Byrnes' Tax & Wealth Management Blog

William Byrnes graduate law programs blog

Meet us at IFA in Basel next week?

Posted by William Byrnes on August 26, 2015


Dr. Andrew Morriss (Dean, Texas A&M & international tax economist) and I look forward toLogo_IFA_Basel_2015meeting other academics and professionals at international tax 69th IFA Congress held in the city of Basel  from Sunday, August 30 to Thursday, September 3.

Email me so that we can link up at the Congress.

The International Fiscal Association (IFA) was established in 1938 with its headquarters in the Netherlands. It is the only non-governmental and non-sectoral international organisation dealing with fiscal matters.   12,000+ government officials, MNE counsel, senior partners, and academics from 111 countries.

Its objects are the study and advancement of international and comparative law in regard to public finance, specifically international and comparative fiscal law and the financial and economic aspects of taxation.

STUDY 1:  TAX INCENTIVES ON RESEARCH AND DEVELOPMENT (R&D)

STUDY 2: PRACTICAL PROTECTION OF TAXPAYERS’ FUNDAMENTAL RIGHTS

SEMINAR A: “PATENT BOXES”

SEMINAR B: THE TAXATION OF EXPATRIATES

SEMINAR C: CROSS-BORDER SUPPLY OF SERVICES AND VAT/GST: DEVELOPMENT OF IFA PROPOSALS

SEMINAR D: PRACTICAL PROTECTION OF TAXPAYERS IN THE EXCHANGE OF INFORMATION PROCESS

SEMINAR E: CROSS-BORDER MERGERS OF COMPANIES

SEMINAR F: IFA/EU: “STATE AID REVIEW AS A MEANS TO COMBAT AGGRESSIVE TAX PLANNING”

SEMINAR G: IFA/OECD

SEMINAR H: THE TAXATION OF GLOBAL FAMILIES

SEMINAR I: EFFECTIVENESS OF PARTICIPATION EXEMPTION

SEMINAR J: RECENT DEVELOPMENTS IN INTERNATIONAL TAXATION

SEMINAR K: PRACTICAL PROTECTION OF TAXPAYERS IN THE TAX LITIGATION PROCESS

SEMINAR L: TIMING ISSUES IN THE APPLICATION OF TAX TREATIES

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Aggie Law’s orientation week wraps up

Posted by William Byrnes on August 25, 2015


12th Man SIgned Tshirt

Aggie Law’s orientation week just wrapped up – and mine as well as one of the 11 new Texas A&M law faculty.  The Dean, Andy Morriss, hosted an incoming Aggie BBQ – and Texas BBQ is good BBQ.

139 new Texas Aggies hailing from more than 60 universities, already greeting me in the ‘Howdy’ tradition at every turn.  Friendliest folk – not a whippersnapper among them.

I’m looking forward to engaging with Aggie diversity – one-fifth the first member of the family to graduate from college, quarter ethnically diverse, and majority female.

Just watched the Aggie incoming student interviews.  Quotes like “Aggie land is home”, “I feel like I could walk up to anyone and start a conversation with them” and “It’s like a big family here” – think I am going to fit in.

Especially after my first Aggie football game – against the Arkansas Razorbacks – Sept 26th.

Howdy Aggie 1Ls and GigEm!

Posted in Courses | Tagged: | 1 Comment »

IRS Isn’t Confident FATCA Will Work?

Posted by William Byrnes on August 24, 2015


Dr. Jack Manhire gets a tip of the hat for pointing out the following blog post on Federal Tax Crimes

  • The IRS might use a summons (presumably John Doe Summons) to obtain offshore creditIrs_logocard information to track and identify U.S. offshore account depositors through correspondent banks.
  • The IRS may reinstitute a broker initiative to issues summons to brokers to identify U.S. beneficial owners of foreign corporations with U.S. brokerage accounts.

What this information indicates to  me?

(1) The IRS is not so certain that FATCA reporting will be effective to catch the non-compliant taxpayers.

(2) The IRS estimates that many Americans with foreign accounts are noncompliant.

