http://www.taxsagenetwork.com/blog daily 0.75 2021-04-21 http://www.taxsagenetwork.com/blog/2021/4/21/american-exceptionalism-low-corporate-taxation monthly 0.5 2021-04-21 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1619020959159-WDHSJU8V80OB2CQCBLPD/image001.png Blog - Low overall US corporate taxation http://www.taxsagenetwork.com/blog/2021/3/16/6dbgljyk1ul8dsaqq2n4luddqpd4cn monthly 0.5 2021-03-16 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1615906757981-DZA5IUCJP3WUMX70IXR3/Disparate%2Bracial%2Bimpact%2Bnot%2Bequal%2Bsign.jpg Blog - Disparate Racial Impact: Equity-Focused Tax Expenditure Reform Needed http://www.taxsagenetwork.com/blog/2020/10/29/global-minimum-tax-gilti-co-existence-equals-guilty-conscience monthly 0.5 2020-10-29 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1603983332482-QYNFQR53E9524INBZS6B/Pic+Guilty+conscience.png Blog - Global Minimum Tax: “GILTI co-existence” equals guilty conscience? http://www.taxsagenetwork.com/blog/2020/10/12/economic-impact-assessment-of-oecd-digitalization-tax-proposals-foundation-for-further-analyses monthly 0.5 2020-10-12 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1602522016370-LDKWOE2WYZALUONKWAGD/OECDG20+Pic+Base+Erosion+and+Profit+Shifting.png Blog - Economic Impact Assessment of OECD Digitalization Tax Proposals: Foundation for further analyses http://www.taxsagenetwork.com/blog/2020/7/20/oecds-newest-corporate-tax-statistics-expansion-in-progress monthly 0.5 2020-07-20 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1595272013459-VT4LOEY4WD7GQ2Q4EPQL/Corporate+Tax+Statistics+2020.png Blog - OECD’s newest Corporate Tax Statistics: Expansion in progress http://www.taxsagenetwork.com/blog/2020/7/11/oecd-releases-26-countries-cbcr-data-first-look-for-non-us-countries monthly 0.5 2020-07-11 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1594496173906-3MDIUCYGKF97YYPKGWQD/Half+empty.png Blog - OECD releases 26 countries’ CbCR data: First look for non-US countries The OECD just released its second Corporate Tax Statistics publication, which includes County-by-Country Reports (CbCR) data tabulations for the first time. Similar to the first publication, the release can be viewed as half-full or half-empty, especially with the scope and limitations of the CbCR tabulations. [Couldn’t resist reusing image from 1/24/19 blog on the OECD’s first Corporate Tax Statistics publication.] In 2015, I fought hard (and successfully) multiple times to retain eight words in the Base Erosion and Profit Shifting (BEPS) Action 13 report allowing the CbCR to be used “where appropriate for economic and statistical analysis.” Thus, it is gratifying to finally see the initial CbCR reports from 26 countries. The U.S. released its 2016 CbCR data in December 2018, but the OECD Corporate Tax Statistics data is the first time CbCR has been released publicly for at least 24 other countries. Those countries should be applauded for finally releasing publicly their data, although some of their data is in truncated form. Other countries, such as Germany and the United Kingdom, should start reporting their CbC data and help lead in this effort at improved tax transparency. This new information will help international tax policy analysts understand a broader group of MNEs’ cross-border activities, and also to assist policymakers in the 2020 BEPS Inclusive Framework (IF) review of the current CbCR template. The release will also focus the debate between public disclosure of individual MNEs’ data vs. public aggregated and anonymized tabulations by tax administrations. The OECD’s CbCR data tabulations are helpful, but also disappointing for several reasons: · Although intra-group dividends were explicitly excluded from the revenue measure, their treatment was left unclear in the pre-tax profits/income measure defined in the 2015 BEPS Action 13 report. Countries and companies used different approaches resulting in varying degrees of double-counting, which understate tax-to-income and income-to-revenue ratios, as well as distort the geographic allocation of income. Clarification of this issue was made by the OECD in 2019, but it won’t affect the data until 2020 (which will then be confounded by the Covid-19 pandemic). In the meantime, effective tax rate metrics need to be viewed with caution, although many would argue that it may be the Best Available Data (BAD). · Data for “Stateless entities” were requested to capture companies such as Apple Sales International that had tens of billions of income not reported to any tax authority in 2011-2013. However, stateless entities also include many “tax transparent” entities, such as partnerships which aren’t taxed at the entity level, but rather at the owners’ level. Thus, “stateless entity” data includes both BEPS avoidance along with income on which tax is paid but not at the entity level. The BEPS Inclusive Framework’s 2020 CbCR review is considering alternative meaningful reporting of stateless entities’ data, and that decision should be made quickly so it can apply to 2020 data. · Details on specific BEPS planning channels is needed. As part of the political process of achieving mandatory CbC reporting, several key financial items were scrapped from the initial