Category: Regulatory

Base erosion and profit shifting – a South African perspective

The concept of base erosion and profit shifting (BEPS) has been debated at various international forums following discussions at the G20 Finance Ministers and Central Bank Governors meeting and the G20 Heads of State summit in Russia last year. The Organisation for Economic Co-operation and Development’s (OECD) BEPS Action Plan… – Continue reading

Base erosion and profit shifting – treaty shopping

The concept of base erosion and profit shifting (“BEPS”) has been much discussed at various international forums including the G20 Finance Ministers and Central Bank Governors meeting in July 2013 in Moscow as well as the G20 Heads of State meeting in September 2013. From a South African perspective, the… – Continue reading

UK: In Uncle Sam’s Footsteps

When FATCA was signed by Barack Obama in 2010, many commentators were quick to argue that such ‘breathtakingly extra-territorial’ provisions would never come to fruition. Fast-forward only a few years and those five letters, FATCA, have become etched in the minds of exasperated US taxpayers (many of whom are queuing… – Continue reading

Schaeuble raps German firms for avoiding taxes via Luxembourg -Focus

Nov 22 (Reuters) – German Finance Minister Wolfgang Schaeuble sharply criticised leading German companies for reducing taxes by creating subsidiaries in Luxembourg, where tax rates are lower, according to Focus news magazine. “The list of those that have institutions in Luxembourg with the aim of saving taxes is a Who’s… – Continue reading

Clampdown on tax avoidance

By closing the tax gap, South Africa can reap billions of rands to benefit the economy. A global crackdown on tax avoidance has begun and South Africa is forging ahead in a bid to tackle wealthy individuals and corporates who practise this tactic. The initiative is better poised to succeed… – Continue reading

Peter Costello offers tax advice to Abbott government, defends fossil fuel investments

Former treasurer Peter Costello and Future Fund chairman appears before the Finance Estimates committee at Parliament House. Photo: Andrew Meares Former treasurer Peter Costello has offered some veiled advice to the Abbott government on how to collect more tax revenue, saying it would be easier to tighten Australia’s domestic tax… – Continue reading

Banks To Report FATCA Information To TAJ

Jamaican banks and other financial institutions affected by the US Foreign Account Tax Compliance Act (FATCA) will have to bear the cost to implement the programme, says the Jamaica Bankers Association (JBA). “Though no formal research has been undertaken by the JBA to ascertain the cost implications for its members… – Continue reading

BEPS – Discussion draft on follow-up work under Action 6 (prevent treaty abuse)

November 21:  The Organisation for Economic Cooperation and Development (OECD) today released a discussion draft [PDF 179 KB] concerning follow-up work as mandated under a report with respect to Action 6 (prevent treaty abuse) under the base erosion and profit shifting (BEPS) action plan. Background The OECD in September 2014… – Continue reading

INTERNET COMPANIES PAY MORE TAX THAN THE EUROPEAN AVERAGE

Sit down before you read this: Internet companies pay more corporation tax than the European average, in some cases many times more. According to the European Commission the average ‘effective’ corporate tax rate in the European Union and EFTA is 12.9%; in 2012 Amazon had a whopping 78% in corporation… – Continue reading

HMRC bank raid proposals diluted to protect the ‘vulnerable’

HM Revenue & Customs has introduced “safeguards” to reduce the potential impact of its proposals to recover tax directly from debtors’ bank accounts. The plans, which are known as Direct Recovery of Debts (DRD), will allow the Revenue to recover cash directly from the bank accounts, building society accounts and… – Continue reading

Credit Suisse $2.6 Billion Deal Gives Judge Few Options

Credit Suisse AG (CSGN)’s $2.6 billion plea bargain resolving allegations it helped wealthy Americans avoid paying taxes faces a final hurdle from a federal judge who will decide whether to accept it or throw it out. The first global banking unit in more than a decade to plead guilty to… – Continue reading

BEPS – Discussion draft on follow-up work under Action 6 (prevent treaty abuse)

November 21:  The Organisation for Economic Cooperation and Development (OECD) today released a discussion draft [PDF 179 KB] concerning follow-up work as mandated under a report with respect to Action 6 (prevent treaty abuse) under the base erosion and profit shifting (BEPS) action plan. Background The OECD in September 2014… – Continue reading

HSBC Swiss private banking arm faces tax investigation

French magistrates examining whether the bank helped wealthy clients avoid a new tax, the European Union Savings Directive French judges have put the Swiss branch of HSBC under official investigation over allegations that Britain’s biggest bank helped wealthy clients avoid taxes. It was revealed on Friday that the unit had… – Continue reading

Credit Suisse Sentenced for Conspiracy to Help U.S. Taxpayers Hide Offshore Accounts from Internal Revenue Service