Given that the IRS has forced billions in spending in four years to bring about FATCA compliance, I find it disturbing that it may not think it is working.  Worse is that this tool was always at the IRS disposal, just like the credit card John Doe Summons, and it is a good tool.  So why not ask for funding to use it back in 2009 instead of FATCA?

It appears that the strategy for bringing non-compliant taxpayers into compliance is hodge podge, without thought to the ramifications of each, as a whole, and without addressing underlying problems, like taxpayer education and easy to file FBAR.  At least Treasury modified the FBAR date to coincide with the 1040 filing date.  But the forms are still uncoordinated with different questions, different filing procedures, different penalties.  Just not good administration techniques.

See Treasury’s Taxpayer Advocate discloses FATCA Imposes Unnecessary Burdens, Will Not Improve Compliance

Posted in FATCA | Tagged: | 2 Comments »

Update on Voluntary Disclosure Programmes: A Pathway to Tax Compliance

Posted by William Byrnes on August 18, 2015


OECDThis second edition reflects the wealth of practical experience gained by 47 countries gained in relation to voluntary disclosure programmes. In addition, the guidance on the design and implementation of the programmes has been updated, particularly taking into account the views of private client advisers.

 When the OECD published the first edition its report on Voluntary Disclosure Programmes in 2010, it was just 18 months after the G20 Leaders had declared the end of the era of banking secrecy and called upon countries to implement the standard on exchange of information on request. In that very short time, considerable progress in the global fight against offshore evasion had been made, with more than 500 tax information exchange agreements having been put in place that comply with the standard.

 The work of the Global Forum on Transparency and Exchange of information for Tax Purposes was reorganised to deliver a robust programme of peer reviews to ensure that agreed standards were being effectively implemented. At the same time, the OECD has always recognised the importance of offering taxpayers the opportunity to become compliant and has encouraged governments to enable people who want to regularise their tax affairs to declare the income and wealth they have concealed in the past. Voluntary disclosure programmes offer such taxpayers a way to do this and for governments a way to secure payment of missing revenue, using relatively limited administrative resources.

 Since 2010, a very substantial amount of further progress has been made in the area of international exchange of information and transparency in tax matters. The Global Forum now has more than 125 members and an impressive body of results from the ongoing programme of peer reviews.

Another major milestone in tax transparency was reached in 2014 with the adoption of the OECD Standard for Automatic Exchange of Financial Account Information in Tax Matters. Most financial centres have publicly committed to implementation and are working on a specific and ambitious timetable leading to the first automatic information exchanges in 2017 or 2018.

 With the implementation of the Standard being underway and providing the basis for a new level of transparency in tax matters, the time is right to update the guidance on voluntary disclosure programmes published in 2010.

 This updated report reflects the wealth of practical experience gained by 47 countries gained in relation to voluntary disclosure programmes. In addition, the guidance on the design and implementation of the programmes has been updated, particularly taking into account the views of private client advisers.

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Retirement: Pros, cons, commissions and costs of fixed-index annuities

Posted by William Byrnes on August 17, 2015


Fixed index annuities are the current flavor and will remain so while consumers perceive the market indexes potentially rising,” says William Byrnes, an associate dean at Texas A&M University School of Law in Fort Worth.

Sales of FIAs rose 14% to $38.7 billion in 2013 and another 24% to $48 billion in 2014, or about 21% of all annuity sales …

read the USA Today analysis of Fixed Index Annuities at USA Today and whether these are a good fit for a retirement plan.

Posted in Retirement Planning | Tagged: , | 2 Comments »

IRS 2015 APA for Transfer Pricing Final Rev Proc 13 Key Differences from 2013 Version

Posted by William Byrnes on August 13, 2015


This morning the US Treasury released the long awaited Advanced Pricing Agreement Procedures.IRS_logo

The 13 principal differences between these final revenue procedures and the proposed version of Notice 2013-79 are:

1. The final revenue procedure clarifies that if APMA requires, as a condition of continuing with the APA process, that the taxpayer expand the proposed scope of its APA request to cover interrelated matters (interrelated issues in the same years, covered issues or interrelated issues in other years, and covered issues or interrelated issues in the same or other years as applied to other countries), APMA will do so with due regard to considerations of principled, effective, and efficient tax administration and only after considering the views of the taxpayer and the applicable foreign competent authority. Further, APMA will communicate to the taxpayer any concerns about interrelated matters and possible scope expansion as early as possible.