draft CbCR template in 2014. The 2020 IF review should include a public debate on the benefits and costs of including related-party royalty payments and related-party interest payments, key features of significant BEPS planning. MNEs are incurring non-significant costs in filing CbCRs, so the data should include important BEPS risk-relevant items in a standardized format for tax administration and tax policy analysis. A few additional key data items would have a high benefit-to-cost relationship. · Confidentiality is cited by many countries not reporting much, if any, detail on the geographic location of their MNEs’ activities. Finland, Ireland, Korea and Netherlands lumped together all foreign jurisdictions, even though they had 1,216, 1,068, 2,127, and 3,530 foreign subgroups, respectively. Aggregating subgroup information when there are at least 10 or more subgroups in more disaggregated country displays defeats the purpose of country-by-country reporting. The debate on public individual MNE reporting of CbC data will continue, and the now-apparent limitations of the aggregated and anonymized tabulations will give additional rationale for individual MNE reporting. Nonetheless, the OECD’s Corporate Tax Statistics publication is a significant, albeit incremental, step forward in improved tax transparency about large MNEs’ global tax activities. Issues, such as intra-group dividends, stateless income, and details on BEPS channels, would also be important for analysis of public individual MNE CbC reporting. The OECD’s compilation of countries’ 2016 CbCR data has already improved tax policy analysis of potential anti-BEPS proposals, such as the Inclusive Framework’s digital tax proposals, by supplementing other existing cross-country data. I look forward to next year’s Corporate Tax Statistics with a second year of CbCR data, with expanded scope and refinements. In the meantime, hopefully academics will find new insights from the large amount of new CbCR data. Tom Neubig http://www.taxsagenetwork.com/blog/2020/4/23/best-available-data-bad-with-double-counting-and-geographic-allocation monthly 0.5 2020-05-06 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1587654687516-BECJM644MAHO4TDIG01Q/Tax+haven+income+%25+FSI.png Blog - Best Available Data (BAD) with double-counting and geographic income misallocation http://www.taxsagenetwork.com/blog/2020/2/5/oecd-webcast-on-economic-assessment-of-digitalisation-tax-proposals-13-february monthly 0.5 2020-02-06 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1580961081074-KZTWED0Z531I2OHUC4HJ/shutterstock_1456634993-200x200.png Blog - OECD webcast on economic assessment of digitalisation tax proposals: 13 February http://www.taxsagenetwork.com/blog/2019/12/19/some-initial-observations-from-the-2017-us-country-by-country-report-tabulations monthly 0.5 2019-12-20 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1576808550241-NWPGJVYSRNYCPDN8TJFJ/CbCR+2017+blog+graph+better+%232.png Blog - Some Initial Observations from the 2017 US Country-by-Country Report Tabulations https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1576808038787-O1RQDX4OIKNY0T2DLOUL/CbCR+2017+blog+agg+tabs.png Blog - Some Initial Observations from the 2017 US Country-by-Country Report Tabulations https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1576808165014-F6R4OEEALN2GOQ6A9QR4/CbCR+2017+blog+ETR.png Blog - Some Initial Observations from the 2017 US Country-by-Country Report Tabulations http://www.taxsagenetwork.com/blog/2019/12/7/should-digital-services-gross-receipts-taxes-be-a-harmful-income-tax-practice monthly 0.5 2019-12-09 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1575726596784-NXQLT3SRHNO42RGY75VA/BEPS+Action+5+report.png Blog - Should Digital Services (Gross Receipts) Taxes be a Harmful (Income) Tax Practice? http://www.taxsagenetwork.com/blog/2019/10/31/new-us-cfc-tax-data-from-2016-no-evidence-of-declining-tax-haven-use monthly 0.5 2019-10-31 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1572550852610-J5HGEP71XLNTHWOD3M6C/US+CFCs+in+Tax+Havens.png Blog - New US CFC tax data from 2016: No evidence of declining tax haven use https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1572551025704-C6WWILTMAIP7RE7N3IW0/9+Tax+havens+CFC+data.png Blog - New US CFC tax data from 2016: No evidence of declining tax haven use http://www.taxsagenetwork.com/blog/2019/10/10/cross-border-tax-rate-differentials-drive-beps-global-minimum-tax-reduces-differentials monthly 0.5 2019-10-10 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1570733729867-D3212JR9XYHLB2BRK080/OECD+CIT+rates+2018.png Blog - Cross-border tax rate differentials drive BEPS: A global minimum tax would reduce those differentials https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1570734282213-WALTPY6SP081E0NMSVRJ/Rate+diff+min+tax+2.png Blog - Cross-border tax rate differentials drive BEPS: A global minimum tax would reduce those differentials http://www.taxsagenetwork.com/blog/2019/7/26/country-by-country-reporting-transparency-initiatives-are-working-initial-evidence monthly 0.5 2019-09-05 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1564198559584-IJSHWMPEXYMRE0VVIN3I/CbCR+public+vs+private.png Blog - Country-by-Country