Washington, DC – Credit Suisse AG was sentenced today for conspiracy to aid and assist U.S. taxpayers in filing false income tax returns and other documents with the Internal Revenue Service (IRS).  Credit Suisse pleaded guilty to conspiracy on May 19.  The sentencing of the Swiss corporation is the result… – Continue reading

OECD/G20 Base Erosion and Profit Shifting Project

On September 16, 2014, the Organisation for Economic Cooperation and Development (“OECD”) released seven reports addressing certain aspects of the base erosion and profit shifting (“BEPS”) project. The seven BEPS reports released by the OECD include tax challenges of the digital economy (Action 1), hybrid mismatch arrangements (Action 2), countering… – Continue reading

Action 6 – Preventing the Granting of Treaty Benefits in Inappropriate Circumstances

Action 6 of the BEPS Action Plan identified treaty abuse as one of the most important sources of BEPS concern. The report offers alternative model provisions for the prevention of treaty abuse given constitutional and other restrictions that may apply to some treaty countries. Notwithstanding, each alternative shares a common… – Continue reading

Russia Cracks Down On Offshore Tax Havens

MOSCOW — There is nothing new about offshore tax shelters. In ancient Athens, after the government decided to levy a 2% tax on all trade operations, merchants started avoiding the city, conducting business on the surrounding islands instead. Those Greek islands became the first offshore tax havens. The current offshore… – Continue reading

Base Erosion and Profit Shifting: The Australian Perspective

Background In July 2013, the G20 Finance Ministers, including Australia, fully endorsed the base erosion and profit shifting (BEPS) Action Plan. As a result of the Action Plan, the Australian government encouraged a new commitment to focus resources on investigating international business structures to ensure companies pay tax in the… – Continue reading

Offshore Services – British Virgin Islands

The Tax Information Exchange Agreement (TIEA) between Japan and the British Virgin Islands came into effect on October 11 2014. Authority and scope The BVI-Japan TIEA is essentially consistent with the Organisation for Economic Cooperation and Development standard model template for TIEAs. It provides for assistance through exchange of information… – Continue reading

Students lobby G20 leaders to tackle corruption and tax avoidance

Students from ‘ONE Durham’ took part in a campaign outside the Bill Bryson Library on Tuesday 11th November in support of an international campaign to fight corruption and tax avoidance. The group is part of a wider international advocacy organisation, ‘ONE campaign’, which has six million members across the globe…. – Continue reading

Blue Bison’s FATCA ‘readiness survey’ shows surprising results

The FATCA Readiness Self-Assessment Survey indicates companies are not as prepared for the new regulation as they should be. As part of an initiative to better understand client requirements in accordance with FATCA regulation, software development company, Blue Bison recently conducted a FATCA Readiness Self-Assessment Survey among financial institutions across… – Continue reading

Tax man mulls new transfer pricing law

THE South African Revenue Service (SARS) is investigating possible changes to the law to make it easier for it to audit transfer pricing by multinational companies to ensure that they pay their rightful tax dues to the government. The need to maximise tax revenue has become particularly acute in the… – Continue reading

Fruitless pursuit of black money

People curious to know the amount of “black money” stashed by Indians in foreign banks may be in for yet another disappointment after the Supreme Court monitored Special Investigation Team (SIT), submits its findings. After six months in office, the Narendra Modi Government has not been able to lay its… – Continue reading

Mitsubishi wins big for Japanese trading companies in Indian Berry ratio transfer pricing case

Meredith McBride in Hong Kong Mitsubishi Corporation India’s victory over the Indian tax authorities in the New Delhi Tax Tribunal on the use of the Berry ratio (gross margin divided by operating expenses) sets important precedents for transfer pricing litigation in India, advisers believe, because it legitimises the use of… – Continue reading

Action 5 – Countering Harmful Tax Practices

Action Item 5 of the BEPS Action Plan commits the Forum on Harmful Tax Practices (“FHTP”) to: “revamp the work on harmful tax practices with a priority on improving transparency, including compulsory spontaneous exchange on rulings related to preferential regimes, and on requiring substantial activity for any preferential regime. It… – Continue reading

Vestager says will use ‘Luxleaks’ documents in EU tax probe

The European Commission will use the ‘Luxleaks’ documents uncovered by investigative journalists three weeks ago in its ongoing investigation of tax avoidance at the European level, Margrethe Vestager, the EU competition chief, said on Thursday (20 November). The documents, known as the ‘Luxleaks’, showed that more than 300 companies, including… – Continue reading

PAC broadside against HMRC is self-defeating

Criticism of slow prosecution of tax avoidance schemes ignores HMRC’s impressive success in closing down the aggressive tax avoidance industry in recent years Tuesday’s Public Accounts Committee (PAC) report and the associated media drive, which accuses HMRC of being ‘unacceptably slow’ in pursuing tax avoidance schemes, is the latest in… – Continue reading

