. The warning comes in response to states looking for ways to limit the impact of a new $10,000 cap on the state and local tax deduction, known as SALT. “Despite these state efforts to circumvent the new statutory limitation on state and local tax deductions, taxpayers should be mindful that federal law controls the proper characterization of payments for federal income tax purposes,” the IRS has stated. New York Gov. Andrew Cuomo, a Democrat, said the state would “continue to fight against this economic missile with every fiber of our being,” adding: “The IRS should not be used as a political weapon, and I urge this administration to stop its partisan assault on New Yorkers and instead work with us to deliver real, lasting relief for hardworking families.”
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IMF: Canada faces significant risks from U.S. tax policy
The International Monetary Fund has warned that U.S. tax and trade policies could have a profound and extended negative impact on Canada’s economy. In the preliminary findings of its annual review of the Canadian economy, the IMF said “economic anxiety is high,” with deep U.S. cuts to corporate tax rates threatening to make Canada a less-attractive place for investment in the medium-term. Additionally, new steel and aluminum tariffs, along with uncertainty regarding Nafta negotiations, could reduce Canadian economic output by 0.4% over the next four to five years.
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IRS to spend $291m updating IT systems
The IRS is planning to spend $291m updating its computer systems to help it implement the new tax law, according to a previously undisclosed internal document. The tax law altered long-standing features of the business and individual tax codes that were programmed into the IRS systems that receive and analyze tax returns. Preparing for the new law - especially the tax-filing season that starts in January 2019 - requires revamping those systems. On top of the IT costs, the agency also plans to spend $7.5m to assist the chief counsel’s office, adding funding for the lawyers who write published guidance and regulations.
Wall Street Journal
Big tech face per-employee taxes
Silicon Valley cities housing Google and Apple are considering the introduction of a per-employee tax to raise money to help manage local problems tied to rapid growth, including traffic and a need for affordable housing. Mountain View, Calif., and nearby Cupertino are both considering such measures, although they will be wary of the backlash faced by the Seattle City Council after it recently passed a measure that will tax the biggest companies in the city $275 per employee. A higher-proposed tax was scaled back after Amazon threatened to stop investing in the city.
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Tax cut sparks record-setting buyback bonanza
The Tax Cuts and Jobs Act, which reduced the corporate rate from 35% to 21%, appears to have triggered a wave of share buybacks, with S&P 500 companies spending $178bn on stock repurchases in the first three months of 2018 – 34% up on the same period last year. Howard Silverblatt of S&P Dow Jones Indices has suggested that total buybacks for the year could top $1tn for the first time ever.
Highest UK earners pay 30% of income tax
HM Revenue & Customs data shows Britain’s highest earners paid 9% more in income tax last year than the year before, handing over £54.3bn. By contrast, people earning less than £150,000 saw their contribution grow by only 1% to £123.3bn. The figure for Britons earning more than £150,000 a year constituted 30% of the overall income tax take of £178bn for the year to the end of March. It follows a cut to the maximum tax-free amount that some high earners can pay into a retirement pot, from £40,000 a year to just £10,000. A Treasury spokesman said: “We've taken more than a million people out of paying income tax altogether since 2015, and 31m people pay less tax thanks to our increases in the tax-free personal allowance.”
Apple declines invite to EU hearing
Apple has rejected an invitation to a European Parliament committee hearing on tax evasion on the grounds it does not want to prejudice its challenge to an EU order to pay up to €13bn ($15bn) in back taxes to Ireland. In a letter to the committee, Claire Thwaites, Apple’s senior director of European government affairs, explained: “Since the appeal is ongoing and likely to be heard at the General Court in the near future we will not be able to participate in a public hearing on this topic as it could be detrimental to the proceedings at the Court and any potential appeals thereafter”.
Scotland 'could be hit with more tax hikes'
SNP finance minister Derek Mackay may be forced to increase taxes again in Scotland to deal with a sudden £389m decline in his Budget, according to official analysis of his new economic strategy. The Scottish Parliament Information Centre (SPICe) warned “the Scottish Government may need to plug a revenue shortfall by reducing some areas of spend, increasing taxation” or accessing reserves.
The Daily Telegraph
UK supine in the face of Russian dirty money
Tom Tugendhat, the chairman of the foreign affairs select committee, has attacked the UK government’s failure to tackle the effect of Russia’s “dirty money” on Britain. He said the UK’s “lethargic response” to Russian money-laundering and organised crime emboldened the regime of President Vladimir Putin and was “enabling entire nations to be robbed of their democratic rights.” He added: “This isn’t just a financial crime anymore, but a matter of national security. We’ve got to clean up the City, and stop the flow of Moscow’s dirty gold and the reach of the Kremlin’s influence.”