Reporting Transparency Initiatives Are Working: Initial Evidence Picture from Rasmus Crolin Christensen of Copenhagen Business School. http://www.taxsagenetwork.com/blog/2019/3/28/first-look-at-us-country-by-country-reporting-tabulations monthly 0.5 2019-09-05 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1553789203544-JKDNLS93NSKLKZC6O7U9/CbC+blog+pic1.png Blog - First Look at US Country-by-Country Reporting Tabulations https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1553789590702-5TISGREOVRHC3BL7KMJZ/CbCR+blog+pic%232.png Blog - First Look at US Country-by-Country Reporting Tabulations https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1553789711068-1D8E1BSJ1TUMWKPRJFC9/CbCR+blog+pic%233.png Blog - First Look at US Country-by-Country Reporting Tabulations https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1553789924810-0VTTFYI0PWMLO7FIZAJM/CbCR+blog+pic%234.png Blog - First Look at US Country-by-Country Reporting Tabulations http://www.taxsagenetwork.com/blog/2019/1/24/half-fullhalf-empty-but-more-to-come-oecds-first-corporate-tax-statistics-publication monthly 0.5 2019-01-29 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1548379647434-XDJ4HLGJWLH0RIRAVL3J/Half+empty.png Blog - Half-full/half-empty, but more to come: OECD’s first Corporate Tax Statistics publication http://www.taxsagenetwork.com/blog/2019/1/8/15zr5mcaqjsx2w2ub37iiuk4tk1ien monthly 0.5 2019-01-09 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1546990183337-JS8YQ9EULVMU2HCK3JSS/CUIP+Regression+201901.png Blog - What's wrong with this picture? Assignment of IP and IP income to low-tax rate countries https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1547047395190-MOER104SJGU1Z51MCLD5/CUIP%25R%26D2016+at+20190109.png Blog - What's wrong with this picture? Assignment of IP and IP income to low-tax rate countries http://www.taxsagenetwork.com/blog/2018/11/16/digital-taxation-dont-forget-personal-income-taxes monthly 0.5 2018-11-16 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1542402324713-YE7MGOR55LYW9MMIVUP5/Digital+tax+barter+v2.png Blog - Digital taxation: Don’t forget personal income taxes http://www.taxsagenetwork.com/blog/2018/11/14/transparency-of-tax-expenditures-in-43-countries monthly 0.5 2018-11-15 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1542249317827-TR61KD6AOB6A7S1NHOZF/CEP+Tax+exp+cover.png Blog - Transparency of tax expenditures in 43 countries http://www.taxsagenetwork.com/blog/2018/7/12/tax-expenditure-analysis-gets-no-respect monthly 0.5 2018-07-12 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1531432409589-0T52P9GRBPGBNBP98458/No+Respect.png Blog - Tax Expenditure Analysis Currently Gets No Respect http://www.taxsagenetwork.com/blog/2018/6/26/uofms-office-of-tax-policy-research-30th-anniversary monthly 0.5 2018-06-26 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1530037422091-1QRJK0ZEWC5ID9J5C9ZM/OTPR+30th.png Blog - UofM’s Office of Tax Policy Research 30th Anniversary http://www.taxsagenetwork.com/blog/2018/4/30/no-longer-a-chump monthly 0.5 2018-04-30 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1525105120727-G56VXYAYSHBZK8C91POY/Chump.png Blog - No Longer a Chump http://www.taxsagenetwork.com/blog/2018/3/25/digital-taxation-ec-proposal-and-oecd-interim-report monthly 0.5 2018-03-25 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1522011247587-P2N4TUYXVTF6H5DO0PST/OECD+digital+report+cover.png Blog - Digital Taxation: EC proposal and OECD interim report http://www.taxsagenetwork.com/blog/2018/3/25/tax-beps-distorts-national-statistics monthly 0.5 2018-03-25 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1522007771490-LZC4KCSNDC1OR22DG0OL/IMG_0641.JPG Blog - Tax BEPS Distorts National Statistics: Good news reduced future distortions I spoke at two symposiums last week in London (Economic Statistics Centre of Excellence) and Luxembourg (EC's Eurostat on distortions to countries’ national economic statistics as a result of multinational companies’ tax planning involving intellectual property. Current national statistics in a globalized intangible-intensive economy with sophisticated cross-border supply changes may not be reliable for economic policymaking due to the effects of tax base erosion and profit shifting (BEPS). A recent NBER Conference on Research in Income and Wealth explored similar topics. Two examples below illustrate the problem. Fortunately, recent global and national tax initiatives will reduce the distortions in the future. Distortions in national statistics from tax BEPS aren’t limited to Ireland and the United States, but both counties illustrate the problem. · 25% GDP growth rate in Ireland: In 2015, Ireland’s Gross Domestic Product grew at an astronomical rate due to several factors, including changing the location of headquarters (so-called tax inversions) and also the transfer into Ireland of IP of foreign MNEs combined with foreign contract manufacturing. Ireland’s Central Statistics Office now also presents an “adjusted” Gross National Income to better measure actual economic activity of Irish residents. Distorted high macroeconomic growth might just tighter macroeconomic policy than appropriate. See the analysis by John Fitzgerald of Trinity College