2. In the interest of efficient tax administration, rollback years may be formally covered within an APA. A rollback will be included in an APA when a rollback is either requested by the taxpayer and approved after coordination and collaboration between APMA and other offices within the IRS or, in some cases, is required by APMA, after coordination and collaboration with other offices within the IRS, as a condition of beginning or continuing the APA process.

3 The final revenue procedure provides expanded guidance as to when an APA request will be considered complete.

4. The required contents of APA requests that were specified in the Appendix of the proposed revenue procedure have generally been retained.

5. Taxpayers are required to execute consent agreements to extend the period of limitations for assessment of tax for each year of the proposed APA term, and the required consent could be either general or restricted.

6. User fees are increased for APA requests but provides that total user fees may be reduced for multiple APA requests filed by the same controlled group within a sixty-day period. Also, user fee for requests for discretionary LOB relief are increased.

7. The final revenue procedure limits the scope of requests to which mandatory -pre-filing procedures apply to requests involving taxpayer-initiated positions.

8. To ensure that taxpayers have broad access to the U.S. competent authority to resolve disputes under U.S. tax treaties, taxpayers will not be required under the final revenue procedure to expand the scope of a competent authority request to include interrelated issues as a condition of receiving competent authority assistance. Taxpayers may still be required to provide information that will allow the U.S. competent authority to evaluate the appropriateness of the relief sought under the applicable U.S. tax treaty in light of the taxpayer’s positions on interrelated issues.

9. The final revenue procedure clarifies that the U.S. competent authority may consult with taxpayers with respect to certain additional issues that may arise in connection with competent authority requests, such as issues relevant to the determination of foreign tax credits and repatriation payments.

10. The final revenue procedure provides additional guidance on requesting discretionary determinations under the limitation on benefits articles of U.S. tax treaties, including time frames for taxpayers to provide notification of material changes in fact or law and the introduction of a triennial statement procedure to maintain a favorable grant of discretionary benefits.

11. Consistent with the objective of providing taxpayers with broad access to the U.S. competent authority to resolve disputes under U.S. tax treaties, the U.S. competent authority will not condition assistance on the taxpayer’s notification of the U.S. competent authority, or on obtaining its concurrence, with respect to signing a standard Form 870 with IRS Examination.

Similarly, a taxpayer will not be required to obtain the U.S. competent authority’s agreement prior to entering into a closing agreement or similar agreement with IRS Examination, but in these cases the assistance provided by the U.S. competent authority will be limited to seeking correlative relief from the foreign competent authority, thus potentially not eliminating double taxation.

12. The final revenue procedure provides additional information about the process followed by the U.S. competent authority in conducting its review under the simultaneous appeals procedure.

13. The final revenue procedure clarifies and refines the bases on which the U.S. competent authority may decline to accept a competent authority request or may cease providing assistance, consistent with U.S. tax treaty policy that taxpayers should have broad access to the U.S. competent authority to resolve instances of taxation not in accordance with the applicable U.S. tax treaty.

Procedures for Advance Pricing Agreements  Download APA New Procedures Rev Proc 15-40

Procedures for Requesting Competent Authority Assistance under Tax Treaties  Download APA New MAP Procedures Rev Proc 15-41

William Byrnes is the primary author of Lexis’ Practical Guide to US Transfer Pricing which provides 3,000 pages of in-depth analysis and practical examples for the corporate transfer pricing counsel and risk manager.

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New IRS Procedures to Ensure Effectiveness of Civil FBAR Penalties

Posted by William Byrnes on August 12, 2015


The purpose of the IRS interim guidance is to implement procedures to improve the administration of the Service’s FBAR compliance program.

