Weekly transfer pricing roundup – 19 December

Oxfam (an international confederation of 18 NGOs working with partners in over 90 countries) is trying to end the injustices that cause poverty. Oxfam released a new report which examined the extent to which countries encourage corporate tax avoidance. A link to the PDF of the report is here. Oxfam identified the following 15 tax havens as the world’s worst corporate tax havens:

  1. Bermuda
  2. Cayman Islands
  3. Netherlands
  4. Switzerland
  5. Singapore
  6. Ireland
  7. Luxembourg
  8. Curaçao
  9. Hong Kong
  10. Cyprus
  11. Bahamas
  12. Jersey
  13. Barbados
  14. Mauritius
  15. British Virgin Islands

These countries earned their place on Oxfam’s ‘world’s worst’ list because [Oxfam is of the opinion that] they facilitate the most extreme forms of corporate tax avoidance, driving the race to the bottom in corporate taxation. To create the list, Oxfam researchers assessed countries against a set of criteria that measured the extent to which countries used three types of harmful tax policies: corporate tax rates, the tax incentives offered, and lack of cooperation with international efforts against tax avoidance. One article (see below) has already caught onto this and Singapore is already defending themselves.

It seems we are also getting some reviews on what Trump’s tax plan could mean for multinational companies. Even though companies on the S&P have been enjoying Trump’s promise of lowering corporate taxes, there is more to it, and multinationals may be left hanging.

Hope you enjoy this weeks update, don’t forget to leave me your comments below.

Trump’s tax plan could knee-cap a bunch of huge companies (Business Insider)

“Not all companies are going to have their taxes lowered.

Depending on a couple factors, some companies could see their tax rate shoot up. One of those companies is former Wall Street darling and current Wall Street headache, Valeant Pharmaceuticals…”

Follow the link to the website which provides some great examples and insight which I don’t really want to just copy here.

Singapore fifth worst tax haven in the world: Oxfam (todayonline)

“Months after committing to a global initiative to curb tax avoidance, Singapore has again come under the spotlight for its regime that allows companies to legally but artificially shift profits across borders to keep overall corporate taxes low.

A new report, titled “Tax Battles: the dangerous global race to the bottom on corporate tax,” was released on Monday (Dec 12) by United Kingdom-based charity organisation Oxfam, which examined the extent to which countries encourage corporate tax avoidance. Oxfam named Singapore the fifth worst corporate tax haven for its lack of withholding taxes, its range of tax incentives, and evidence of substantial profit shifting.

The Ministry of Finance (MOF) defended Singapore’s tax regime and said parts of the Oxfam report were inaccurate. “We note that the report cites the lack of withholding taxes as one of the characteristics of our regime. This is inaccurate. Withholding tax (for example, interest, royalty, services, etc.) is applicable for payments made to non-resident persons. Singapore does not impose withholding tax on dividends due to our one-tier corporate tax system. Under this system, profits are taxed at the corporate level and is a final tax,” the MOF said.

Singapore came after Bermuda, Cayman Islands, Netherlands and Switzerland in Oxfam’s ranking of 15 worst tax havens in the world. The only other Asian city in the list is Hong Kong — at ninth place. “In an attempt to attract business, governments around the world are slashing corporate tax bills — damaging their own economies, and those of other countries in the process,” Oxfam said in the report, adding that corporate tax rates globally have fallen from an average of 27.5 per cent just ten years ago to 23.6 per cent today, despite the rise in profits reported by the world’s largest companies.

Oxfam said reduced corporate tax revenue is harmful to developing countries, who lose around US$100 billion annually as a result of corporate tax avoidance schemes. And tax havens such as Singapore is partially responsible for this, it added…”

Cyprus removed from India’s Tax blacklist (InTabloid)

Even though Oxfam still has Cyprus in the top ten of countries in tax havens, India has removed Cyprus from its blacklist. It seems fair enough considering:

“It was the only country to have been blacklisted by India as a non-cooperative jurisdiction. The action was taken due to lack of effective exchange of information.

India’s Tax blacklist has seen some modification. Cyprus has been formally removed from India’s tax blacklist. It will not be considered as ‘non-cooperative’ jurisdiction for income tax purposes…”

French Measure on Public Tax, Profit Reporting Voided (BNA)

“France’s Constitutional Council rejected a measure under which multinational companies with headquarters in France would have had to file public country-by-country reports on their global taxes and profits starting from 2018…”

Wonder if the EU will follow suit. What are your thoughts on having a public CBCr? I think companies paying a ‘fair’ effective tax rate will probably mind less, but even then, some MNEs may not want to share their margins as competitors can use this to their advantage. Besides the obvious tax transparency, something like a public CBCr may bring different issues.

Canada May End Voluntary Transfer Pricing Disclosures (BNA)

“A proposal for Canada to stop offering voluntary disclosure incentives in transfer pricing cases is an overreaction to perceptions of widespread tax avoidance by multinational corporations, tax lawyers told Bloomberg BNA…”

Tax issue will not affect operations, Feng Tay (Taipei Times)

“Feng Tay Enterprises Co (豐泰企業), a key supplier of Nike Inc, yesterday said it does not expect back tax issues at its two subsidiaries in China’s Fujian Province to affect its operations.

“Feng Tay will plead not guilty” to tax avoidance, company spokeswoman Amy Chen (陳麗琴) said by telephone, adding that the four shoemaking plants in Fujian only account for about 13 percent of the company’s total capacity…”

If these transfer pricing cases continue I may have to start a new category. I will think about that over the holiday season.

New Zealand Unlikely To Adopt Diverted Profits Tax: Cabinet (Tax-News)

“New Zealand’s Cabinet has said a Diverted Profits Tax is not currently its “preferred option” for tackling base erosion and profit shifting…”

Azerbaijan: Gov’t keen to tax operations with offshore companies (Azernews)

“…The minister said that the transfer prices are planned to be applied to operations with companies registered in offshore zones, mentioning that the practice will be used in operations the total amount of which with each offshore company exceeds 500,000 manats ($ 286,123) within a year…”

What are your thoughts?

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