Dublin. · Profit-shifting out of the high-tax-rate US to lower-tax-rate countries raised the US trade deficit, by lowering the measured value of US exports and raising the measured value of US imports. A recent NBER paper by Guvenen, Mataloni, Raissier and Ruhl estimate the distortion could have been as large as one-half of the US trade deficit in 2012. Would the Trump Administration be pushing tariffs and quotas as strongly if the measure of the trade deficit was not distorted by BEPS? My recent World Intellectual Property Organization (WIPO) working paper finds that BEPS distorts the measure of Charges for the Use of Intellectual Property (CUIP). Additional empirical analysis finds that CUIP receipts relative to prior year Research and Development expenditures is significantly reduced by high statutory tax rates on Intellectual Property income. The bad news is the national statistics have been distorted and they would be unlikely to be improved by attempted imputations, for instance through formula apportionment of global income. Similar to double non-taxation, some world GDP does not get counted due to mismatches resulting from MNE tax planning. National statisticians are grappling with how to measure economic ownership, similar to tax transfer pricing rules determining the allocation of cross-border profits by functions performed, risks assumed and assets used. The good news is that the national statistics distortions from BEPS will be reduced (not eliminated) by recent global tax initiatives and national tax changes. These include: · the OECD/G20 BEPS Project’s tighter linkage between intangible pricing and value added in the revised OECD Transfer Pricing Guidelines; · shutting down tax haven “cash boxes;” · restraint on harmful tax completion by requiring economic nexus for special tax rates, including for Intellectual Property; · new transparency rules requiring country-by-country reporting (CbCR) and special country tax rulings; · reduction in the variation across country tax rates, particularly after the 2017 US tax change, see November 20, 2017 blog; · Ireland’s ending the tax rules enabling the Double Dutch Irish Sandwich next year; and · increased focus in both tax policy and administration on hybrid structures and transfer mispricing. National statistical offices (NSOs) are grappling with how best to measure national production and income in an increasingly global and intangible-intensive economy. Many of the same issues are being addressed by tax policymakers and tax administrations. NSOs often worry that asking companies about tax in their surveys would reduce response rates, but tax statistics may be the best available data for national measures of income of multinational corporations. One of the potential action steps at the Eurostat symposium was increased data sharing across NSOs. I would also recommend more data sharing between tax administrations and NSOs. In the U.S., the Bureau of Economic Affairs benefits from being able to utilize tax statistics under strict confidentiality arrangements. The CbCR by MNEs to tax administrations is to be used for high-level risk assessment, and also “where appropriate, for economic and statistical analysis.” Reducing the distortions in countries’ macroeconomic national statistics is an important reason for policymakers to have the CbCR aggregated data published by their tax administrations and also to give their NSOs limited access to the new CbCR information. Improving national statistics is important and continued focus and cooperation between tax and national statistics will be critical to addressing future measurement issues, such as cross-border income from digitalization of the global economy. Tom Neubig http://www.taxsagenetwork.com/blog/2018/2/26/bw6qmp3jjj26mo4y8ufa09g3rscigq monthly 0.5 2018-02-26 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1519621292139-7CZVRDY1DMURUU4VK6NB/Tax+and+SDGS.png Blog - Tax and the UN’s Sustainable Development Goals http://www.taxsagenetwork.com/blog/2018/2/22/stop-wasting-tax-dollars monthly 0.5 2018-02-22 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1519329767090-O3891NXM0825T2VH1DKW/Windfall+head.jpg Blog - Stop wasting tax dollars http://www.taxsagenetwork.com/blog/2018/2/8/1980s-redux-tax-cuts-followed-by-deficit-concerns monthly 0.5 2018-02-09 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1518148533213-V3HHKATVIXVUOJSMD7QK/1980s+redux.png Blog - 1980’s Redux? Tax cuts followed by deficit concerns http://www.taxsagenetwork.com/blog/2018/1/22/beps-after-the-2017-us-tax-change monthly 0.5 2018-01-26 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1516928810239-7AU6YSKA4Q8JVJDFKD1A/OECD+rates+StDev+amended+20180125.png Blog - BEPS After the 2017 US Tax Change https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1516929257596-QKDMTO65PO97C6ZWHA65/Anti-BEPS+2017+changes+amended+20180125.png Blog - BEPS After the 2017 US Tax Change http://www.taxsagenetwork.com/blog/2017/12/21/tax-reform-or-simply-tax-cuts monthly 0.5 2017-12-21 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1513885914283-9SPSKGPU4BBUTJUMB5KM/2017+tax+bill+largest+provisions+2.png Blog - Tax reform or simply tax