May 2, 2021
U.S. International Tax This Week for April 30
Ernst & Young's U.S. Tax This Week newsletter for the week ending April 30 is now available. Prepared by Ernst & Young's National Tax Department in Washington, D.C., this weekly update summarizes important news, cases, and other developments in U.S. taxation.
President Joe Biden on 28 April addressed a joint session of Congress, making the case for enactment of his multi-trillion dollar American Jobs Plan and American Families Plan to Congress and the public. The President called the 2017 Tax Cuts and Jobs Act a "a huge windfall for corporate America and those at the very top," and said: Corporations "benefit from tax loopholes and deductions that allow for offshoring jobs and shifting profits overseas. That's not right. We're going to reform corporate taxes so they pay their fair share — and help pay for the public investments their businesses will benefit from."
Earlier that day, the White House outlined the $1.8 trillion American Families Plan, which calls for $1 trillion in investments and $800 billion in tax cuts directed at American families and workers, as well as tax code reforms focused on high-income Americans, estimated to raise about $1.5 trillion over a decade. More specifically, the plan proposes raising the top individual tax rate to 39.6% and raising the capital gains rate from 20% to 39.6% for taxpayers making over $1 million. According to the Families Plan Fact Sheet, when combined with the American Jobs Plan, all of the investments would be fully paid for over the next 15 years.
The President's message came as some centrist Democrats are indicating concern with the enormous cost of the dual packages, now proposed to cost nearly $6 trillion.
Treasury on 28 April issued a press release detailing the plan to increase resources to the Internal Revenue Service (IRS) in order to improve tax compliance. According to the release, President Biden proposes to direct $80 billion to the IRS over the next 10 years to: (i) improve technology; (ii) increase the hiring and training of auditors to focus on complex investigations of large corporations, partnerships and global high-wealth individuals; and (iii) increase enforcement against high-income individuals. "The IRS requires more resources to conduct investigations into underreported income and to pursue high-income taxpayers who evade their tax liability through complex schemes," according to the release.
Treasury expects these changes to result in $700 billion in tax revenue over the next 10 years. Treasury also said it wants the IRS to implement a mechanism for cross-checking the accuracy of tax filings from "opaque sources," such as partnerships and proprietorships. Treasury said it will leverage "the information that financial institutions already know about account holders, simply requiring that they add to their regular, annual reports information about aggregate account outflows and inflows."
Long-delayed previously-taxed earnings and profits (PTEP) proposed regulations are now expected to be released in multiple packages, according to a senior Treasury official this week, with the first piece not expected to be issued before summer or early fall. The official reportedly said the initial guidance is far along but requires additional work with regard to the implementation of IRC Section 961(c), and its application. Sometime later, the second installment of PTEP guidance will address partnerships.
The United Nations (UN) on 27 April released the third edition of the UN Transfer Pricing Manual aimed at developing countries. The new third edition includes a major revision of the section on profit splits and contains new guidance on financial transactions, centralized procurement functions and comparability issues. It also includes a new country specific section on Kenya.
EY Guides, Surveys, and Reports
Digital services tax jurisdiction activity summary updated
The most recent version of EY's Digital services tax jurisdiction activity summary is now available. The activity summary provides the latest information as of April 1, 2021, on the introduction of digital services taxes in several jurisdictions.
Work from anywhere: How do we re-envisage our future after the unimaginable? (May 19)
During this EY Webcast, Ernst & Young professionals will highlight the journey of four organizations during this complicated year. Learn how they each reimagined how and where work gets done. Each panelist will share a unique point of view on the success and challenges of the past year, including a look ahead.
A taxpayer’s guide to the International Compliance Assurance Programme (ICAP) (May 20)
During this EY Webcast, Ernst & Young professionals along with the Organisation for Economic Cooperation and Development (OECD) will discuss the recently announced third phase of ICAP.
Recent Tax Alerts
— Apr 29: Indian Court rules on applicability of Most Favored Nation clause for determining withholding tax rate on dividend payments (Tax Alert 2021-0881)
— Apr 28: Hong Kong introduces legislation regarding tax treatment of court-free amalgamation of companies (Tax Alert 2021-0867)
— Apr 23: Taiwan extends validity period of withholding tax relief at source for certain foreign institutional investors (Tax Alert 2021-0845)
Canada & Latin America
— Apr 29: Canada bans flights from India and Pakistan for 30 days (Tax Alert 2021-0877)
— Apr 26: Dominican Republic issues amendments to transfer pricing regulations (Tax Alert 2021-0858)
— Apr 26: Mexico enacts labor reform, denies deductions for outsourcing services (Tax Alert 2021-0857)
— Apr 23: Colombia's Executive branch submits tax reform bill to Congress (Tax Alert 2021-0849)
— Apr 23: Mexican Congress approves labor reform addressing outsourcing services (Tax Alert 2021-0846)
— Apr 22: Ecuador and the United States sign Tax Information Exchange Agreement (Tax Alert 2021-0832)
— Apr 28: Changes to Portugal's OSS scheme and VAT filing and payment deadlines discussed (Tax Alert 2021-0870)
— Apr 28: Portugal nonresidents must use authorized software to issue VAT invoices from 1 July 2021 (Tax Alert 2021-0866)
— Apr 26: German Federal Ministry of Finance tightens marketplace liability rules (Tax Alert 2021-0856)
— Apr 23: Danish Government revises proposed CFC legislation (Tax Alert 2021-0841)
— Apr 23: Turkey increases corporation tax rate for 2021 and 2022 tax years (Tax Alert 2021-0835)
— Apr 28: OECD releases Israel Stage 2 peer review report on implementation of Action 14 minimum standard (Tax Alert 2021-0871)
— Apr 29: OECD releases New Zealand Stage 2 peer review report on implementation of Action 14 minimum standard (Tax Alert 2021-0880)
— Apr 29: OECD releases Australia Stage 2 peer review report on implementation of Action 14 minimum standard (Tax Alert 2021-0879)
IRS Weekly Wrap-Up
Internal Revenue Bulletin
| ||2021-17||Internal Revenue Bulletin of April 26, 2021|
| ||2021-18||Internal Revenue Bulletin of April 30, 2021|
Ernst & Young Client Portal, the leading source for news, analysis, and reference materials for corporate tax professionals, has a variety of content of interest to international tax practitioners, including:
— International Tax Online Reference Service. Key information about, and important tax developments from, 56 foreign jurisdictions, including information on tax rates, interest rates and penalties, withholding, and filing dates.
— EY/Passport. EY/Passport is your guide to planning ventures in the global economy, offering a wealth of tax and business knowledge on more than 150 countries.
Because the matters covered herein are complicated, U.S. International Tax This Week should not be regarded as offering a complete explanation and should not be used for making decisions. Any decision concerning matters covered herein should be reviewed with a qualified tax advisor.