When asserting an FBAR penalty, the burden is on the IRS to show that an FBAR violation occurred Irs_logoand, for willful violations, that the violation was in fact willful. The FBAR penalty provision of Title 31 establishes only maximum penalty amounts, leaving the IRS to determine the appropriate FBAR penalty amount based on the facts and circumstances of each case.

Read the May 13, 2015 IRS FBAR Guidance

Prof Jack Townsend, on his federal tax crimes blog, discusses the recent Moore v United States (W.D. WA 2015) in which the Court “admonishes the IRS and imposes a cost for misleading the taxpayer” about a FBAR assessment.

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OECD Releases 3 New Reports to Combat Offshore Tax Evasion

Posted by William Byrnes on August 8, 2015


The OECD today releases three new reports to help jurisdictions and financial institutionsOECDimplement the global Standard for automatic exchange of financial account information.

  • Common Reporting Standard Implementation Handbook (the CRS Handbook): this first edition provides practical guidance to assist government officials and financial institutions in the implementation of the Standard. It sets out the necessary steps for implementation and will help financial institutions and governments implement the Standard more efficiently by promoting the consistent use of optional provisions, identifying areas for alignment with FATCA and addressing the operational and transitional challenges resulting from the staggered implementation of the Standard. It also contains answers to frequently asked questions (FAQs) received from business and governments, with a view to furthering the effective implementation of the Standard. The Handbook is intended to be a “living” document and will be updated on a regular basis.

  • Offshore Voluntary Disclosure Programmes: this second edition contains a wealth of practical experience from 47 countries in relation to their voluntary disclosure programmes. The guidance on the design and implementation of such programmes has been updated, particularly taking into account the views of private client advisers. The limited time left until the automatic exchange of information under the Standard becomes a reality will in many instances be the last window of opportunity for non-compliant taxpayers to voluntarily disclose. This is therefore a crucial moment to update the publication and reflects OECD policy of encouraging countries to examine voluntary compliance strategies that enable non-compliant taxpayers to come forward.

The Standard calls on jurisdictions to obtain information from their financial institutions and automatically exchange that information with other jurisdictions on an annual basis. Over 90 jurisdictions have committed to implement the Standard, with the first exchanges starting in 2017/2018, subject to the completion of necessary legislative procedures.

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Four More Go Down But One Receives Get Out Of Jail for Free Card

Posted by William Byrnes on August 6, 2015


A couple days ago Bank EKI Genossenschaft (Bank EKI) entered into a non prosecution agreement Justice logowith the US Department of Justice, admitting it assisted US taxpayer with tax evasion.  Privatbank Reichmuth & Co., Banque Cantonale du Jura SA and Banca Intermobiliare di Investimenti e Gestioni (Suisse) SA then today announced their non-prosecution agreements. One bank will pay no penalty, while the other three will pay penalties $400,000, $2.6 million, and $970,000 respectively, and turn over client records.

The banks started with 201 clients among them in 2008, but one bank closed its non-compliant accounts and thus has been received a “get out of jail” free.

read about each bank’s nefarious activities and resolution thereof on International Financial Law Prof Blog

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Global Forum releases new compliance ratings on tax transparency

Posted by William Byrnes on August 6, 2015


The Global Forum on Transparency and Exchange of Information for Tax Purposes published new peer review reports today for 12 countries or jurisdictions, moving further OECDahead with its goal to implement global standards on transparency and exchange of information for tax purposes.

Phase 1 reports on AlbaniaBurkina FasoCameroonDominican Republic,LesothoPakistan and Uganda assessed their legal and regulatory frameworks for transparency and exchange of information on request. These countries were assessed to have legal frameworks in place to enable them to move to the next stage of the review process, which will assess exchange of information practices.

The Global Forum also reviewed exchange of information practices through Phase 2 peer review reports in Lithuania and Sint Maarten. Both were given a rating for compliance with the individual elements of the international standard and an overall rating with Lithuania receiving an overall rating of “Compliant” and Sint Maarten an overall rating of “Partially Compliant.”