cuts? https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1513884880531-9B9AETN0KVIM7I880ZJU/Tax+Cuts+and+tax+expenditures.png Blog - Tax reform or simply tax cuts? http://www.taxsagenetwork.com/blog/2017/12/1/tax-reform-reflects-politicians-social-and-economic-values monthly 0.5 2017-12-01 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1512157008313-XNGLO8J3L4BI1FOP2XHB/WSU+pic.jpeg Blog - Tax "reform" reflects politicians' social and economic values http://www.taxsagenetwork.com/blog/2017/11/20/tax-planning-involving-intangible-capital-distorts-national-statistics monthly 0.5 2017-11-21 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1511225092867-370WJ1RJ72IKEP9UUSSF/WIPO+2017+report+cover+final.png Blog - Tax planning involving intangible capital distorts national statistics http://www.taxsagenetwork.com/blog/2017/11/17/progress-on-evaluating-tax-incentives monthly 0.5 2017-11-18 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1510971984731-6BY8UGLIYOGOKYKFF1VI/Bartik+tax+incentives.png Blog - Progress on Evaluating Tax Incentives http://www.taxsagenetwork.com/blog/2017/11/14/98b85l37aby3j5hwt661pmmlxz70k2 monthly 0.5 2017-11-14 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1510702168918-0Q5XBQJCDVTHNSC2K09B/150713-F-GX122-105.JPG Blog - Tax reform obstacles http://www.taxsagenetwork.com/blog/2017/11/5/distribute-all-tax-cuts monthly 0.5 2017-11-05 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1509884984586-B0WJQQT92PEVLAB4CJ5G/SOI+estate+composition+final.png Blog - Distribute all the tax cuts! http://www.taxsagenetwork.com/blog/2017/11/3/bradys-tax-reform-plan-kudos-and-caveats monthly 0.5 2017-11-03 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1509722226273-SR05899EOJFZEOPLA3JN/Composition+of+brady+tax+cuts.png Blog - Brady's tax reform plan: kudos and caveats https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1509723458204-6FHO3YAGRAQ9WOYWTTQ4/Brady+plan+revenue+detail.png Blog - Brady's tax reform plan: kudos and caveats http://www.taxsagenetwork.com/blog/2017/10/4/which-comparative-corporate-statutory-tax-rates monthly 0.5 2017-10-05 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1507170536492-BP9WZCK7TIY8CJ70NNKG/corp+tax+rates+exports+FDI.png Blog - Which comparative corporate statutory tax rates? https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1507170058177-YFXZFO02D8V9AGS4Y8RQ/corp+tax+rates+2017.png Blog - Which comparative corporate statutory tax rates? http://www.taxsagenetwork.com/blog/2017/10/3/improve-not-hide-tax-research monthly 0.5 2017-10-03 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1507061336726-KWHRMETYKY3BKQRMYJ2B/1985+distributional+table.jpeg Blog - Improve, not hide, tax research on corporate taxes https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1507058298867-SZBFUZI55ZDOBX067HUH/OTA+2012+Paper.png Blog - Improve, not hide, tax research on corporate taxes http://www.taxsagenetwork.com/blog/2017/9/26/tax-reform-is-hard-choices-and-heavy-lifting monthly 0.5 2017-09-27 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1506470417174-609HH0MJBAT41UNTWG8X/1986+provision+table+cleaned+up.png Blog - Tax reform is hard choices and heavy lifting https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1506469568191-7CD7VCKWKMRHWNSO74KV/1986+tax+reform+act+ind+corp+tax+changes.png Blog - Tax reform is hard choices and heavy lifting http://www.taxsagenetwork.com/blog/2017/9/21/changing-headquarters-landscape-2000-2017 monthly 0.5 2017-09-21 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1505987503460-WKO33OG08Y8KQ94POYDT/FG500+2000-2017+table.png Blog - Changing Global Headquarters Locations, 2000-2017 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1505987539536-UNYO2DUDALGSK4GYPN6B/FG500+US+chart.png Blog - Changing Global Headquarters Locations, 2000-2017 http://www.taxsagenetwork.com/blog/2017/9/5/avoid-zonkey-taxes monthly 0.5 2017-09-05 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1504636575400-0DN6RRSZP281H9OOHM3U/zonkey-half-zebra-half-donkey-8.jpg Blog - Avoid Zonkey (hybrid) taxes The US political system continues to debate the merits of income versus consumption taxes. The current US income tax is a hybrid with many consumption tax elements (e.g. exempt capital income, immediate expensing of many investments). Thus, it is like the Zonkey pictured above: half zebra, half donkey. Most hybrid animals are infertile. Similarly, hybrid tax systems are also difficult to sustain politically. The House Republican’s 2016 Better Way tax plan was designed to move toward a consumption-based tax in the guise of a business income tax. Thus, it had border adjustments consistent with a destination-based value-added tax, while claiming to fall only on economic “rents” of business owners. Although based along the lines of David Bradford’s X-Tax, which was designed to be a more progressive consumption tax with a business cash-flow tax combined with a progressive wage tax, the House Republican proposal only included the business cash-flow tax in combination with the current hybrid personal income tax. Thus, it was a Zonkey proposal and wasn’t sustainable politically. Michigan’s former Single Business Tax (SBT) is another example of political unsustainability of a Zonkey tax. The State of Michigan