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Denmark set to cut down on Airbnb tax losses
Airbnb will automatically report homeowners' income to tax authorities in Denmark under landmark proposals. It will make it easier to spot tax evasion by homeowners renting out rooms and properties via the site. Danish tax minister Karsten Lauritzen said the country wants a "sharing economy" to flourish, but on the condition that taxes are paid. Danish Tax Minister Karsten Lauritzen has launched a global campaign to recoup billions of crowns the country alleges were paid out in fraudulent tax refunds between 2012 and 2015.
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Italian government will not raise sales tax
Italy’s deputy prime minister and head of the 5-Star Movement has said the new Italian government will not raise sales taxes. Luigi Di Maio also made a pledge to be careful with public accounts, at a conference held by Italian retailers.
Pressure mounting on German discounters
German supermarkets Aldi and Lidl are facing calls to reveal precise details of their company structures and the amount of tax paid in UK as they continue to eat into the market share of the UK’s Big Four supermarkets.
Tax threats could drive Greek shipowners to Britain
Greek shipowners could relocate to Britain after it leaves the European Union if European regulators demand changes to favourable shipping taxes in Greece, a top industry official has said.
Nigeria recovers $98m in tax evasion amnesty
The Nigerian government's finance ministry says it has recovered around 30bn naira ($98m) from individuals and companies through a tax amnesty program. Reuters notes Nigeria's low tax-to-GDP ratio of 6%. Federal Inland Revenue Service chairman Babatunde Fowler is hopeful that an increase of the database of registered taxpayers from 14m in 2016 to more than 19m this year "would translate into a positive growth in the country’s tax revenue-to-GDP ratio.”
Kenya proposes new corporate tax rate
A draft bill from Kenya’s government to be introduced this month would see a new top bracket for income tax and lift the rate for companies with an annual income of more than 500m shillings ($4.9m) to 35%, the highest in the region, also boosting the levy on capital gains to 20% from 5%.
Jordan labour unions want tax law scrapped
Labour unions in Jordan and a majority of lawmakers are pressing the government to ditch a tax bill which is part of a three-year program of IMF-sanctioned austerity measures including an increase in the general sales tax. Parliament speaker Atef Tarawneh said more than 80 deputies in the 130-member assembly wanted the withdrawal of the tax bill. "We won't submit to the dictates of the IMF," he said.
Times of Oman
Saudi family committed fraud
A Cayman Islands court ruling has accused Saudi Arabia's al-Gosaibi family of being involved in a $330bn fraud. Grant Thornton, liquidator of one of the companies accused by the Gosaibis of defrauding them, said that the family had run a "massive fraud against more than 100 Saudi and international banks for more than two decades."
Mexican businessman gets more than six years prison in U.S. fraud case
Carlos Djemal Nehmad, a former partner and part-owner of Mexico’s InvestaBank SA, has been sentenced to six years and three months in prison after he pleaded guilty to a U.S. charge that he and others fraudulently obtained $21m in tax refunds from the Mexican government. Under his plea agreement, the prosecutors agreed to drop related money-laundering charges. Prosecutors said that from 2011 to 2016, Djemal and the three other defendants fraudulently claimed tax refunds from the Mexican government by purchasing outdated cellular phones through front companies and selling them to front companies in the United States.
EU removes Caribbean nations from tax haven watchlist
European Union finance ministers have agreed to remove the Caribbean island countries of The Bahamas and Saint Kitts and Nevis from an EU list of tax havens. The two countries are now on a so-called ‘grey list’ of jurisdictions with low tax transparency standards but aiming to become less opaque. Seven other nations remain on the main watchlist: Namibia, Palau, Samoa, Trinidad and Tobago and the three U.S. territories of American Samoa, Guam and the U.S. Virgin Islands.
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Samsonite defends accounting record
Hong Kong headquartered luggage firm Samsonite has rejected allegations of accounting lapses, stating that KPMG “has not withdrawn its audit opinions, or indicated that it intends to withdraw its audit opinions, in respect of the company’s previous consolidated financial statements.” However, Samsonite chief executive Ramesh Tainwala has resigned after Blue Orca Capital claimed he had falsified educational credentials.
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China launches tax evasion probe in media sector
China's tax bureau is to commence a tax evasion probe focussed on the country's film and television industry. “If violations of tax laws and rules are found, they will be dealt with in accordance with the law,” said the State Administration of Taxation.
Vatican denounces offshore tax havens
The Vatican’s doctrine office has denounced offshore tax havens and financial instruments such as derivatives and credit default swaps as gravely immoral and unjust. A new document, approved by Pope Francis, urges better regulation of financial products, and recommends that banks create internal ethical committees to ensure decisions work for the common good and not just the "myopic egoism" of individual corporate bottom lines.
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