Levine on Wall Street: Golf and Taxes

A while back we talked about how very complicated it seems to have been for U.S. citizens to avoid taxes on Swiss bank accounts. Here’s a criminal case that New York U.S. Attorney Preet Bharara just brought against a Kentucky resident (OK!) who allegedly did some of that tax avoidance…. – Continue reading

Opening a UK bank account has however been a longwinded and complicated process

An increasing number of South Africans are sending substantial amounts of money offshore each year due to frequent travel, a greater appetite for offshore investing, business interests abroad and a growing trend to educating their children there. The UK has proven to be the popular choice due largely to the… – Continue reading

Many companies seen as unprepared for Fatca

Small- and medium-sized firms are unprepared for tough new US tax reporting legislation, a survey has found. Software firm Blue Bison, part of the Ignition group of companies, found that more than half of respondents to its readiness survey admitted that understanding the requirements of the Foreign Account Tax Compliance… – Continue reading

UK Committee Weighs In On HMRC Compliance Efforts

The UK’s Public Accounts Committee (PAC) has criticized what it says has been “unacceptably slow” action from HM Revenue and Customs (HMRC) against tax avoidance and has recommended that the Department be more transparent about its compliance yield estimates. In a new report, PAC said tax revenues are being placed… – Continue reading

Luxembourg PM slams EU single tax plans

Luxembourg Prime Minister Xavier Bettel said he was firmly opposed to harmonising tax policies in the EU, a report said Wednesday, hitting back after an investigation exposed his tiny country as a global tax haven. Jean-Claude Juncker, Bettel’s predecessor and new European Commission president, is under pressure after it was… – Continue reading

East Africa: EAC Tax Variance Still a Major Hurdle – Kam

REGIONAL businesses continue to suffer from double taxation three years after a plan to harmonise taxes was approved, causing a delay in realisation of East Africa Community integration benefits. Kenya Association of Manufacturers CEO Betty Maina said the tax issue needs to be urgently addressed by ensuring all member countries… – Continue reading

Luxembourg’s Bettel opposes fiscal standardisation

Luxembourg’s Prime Minister has spoken out against a harmonsiation of tax within the EU, arguing that it should be left to member states to decide. Xavier Bettel was quoted in an interview published by Belgian daily L’Echo on Wednesday, following the Lux Leaks scandal in which tax agreements between the… – Continue reading

Luxembourg PM rejects EU single tax plans

Luxembourg’s Prime Minister Xavier Bettel has criticized the European Union’s single tax plans, arguing that it should be left to member states to decide. “To say that everyone within the European Union must move toward a single tax policy with the same tax rate, that I’m against,” Belgian daily L’Echo… – Continue reading

Give Americans a $2,000 Check From ‘Deferred’ Corporate Taxes

U.S. multinational corporations are hoarding an estimated $2 trillion “offshore” to take advantage of a loophole in our tax laws. At our 35 percent top federal corporate tax rate, that represents up to $700 billion in taxes owed but “deferred” because they are “offshore.” This is not imaginary or future… – Continue reading

Juncker faces censure motion over Luxembourg tax deals

The European Commission faces a censure motion in the European Parliament next week after right-wing, and far-right Eurosceptic lawmakers united to condemn the role its president, Jean-Claude Juncker, played in Luxembourg tax evasion schemes. A lack of support for the censure motion from other parties, less than a month after… – Continue reading

Rates Cut In New Canada, Spain DTA Protocol

Canada and Spain have signed a Protocol to their income tax convention which, when implemented, will reduce the withholding tax rates applicable on payments of dividends and interest. The Protocol was inked on November 18, 2014, by Canada’s Ambassador to Spain, Jon Allen, and Spain’s Finance Minister, Cristóbal Montoro. The… – Continue reading

Russia’s parliament approves anti-offshore legislation

MOSCOW, November 19. /TASS/. The Federation Council, the upper house of Russia’s parliament, approved a new tax law on Wednesday as part of President Vladimir Putin’s “deoffshorization” initiative designed to return Russian capital and assets from foreign jurisdictions. The law introduces amendments to the country’s tax code that will oblige… – Continue reading

The UK emerges as a competitive holding company regime

UK and multinational enterprises are starting to consider (re)organising themselves under a UK holding company for their global operations, rather than using other traditional onshore holding company jurisdictions. This new trend is the result of a number of factors, which have moved the UK from an outside choice as an… – Continue reading

The costs of offshore tax avoidance, part 2

In our previous post, we looked at the ways that global corporations minimise their tax burdens by routing income through offshore tax havens and transfer pricing. The ultimate beneficiaries of these shenanigans, of course, are actual people rather than legal entities. Many of these people also take advantage of offshore… – Continue reading

The costs of offshore tax avoidance, part 1

Nobody likes paying taxes. The rich, however, can reduce the burden more easily than others because capital is more mobile than labour. A clever new paper in the Journal of Economic Perspectives by Gabriel Zucman attempts to measure how much government revenue is lost because of the careful re-routing of… – Continue reading