replaced its state corporate income tax (and six other business taxes) with an additive method value-added tax imposed on all forms of business entities, the SBT, in 1976. The SBT, similar to other consumption taxes, provided no business deduction for employee compensation, which usually accounts for 70% of value-added. Labor-intensive businesses didn’t like the SBT because they couldn’t deduct employee compensation, which they argued was inconsistent with income taxation. Companies complained that they had to pay SBT when not earning profits, which is to be expected with a consumption tax. Michigan’s use of both a retail sales tax and an entity-level VAT created another political tension. Michigan politicians were whip-sawed between consumption tax and income tax arguments, so provided generous deductions for certain labor-intensive businesses. While the tax was operational in different forms for 45 years, the mixture of consumption tax and income tax concepts, combined with the uniqueness of the tax, made it increasingly difficult to defend. It was repealed in 2007 and Michigan returned to a business income tax in combination with a modified gross receipts tax. The current US tax reform debate has resulted in confusion about how to tax business income. The debate about the “border adjustment tax” and proposals to eliminate interest deductions reflect the Zonkey nature of many hybrid tax proposals. A general limitation on business interest deductions is consistent with consumption taxation, but inconsistent with income taxation, except in narrow cases of excess leverage in multinational subsidiaries or debt financing of tax-favored investments. Most tax systems have some hybrid features, but the political debates and economic analyses underpinning them would be clearer if purer income and consumption taxes were debated. Almost all other countries have both income and consumption taxes, and can adjust the relative mix by modifying the tax rates rather than Zonkifying either tax base. The US’ aversion to politically considering a federal general consumption tax, such as a value-added tax, results in veiled attempts to adopt variants of indirect or entity-level consumption taxes with income tax sounding names, or further eroding the income tax base. Instead of trying to back into a consumption tax by destroying fundamental features of the corporate and individual income tax, federal policymakers should specifically debate the merits of a general consumption tax and a broad-based income tax. The initial 1984 US Treasury tax reform proposal concluded that a broad-based, lower-rate income tax was preferred to a consumption tax, which was the end result in the 1986 Tax Reform Act. Thirty years later with growing long-term fiscal deficits and a more competitive global economy, a broad-based consumption tax may be needed, in addition to a broader-base lower-rate income tax. Loading the current income tax up with consumption tax features (expensing of capital investment, lower tax rates on capital income, a general interest disallowance or a VAT-like border adjustment) is a Zonkey tax policy with undesirable consequences. Tom Neubig and Bob Cline http://www.taxsagenetwork.com/blog/2017/7/28/tax-expensing-favors-long-lived-and-risky-investments monthly 0.5 2017-07-28 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1501255749610-162SXMOYH2HZSRQWQZTY/image-asset.png Blog - Tax Expensing Favors Long-Lived and Risky Investments https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1501255654215-2WHQ3EF08M3QJMW5SUOS/image-asset.png Blog - Tax Expensing Favors Long-Lived and Risky Investments http://www.taxsagenetwork.com/blog/2017/7/14/progress-on-curtailing-base-erosion-and-profit-shifting monthly 0.5 2017-07-14 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1500069467366-MVGQDB0J6M2DTJO7IK8G/image-asset.png Blog - Progress on curtailing Base Erosion and Profit Shifting http://www.taxsagenetwork.com/blog/2017/6/13/yv9r8amyrvlkuut409we3jmow2ucmf monthly 0.5 2017-06-14 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1497453606836-QP4DPKOUPOE0K3BQOMOK/image-asset.png Blog - Tax gap: Canada adds an important analytical tool http://www.taxsagenetwork.com/blog/2017/6/12/i8plb9b8ygjbl2n2tu0ski4noepsmr monthly 0.5 2017-06-12 http://www.taxsagenetwork.com/blog/2017/4/21/does-the-employer-share-of-payroll-taxes-matter monthly 0.5 2017-04-21 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1492804023221-R1AH1RSZ2VOLLZTLAMSS/image-asset.png Blog - Does the employer share of payroll taxes matter? https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1492804098375-7FXWXA8IYKVIW8RLD5ER/image-asset.png Blog - Does the employer share of payroll taxes matter? http://www.taxsagenetwork.com/blog/2017/4/3/profit-shifting-tax-rate-differentials-continue-to-increase monthly 0.5 2017-04-03 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1491249378492-QG0P6F9ZZCG43TP98UKM/image-asset.png Blog - Profit-shifting tax rate differentials continue to increase http://www.taxsagenetwork.com/blog/2017/1/27/h2fjb9anpe2mic3i89fi54gkf2zxl6 monthly 0.5 2017-01-28 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1485560867942-4FMC838XUCQVUSZFY13V/image-asset.png Blog - A