Jurisdictions continue to request supplementary reviews that assess steps taken to address recommendations of the Global Forum to address gaps in their legal frameworks and exchange of information practices identified in previous reviews. This included the Marshall Islands, which had been blocked from moving to Phase 2 of its review process due to significant gaps in its legal framework. A supplementary review concluded that key changes to its legislation now enable the Marshall Islands to move to Phase 2.

Austria, which was rated “Partially Compliant” in July 2013, has since implemented a number of recommendations by the Global Forum, leading to an upgrade of its overall rating to “Largely Compliant” in its supplementary report. The supplementary report of the British Virgin Islands, which assesses progress made since its Phase 2 report in July 2013 also concluded that based on significant improvements having been made, its overall rating be upgraded from “Non-Compliant” to “Largely Compliant.”

The Global Forum is the world’s largest international tax group, with 127 members on an equal footing. The Forum has now completed 198 peer reviews and assignedcompliance ratings to 80 jurisdictions that have undergone Phase 2 reviews. Of these, 21 jurisdictions are rated “Compliant”, 46 are rated “Largely Compliant”, 10 are rated “Partially Compliant” and 3 jurisdictions are “Non-Compliant.” A further 11 jurisdictions are blocked from moving to a Phase 2 review due to insufficiencies in their legal and regulatory framework.

The Global Forum continues to ensure that the benefits of participation in the new tax transparent and cooperative environment are available to all. It has conducted a number of training seminars to help jurisdictions prepare for peer reviews, sensitize tax auditors in the use of the exchange of information infrastructure and equip governments to implement automatic exchange of information. Around 200 tax experts participated in seminars in Colombia, Cameroon, Ghana and Kenya. The Global Forum will also support a new pilot project on Automatic Exchange of Information announced jointly by Ghana and the UK on the sidelines of the 3rd Financing for Development Conference in Addis Ababa.

Global Forum members will meet at their annual plenary meeting on 29-30 October 2015 in Bridgetown, Barbados.

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Treasury Acknowledges More Favorable FATCA IGA Terms for BVI

Posted by William Byrnes on August 5, 2015


Based on the BVI IGA for FATCA, the United States considers the language in italics to be “more favorable Treasury-Dept.-Seal-of-the-IRSterms” in Annex I, except in those cases where the Agreement already includes such language: (excerpted below in relevant part) –

Annex I: G. Alternative Procedures for New Accounts Opened Prior to Entry Into Force of this Agreement. …

2. Alternative Procedures. 

a) Within one year after the date of entry into force of this Agreement, Reporting British Virgin Islands Financial Institutions must:

(i) with respect to a New Individual Account described in subparagraph G(1) of this section, request the self-certification specified in section III of this Annex I and confirm the reasonableness of such self-certification consistent with the procedures described in section III of this Annex I, and

(ii) with respect to a New Entity Account described in subparagraph G(1) of this section, perform the due diligence procedures specified in section V of this Annex I and request information as necessary to document the account, including any self-certification, required by section V of this Annex I. 

c) By the date that is one year after the date of entry into force of this Agreement, Reporting British Virgin Islands Financial Institutions must close any New Account described in subparagraph G(1) of this section for which it was unable to collect the required self-certification or other documentation pursuant to the procedures described in subparagraph G(2)(a) of this section.

In addition, by the date that is one year after the date of entry into force of this Agreement, Reporting British Virgin Islands Financial Institutions must: (i) with respect to such closed accounts that prior to such closure were New Individual Accounts (without regard to whether such accounts were High Value Accounts), perform the due diligence procedures specified in paragraph D of section II of this Annex I, or (ii) with respect to such closed accounts that prior to such closure were New Entity Accounts, perform the due diligence procedures specified in section IV of this Annex I. 

