Not surprisingly, Chevron slammed the Australian ruling against its loan arrangement. The ruling will have consequences for Chevron’s other projects which use debt financing and as such Chevron may take the ruling on appeal (I think I have mentioned this now every week but this time Chevron actually said they are thinking about it too). The adjusted interest rate from the ruling must also have material consequences on the affordability or profitability of such projects which brings non-tax related concerns.
I would like Chevron to appeal this, and not just because my prediction would be right, but rather because the ruling will result in some sort of guidance for other countries and it is important to get it right. Now I opened a can of worms! Do I or don’t agree with the ruling? Luckily, there are too many aspects within the ruling to deal with here, but for starters I would have expected that the borrower should have been dealt with as a stand-alone entity.
In non-related Chevron news, Google agreed to pay over 300 million Euros to the Italian tax authorities. This all started with the UK which settled with around 130 million pounds, now the Italian tax authorities received over 300 million Euros and if you remember the French and Spanish authorities have raided Googles office in their respective countries last year. So it is likely to result in further audits/settlements for Google. In other news:
OECD releases CbC reporting implementation status and exchange relationships between tax administrations (OECD)
“…another important step was taken to implement Country-by-Country Reporting in accordance with the BEPS Action 13 minimum standard, through activations of automatic exchange relationships under the Multilateral Competent Authority Agreement on the Exchange of CbC Reports (“the CbC MCAA”). With over a year still to go before the first exchanges of CbC Reports take place, more than 700 automatic exchange relationships have now been established among jurisdictions committed to exchanging CbC Reports as of 2018, including those between EU Member States under EU Council Directive 2016/881/EU…”
This is really becoming a reality. I still remember many people thinking this was not going to work. We are not there yet but it is looking promising. Sometimes I wish I could have been part of this rather than just commenting on it from the outside.
“Brazil could decide to join the Organisation for Economic Co-operation and Development (OECD) as soon as next month, officials told Reuters, as President Michel Temer seeks its seal of approval for reforms to Latin America’s largest economy…”
Joining the OECD will have more to it than just transfer pricing but from a transfer pricing perspective, Brazil is known for its sixth method which isn’t fully in line with the arm’s length principle. It would be interesting to see what happens to this should Brazil join the OECD. The article also mentions that if Brazil manages to join the OECD, it may assist in getting other countries like South Africa to join the OECD as well. It would be great to have more influence from developing countries in the OECD.
“Under pressure from the Tax Office, Google and Facebook have begun to bring their revenue onshore to be taxed. Ebay remains recalcitrant, still deeming its Australian business to be a Swiss business and thereby skiving out of millions in income tax and GST…”
This article is from an Australian perspective but probably true for many jurisdictions. Some companies have started to show more profits in different jurisdictions to try and ‘please’ tax jurisdictions. I think MNEs shouldn’t have to do much differently than before the BEPS world and just follow an arm’s length principle i.e. have profits aligned with the value chain. What is always interesting is when companies change things, the first question is why and if there isn’t a good answer, this may just create more issues. Sadly, I don’t have all the facts to dive deeper but know that even a restructure comes with issues, and not just for transfer pricing.
“Indian tax officials signed a record number of advance pricing agreements (APAs) in fiscal year 2016–17; nonetheless, India’s backlog of unresolved APA cases increased during the period…\
The report reveals that India signed 88 APAs during fiscal 2016–17, an increase from the 2015–16 total of 55. Only 9 APAs were signed during the two fiscal periods prior to that, the report said…
The government said that the most common transfer pricing method adopted in APAs, by far, has been the transactional net margin method…”