Tax-Systems Perspective on New Global Tax Initiatives http://www.taxsagenetwork.com/blog/2017/1/19/wheres-the-competitive-disadvantage-from-other-countries-vat-border-adjustments monthly 0.5 2017-01-19 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1484839896766-KSDPXFIO47SMZCDE7YK4/image-asset.png Blog - Where’s the competitive disadvantage from other countries’ VAT border adjustments? http://www.taxsagenetwork.com/blog/2017/1/18/cash-flow-taxation-and-excess-but-still-marginal-returns monthly 0.5 2017-01-18 http://www.taxsagenetwork.com/blog/2017/1/18/border-adjustability-will-affect-imports-and-exports monthly 0.5 2017-01-18 http://www.taxsagenetwork.com/blog/2017/1/10/fiscal-federalism-affects-multinational-decisions-new-approach-to-winners-losers monthly 0.5 2017-01-10 http://www.taxsagenetwork.com/blog/2017/1/5/businesstaxesmatternotjustcit monthly 0.5 2017-01-25 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1483634713724-97LTF34TBEQTMSZH3WNK/image-asset.png Blog - All business taxes matter: Not just corporate income tax EY/Council on State Taxation Total State and Local Business Taxes FY2015 http://www.taxsagenetwork.com/blog/2016/12/16/tax-exchange-rate-offset monthly 0.5 2019-04-04 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1481919717092-LYZETABOC58S9BUX18S9/image-asset.png Blog - Tax Exchange Rate Offset? http://www.taxsagenetwork.com/blog/2016/11/21/what-the-heck-is-a-normal-return-for-businesses monthly 0.5 2016-11-21 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1479756149001-4JGXXTOB829KN0LKK9WI/image-asset.png Blog - What the Heck is a “Normal” Return for Businesses? I had the pleasure of working on a new OECD working paper highlighting the increasing use of the terms “normal” and “excess” returns in tax policy analyses with my former colleague, Hayley Reynolds, Director (Economist) of Corporate Income Taxation at the National Treasury of South Africa. Let me start by saying I have never heard a businessperson mention “normal” returns. Businesses are failures if they earn a government bond rate that any passive investor can earn by clipping coupons. Businesses talk about requiring minimum “hurdle rates” for their investments that reflect corporate financing and the many risks they manage, which are considerably higher than a government bond rate. “Excess” returns are often suggested as location-specific rents which could be taxed at very high rates, since many analysts think businesses do not respond to taxes on economic rents. In contrast, many analysts argue that “normal” returns should not be taxed to eliminate the tax on real investment and savings. Conceptually, the distinction between “normal” and “excess” returns could matter for more efficient tax policies. Unfortunately, academics and other policy analysts haven’t defined these two terms before policymakers have started enacting the concepts in tax legislation. The Allowance for Corporate Equity (ACE) is an example where the “normal” return in actual tax law ranges from half of the “risk-free” government bond rate to the government bond rate plus 3 percentage points. The European Commission’s new CCCTB proposal includes an Allowance for Equity and Investment, which will set the ACE at the 10-year government bond rate plus an unspecified risk premium. Since hurdle rates differ by type of company, industry and country, practically implementing differential taxation of "normal" and "excess" returns will cause its own distortions. The issue arises in natural resource “rent” taxes and also in cash-flow taxes where tax loss carryforwards require adjustment for an interest factor to achieve the claimed efficiency effects. The House Ways and Means Republican’s Tax Reform Blueprint says tax loss carryforwards under its cash-flow tax will be adjusted by an interest factor that compensates for inflation and a real return to capital, but without specifying the return to capital. Too low a rate means there is still tax on marginal investments, while too high a rate provides a windfall subsidy. Taxing rents on an origin basis makes a country less attractive to invest in since the average effective tax rate increases relative to the after-tax return on comparable investments in other countries, as noted by Devereux and Griffith (1998). If “normal” returns are as low as current government bond rates, does it really matter that they are taxed or not taxed, since businesses focus on earning “economic profits”? The OECD Working Paper notes that many economic analyses and even tax policies are being done without a careful consideration of the terms being used. Tax policy design will never be perfect since policymakers and analysts must weigh trade-offs between efficiency, effectiveness and simplicity, but designing good tax policy is not helped by fuzzy terminology. A clear consensus on conceptual terms, such as “normal” and “excess” returns, will strengthen future analyses and enable better modeling of their effects. Tom Neubig http://www.taxsagenetwork.com/blog/2016/9/27/eus-apple-state-aid-case-competition-between-countries monthly 0.5 2016-10-03 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1475025864505-IJ7XYMP2D0SQCUCHG1WP/image-asset.jpeg Blog - EU’s State Aid Case: Real Issue is Unfair Competition Between Countries http://www.taxsagenetwork.com/blog/2016/9/14/tax-certainty-new-focus-of-g20 monthly 0.5 2016-09-19 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1473877080757-3ADTPP0JS1CPKEHA88EP/image-asset.png Blog - Tax certainty new focus of G20 Risk is often characterized as the different likelihoods within a known distribution (eg. knowing the rules of the game), while uncertainty is the existence of possible multiple distributions (eg. not knowing which game will be played). https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1473876922121-5WFTZA25AGYPG831Y41R/image-asset.jpeg Blog - Tax certainty new focus of G20 The G20 leaders meeting earlier this month highlighted a new fourth “pillar” of its tax work. To the ongoing work on tax transparency, reducing base erosion and profits shifting (BEPS), and building tax capacity of developing countries, the G20 leaders added tax policies to promote inclusive growth and tax certainty. See link to communiqué. Tax policy will now be one of the structural reforms for the G20’s Growth Agenda. As noted earlier, the tax and growth work will focus on more than just efficiency, with the goal of inclusive growth with distributional equity. The prior conclusion that corporation tax is the most harmful to economic growth will be revisited with a broader focus. Some analysts had used the earlier finding to argue that any corporate tax reduction, including from BEPS, was desirable for growth. Other considerations, as noted in the BEPS Action 11 report, suggest a more careful assessment. An important new focus of the G20 will be on tax certainty. With major changes occurring in the international tax environment, including the BEPS Project, businesses are adapting to new tax rules and administrative practices. BEPS Action 14 will help improve tax dispute resolution after disputes have arisen, but it would be better to increase the certainty of tax rules and administrative practices before disputes occur. The G20 asked the OECD and IMF to continue working on the issue of tax certainty, given the potential benefits from increased investment and trade. The G20 Finance Ministers held a special half-day High-Level Symposium on inclusive growth and tax certainty in July 2016. Finance Minister Lou Jiwei of the People’s Republic of China stated: “We should improve the transparency, predictability and standardization in the process of tax policy-making and implementation.” (see link) US Treasury Secretary Jack Lew said "Countries create uncertainty when you change your tax laws on a regular basis, or when you enact laws that are unclear both to the taxpayer and the tax authorities." (see link) Michael Devereux of the Oxford University Centre for Business Taxation conducted a survey of 88 tax officials earlier this year for the European Tax Policy Forum to measure corporation tax uncertainty across countries. He reports that the most commonly encountered problem is complexity in the tax code, followed by unpredictable or inconsistent treatment by tax authorities. Uncertainty (about the effective tax rate on profit) was ranked as more important than the anticipated effective tax rate on profit. “This suggests that uncertainty surrounding the effective tax rate can outweigh even a lower anticipated effective tax rate.” The G20’s focus on tax certainty and the future work of the OECD and IMF is an opportunity for the business community to help policymakers and policy analysts better understand specific sources of tax uncertainty, tax uncertainty’s effects on business operations, and possible solutions to increasing tax certainty for both businesses and governments. It is time to move from generalities and hypotheses about tax uncertainty to specific policy actions to improve both tax policy and tax administration. Business and academics need to contribute to greater understanding of better government policies for increased tax certainty. Tom Neubig http://www.taxsagenetwork.com/blog/2016/9/13/fiscal-rd-incentives-need-careful-design monthly 0.5 2016-09-13 https://images.squarespace-cdn.com/content/v1/577da6629f74568b965a0402/1473777296397-F98XX8IEXGKDLR1ZHBF8/image-asset.jpeg Blog - Fiscal R&D incentives need careful design Two recent OECD Taxation Working Papers (WP24 and WP27) caution that improperly designed fiscal incentives for research and development and innovation can have unintended and undesirable consequences. While potentially having positive effects, some tax policies can favor incumbent firms, encourage small firms to undertake less efficient activities, and create arbitrage and rent-seeking activity. Increased R&D activity in one country may not result in an overall increase in global innovation if it is simply shifted from another country. More research is needed on fiscal incentives' actual effects on both the quantity and quality of overall global R&D and its potential spillovers to other sectors of the global economy before piling on more tax and fiscal incentives for R&D. Negative effective tax rates from multiple fiscal incentives and tax arbitrage may be more detrimental than beneficial to overall R&D and innovation. 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