15 April 2016 EY Center for Tax Policy: This Week in Tax Reform for April 15 FAA bill: The Senate is expected to complete consideration of a bill (H.R. 636) to reauthorize the Federal Aviation Administration (FAA) through September 30, 2017. Ways & Means subcommittee hearing: On April 19 (at 10 a.m.), the House Ways and Means Subcommittee on Oversight will hold a hearing on the Tax Return Filing Season. Members will also discuss efforts to protect Americans from identity theft related tax fraud and cybersecurity attacks. Joint Economic Committee hearing: On April 20 (at 2:30 p.m.), the Joint Economic Committee will hold a hearing on "Is Our Complex Code Too Taxing on the Economy?" Witnesses: — Dr. Arthur B. Laffer, Chairman, Laffer Associates, Nashville, TN Brady tax day speech: On April 15, House Ways and Means Committee Chairman Kevin Brady (R-TX) delivered a Tax Day speech at the U.S. Chamber of Commerce, saying that the House Task Force on Tax Reform intends to "produce a consensus blueprint for comprehensive pro-growth tax reform" by June. As Brady noted, the Task Force — one of a handful appointed by Speaker Paul Ryan (R-WI) to develop a policy agenda — is a dialogue led by Ways and Means with the rest of the Republican House members "about the need for tax reform and what it will take to get there." Chairman Brady also mentioned the Committee's separate examination of international tax reform, including global developments that may burden US businesses and workers such as the OECD BEPS project and European Union state aid investigations. He continued to connect such developments with local communities. "As you know, every one of these American-based global companies has suppliers and other businesses that support their operations. These are local businesses, often small S corporations and LLCs, that will be replaced by foreign vendors if the American company becomes foreign through an acquisition or takeover and the business decisions are made in the new foreign headquarters," Brady said. "The result will be a loss of these local American businesses and the American jobs they create." He said he shares concern about inversions but does not support the Administration strategy of "trying to bully companies into staying in America," which may result in keeping investment out of the United States — "routine, legal investment that creates jobs and economic growth in our communities." During a Q&A session, Chairman Brady said the Committee's tax team is evaluating the impact of the recent Treasury rules related to inversions, as well as the authority under which they were issued. While he recognizes there is broad discretion to rule in that area, it appears Treasury may have overstepped its authority, he said. Boustany less certain about international: Ways and Means Tax Policy Subcommittee Chairman Charles Boustany (R-LA) expressed less certainty about drafting an international tax reform proposal, after earlier scaling back the scope of the plan to omit a corporate rate cut. "I think that our committee goal at the beginning of the year was to come up with draft legislation on international, and I want to verify with the chairman that that is still the plan," Boustany said, according to an April 13 Bloomberg BNA report that also cited Chairman Brady as continuing to say there is no timetable to release a draft. Rep. Boustany said the Committee can at least "send a positive signal that we're preparing that part of the tax code for early next year, so that it's on the shelf ready to go early next year." He also reiterated that the Task Force activity has slowed the process on international reform. Ways & Means subcommittee hearing on income taxes: On April 13, the House Ways and Means Tax Policy Subcommittee held a hearing on Member proposals relating to fundamental reform of the income tax system, including Rep. Bob Goodlatte's (R-VA) bill to sunset the current tax code at the end of 2019 and establish a new system under certain parameters. Rep. Roger Williams (R-TX) testified about his "Jumpstart America" legislative package that, among other things, would lower the corporate tax rate to 20%, allow for a permanent 5% tax rate on the repatriation of foreign earnings, and make 100% bonus depreciation permanent. Ranking Member Richard Neal (D-MA) used his opening statement to call for hearings on the so-called "Panama Papers" detailing the use of shell companies by clients of a Panamanian firm whose records were leaked. In a second panel, Joint Committee on Taxation Chief of Staff Tom Barthold reviewed, at the request of Reps. Boustany and Neal, former Ways and Means Committee Chairman Dave Camp's (R-MI) Tax Reform Act of 2014 (H.R. 1). Rep. George Holding (R-NC) asked about the anti-base erosion provisions of the Camp bill and whether, given the increase in base erosion, they would still be effective today. Barthold did not comment on the question of effectiveness, but explained the Camp bill's establishment of a new category of foreign base company intangible income to put a measure on a business enterprise's intangible investment activity and tax it at a lower rate. The hearing followed a Members' Day hearing last month on consumption tax proposals. European Commission calls for public CbC reports: The European Commission April 12 proposed an initiative to require large multinational companies to disclose publicly — for at least five years on the company's website, and on an official register in the EU — their profits, taxes, employee headcount and other information for each European Union country in which they operate, and for certain tax haven jurisdictions (not yet identified). In addition, they would have to disclose aggregated information regarding their business outside the European Union and the designated tax havens. The initiative is separate from the OECD Base Erosion and Profit Shifting action on country-by-country reporting, which requires more detailed information to be shared between tax authorities and that would not be made public. The Commission also made clear that the purpose of the reporting regimes is different, with the EU initiative aimed at helping EU citizens understand how much and where EU companies pay taxes, while the OECD reporting is aimed at assisting tax authorities in tax compliance. Like the BEPS Action 13 on country-by-country reporting, the proposal would require reporting by a multinational company with annual revenue in excess of EUR 750 million. The information — which, in addition to taxes (both paid and accrued), includes the nature of activities conducted, the number of employees, net revenue, profit before tax, and accumulated earnings — would have to be disclosed for every EU country in which a company is active, "as well as for the so-called tax havens." The initiative is being proposed as an amendment of the EU Accounting Directive, which is not a tax measure, and therefore can be adopted by the EU Council with the support of only a qualified majority (55%, or 16 member states) of the 28 EU member states. The proposal was not precipitated by the release of the Panama Papers detailing the use of shell companies by clients of a Panamanian firm whose records were leaked, though the Commission's action is seen as being influenced by the development. An EY Alert on the development has additional details, along with a Commission fact sheet. Lew at CFR: Asked a question related to the Panama Papers during a Council on Foreign Relations event April 11, Treasury Secretary Jack Lew said that the idea that there are different tax rules for different classes of people is unacceptable. "Everyone has to follow the law and if the laws permit the movement of income to, you know, countries or places where they're inadequately taxed, then that's a tax policy question that we have to address, which is one of the reasons that we've proposed business tax reform so that the U.S. broken tax system would be fixed and we would tax all U.S. income wherever it is in the world at a reasonable level and close the loopholes that make our system as broken as it is," he said. Lew said the current system forces companies to look for ways to avoid a statutory tax rate that's the highest in the developed world, even though the effective tax rate is about average because of deductions and credits. Some of those were worthy when they were put in place, some not, and many have outlived their usefulness, he said. Technical corrections bill: On April 11, the Technical Corrections Act of 2016 (H.R. 4891, S. 2775) was introduced in the House and Senate. The bill includes technical corrections to recently enacted tax legislation. "For those of you who are planning at home, Monday is Tax Day. It's the deadline for filing your taxes. And it is a convenient time to review this administration's record when it comes to tax policy. Many of you will recall that back in 2007, when then Senator Obama was running for president, he talked extensively about how our country's tax policy was skewed toward the top 1%. He was concerned that it was skewed in a direction that was not favorable to the middle class — and those of you who have been covering us over the last seven years are familiar with the president's strategy that our economy is strongest when we're growing it from the middle out. And that is the case that the president made to making some reforms to our tax system." — White House Press Secretary Josh Earnest, April 14
Document ID: 2016-0699 | |||||||||||||||