 Treasury’s Notices of More Favorable Terms:

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UAE Published Detailed FATCA Guidance

Posted by William Byrnes on August 5, 2015


The UAE published 173 pages of detailed FATCA guidance and implementation of the IGA with the
USA for its financial services industry.  Download FATCA UAE Guidance Notes

The FATCA Guidance initially provides a general introduction to the Foreign Account Tax Compliance UAE MOFAct and its application to entities regulated by the Central Bank, the Insurance Authority, the Securities and Commodities Authority, the Dubai International Financial Centre and Unregulated Entities.

 What is FATCA and how will it be applied in the United Arab Emirates?

 How will FATCA affect banking entities, insurance companies, financial services companies and asset managers?

 How will FATCA affect Unregulated Entities?

 What if an entity or account holder does not comply with the UAE IGA?

 Purpose and outline of these Guidance Notes.

CH 1 – General Introduction

CH 2 – Guidance Notes for Banking Sector 

CH 3 – Guidance Notes for Insurance Sector 

CH 4 – Guidance Notes for Financial Services Sector 

 

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Congress Matches FBAR Filing to Tax Return Dates, Allows Extension, Penalty Abatement

Posted by William Byrnes on August 5, 2015


BNA Reports – Practitioners are praising the new deadline for reporting foreign bank accounts tucked into newly signed legislation (Pub. L. No. 114-041) to extend the Highway Trust Fund.

The measure ensures that the due date for the Report of Foreign Bank and Financial Accounts Irs_logo(FBAR), formerly June 30, is now the same as the U.S. tax filing deadline of April 15—a change that practitioners said would help taxpayers who frequently didn’t know the deadlines were different.

Taxpayers can also now ask for the same six-month extension for FBARs that they can get for their tax returns—permitting them to file by Oct. 15. That option didn’t exist before.

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Attacking BEPS through the Profit Split Method

Posted by William Byrnes on August 5, 2015


Prof. Jeffery Kadet‘s explains – Why Expansion of the Profit Split Method is Required to Combat BEPS…

Recognizing the reality that multinational corporations are centrally managed and not groups ofJeffrey-M-Kadet-244x300entities that operate independently of one another, the OECD base erosion and profit-shifting project is considering expanded use of the profit-split method.

This article provides background on why expanded use of the profit-split method is sorely needed. In particular, resource-constrained tax authorities in many countries are unable to administer or intelligently analyze and contest transfer pricing results presented by multinational groups. Most importantly, this article suggests a simplified profit-split approach using set concrete and objective allocation keys for commonly used business models that should be welcomed by multinational groups and tax authorities alike.

Read Prof Jeffery Kadet’s full analysis on SSRN http://ssrn.com/abstract=2593548

Posted in BEPS, OECD, Transfer Pricing | Tagged: , , | Leave a Comment »

OFAC compliance v. FATCA compliance?  Can a SDN FFI Obtain a GIIN?

Posted by William Byrnes on August 4, 2015


The entity I represent is on the Office of Foreign Asset Control’s Specially Designated Nationals list.  Is the entity eligible to register and receive a GIIN?

Answer to be found International Financial Law Prof Blog

 

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UK Income From Its Offshore Disclosure Facilities | Kluwer International Tax Blog

Posted by William Byrnes on August 3, 2015


UK Income From Its Offshore Disclosure Facilities | Kluwer International Tax Blog.

In 2011, HMRC forecast that it would receive “billions” from the Swiss Disclosure Facility.  In 2012, HMRC stated that this number would be five billion sterling, and another three billion sterling from the Liechtenstein Disclosure Facility (LDF).  This implies that at least a couple hundred thousand United Kingdom tax residents are non tax compliant through not disclosing income and income-producing assets overseas, in offshore countries.  

So what have the results been?  What are the future results likely to be?  Read Byrnes and Perryman at UK Income From Its Offshore Disclosure Facilities | Kluwer International Tax Blog.

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EU Asset Management Careers and Compliance Expenditures Report   

Posted by William Byrnes on August 3, 2015


see it on International Financial Law Prof Blog.

 

 

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Please Vote for the International Financial Law Professor Blog

Posted by William Byrnes on July 31, 2015


— Vote for My Blog Please for 100 Best Annual Law Blogs —

The American Bar Association (ABA) is creating its annual list of the 100 best legal blogs, and wants your vote on which blogs it should include.

Go to > ABA Voting for Best Law Blogs < to tell the ABA about the International Financial Law Professor blog please [lawprofessors.typepad.com/intfinlaw]

The ABA may include some of the best comments in its Blawg 100 coverage. But keep the remarks short — a 500-character remarks limit.

Deadline 11:59 p.m. CT on Friday, Aug. 16, 2015: American Bar Association voting link

Much obliged for your continued support and readership – Prof. William Byrnes (Texas A&M Law)

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Dr. Jack Manhire Departs IRS & Treasury for Texas A&M Law School

Posted by William Byrnes on July 30, 2015


Dr. John T. (“Jack”) Manhire, Jr., former Chief of Legal Analysis for the IRS Office of Professional Treasury-Dept.-Seal-of-the-IRS
Responsibility and National Program Chair, Executive Education for the U.S. Treasury Executive Institute, has accepted a position as Director of Program Development at Texas A&M University School of Law.

Last month Texas A & M announced that William H. Byrnes, IV, (co-editor of our International Financial Law Prof Blog) left Thomas Jefferson Law School and joined the faculty of Texas A&M Law.

Including Dr. Manhire and the new University President, Dr. Michael Young, Texas A&M Law has hired 13 significant faculty hires for 2015, and two significant faculty visitors for Spring 2016 through the Texas A&M Institute of Advanced Studies.

For 2016, the law school is seeking to hire several more equally distinguished law professors.  See he previous post  Texas A&M University School of Law 2016-17 Faculty Recruitment Areas of Interest

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What Regulatory Competition Can Teach About Tax Competition

Posted by William Byrnes on July 29, 2015


Tax competition is usually portrayed as a competition over rates.

Critics argue that such competition leads inevitably to a “race to the bottom,” with the result of OECDreducing tax rates and revenue everywhere. They also decry “secrecy” jurisdictions that allow owners of entities to conceal their identities, suggesting that the only reasons for confidentiality can be to cheat tax authorities somewhere out of their due.

But as anyone who has ever filled out a tax return knows, tax rates are just one facet of tax competition. Jurisdictions can compete over a wide range of tax system attributes – all the way from the complexity of the system to special provisions designed to advantage particular forms of investment to general depreciation rules.

Lower rates can attract taxpayers, but allowing more rapid depreciation of capital investment might trump lowering rates for capital-intensive industries, while an honest and efficient revenue agency may matter more than nominal rates for total revenue collections.

Read this article at Competing For Captives: What Regulatory Competition Can Teach About Tax Competition  by authors Dr. Andrew P. Morriss, Dean & Anthony G. Buzbee Dean’s Endowed Chairholder, Texas A&M University School of Law; and Drew Estes, a JD/MBA Candidate, Class of 2016, University of Alabama.

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Attacking BEPS Through ECI? Prof. Jeffery Kadet’s Approach

Posted by William Byrnes on July 29, 2015


Attacking Profit Shifting by Prof. Jeffery Kadet – In recent years the financial press has turned Jeffrey-M-Kadet-244x300increasing attention to MNCs that shift income to low taxed jurisdictions overseas in order to avoid US taxation. What’s generally missing from these discussions is any serious focus on possible IRS attacks on these companies, most of which are CFCs. There’s little apparent concern by anyone that the IRS will try to disallow the profit-shifting structures that have moved so much taxable income out of the US and other countries and into low-taxed foreign jurisdictions.

This is changing. Early this year Caterpillar Inc. in an SEC filing disclosed that the IRS had issued a Revenue Agent’s Report to currently tax certain income earned by one of its Swiss entities. Presumably this is income earned as a result of a certain restructuring conducted in the late 1990s and referred to as the Swiss Tax Strategy when examined in 2014 in hearings held by the Senate Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations (PSI).

The IRS basis for its RAR, as disclosed by Caterpillar, is application of the ‘substance-over-form’ or ‘assignment-of-income’ judicial doctrines. This, however, is not the only approach that the IRS might have chosen to impose taxation on the shifted profits.

Various Congressional hearing documents, the work of investigative journalists, and other sources (all publicly available) provide evidence that the businesses within some profit-shifting structures continue to be managed and substantially conducted from the U.S. and not from any business locations outside the U.S. Where this is the case, the IRS may have a strong case for imposing direct taxation on the effectively connected income (ECI) of these low-taxed foreign subsidiaries.

Just the threat of imposing direct taxation may cause many MNCs to consider scaling back their profit shifting and for them and their outside auditors to start worrying about exposure on prior years. If the IRS were to sustain such direct taxation, it would mean:

·      The regular up-to-35% corporate tax,
·      The ‘branch profits tax’ applied at a flat 30% rate (unless lower by treaty),
·      A loss of deductions and credits for any tax year if the foreign corporation has not filed Form 1120-F for that year, and
·      An open statute of limitations on IRS assessment of tax for any tax year if the foreign corporation has never filed a US tax return on Form 1120-F for that year.
The combined effect of the above is a 54.5% or higher effective tax rate (lower if tax treaty coverage reduces the 30% branch profits tax rate).

Considering these terribly high effective tax rate percentages, where the IRS chooses to examine for possible ECI and develops a credible case, they can use the high effective tax rate as strong leverage to secure agreement for reversal of profit shifting structures. Such agreements would presumably see MNCs agreeing to current taxation within U.S. group members of the shifted profits that had originally been booked in low-taxed foreign subsidiaries.

To demonstrate how significant ECI likely exists within many MNCs that have conducted profit-shifting planning, this article includes a number of realistic examples inspired by the above-mentioned publicly available information on MNC profit-shifting structures.

Recognizing that it can sometimes be a challenge to apply the very old existing regulations to current business models, the article strongly encourages Treasury to prioritize the issuance of modernized income sourcing and ECI regulations that reflect the business models and structures now commonly used and that are often found in profit-shifting structures.

read the full article on SSRN Attacking Profit Shifting by Prof. Jeffery Kadet

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Educational Teaching Methodologies to Reverse Declining Law School Enrollment

Posted by William Byrnes on July 28, 2015


read the CNN Report about the White Paper “Alternative Methods of Teaching and The Effectiveness of Distance Learning For Legal Education”.

The 26 page White Paper is available on SSRN

“legal education today has to be recalibrated so that it is innovative, cross-disciplinary, simultaneously accessible across global borders, and able to expand without millions of dollars for brick and mortar…”

“law schools are experiencing 40% less enrollment today than in years past and new standards are needed to reverse that decline. These new standards address the three missing elements in legal education today: …”

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Citigroup to Close Banamex for Money Laundering Violation, Pay $180 Million in Fines

Posted by William Byrnes on July 27, 2015


… In taking the action against Citigroup, the FDIC determined that the bank failed to implement an effective BSA/AML 640px-FdicLogoCompliance Program for Banamex over an extended period of time. The institution failed to retain a qualified and knowledgeable BSA officer and sufficient staff, maintain adequate internal controls reasonably designed to detect and report illicit financial transactions and other suspicious activities, provide sufficient BSA training, and conduct effective independent testing.

Read the complete story and links to orders here.

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What Can Regulatory Competition Can Teach About Tax Competition?

Posted by William Byrnes on July 27, 2015


from International Financial Law Prof Blog

Critics argue that such competition leads inevitably to a “race to the bottom,” with the result ofOECDreducing tax rates and revenue everywhere. But Dr. Andrew Morriss, Texas A&M Law explains, that anyone who has ever filled out a tax return knows, tax rates are just one facet of tax competition. Jurisdictions can compete over a wide range of tax system attributes – all the way from the complexity of the system to special provisions designed to advantage particular forms of investment to general depreciation rules.

Read this article at Competing For Captives: What Regulatory Competition Can Teach About Tax Competition  by authors Dr. Andrew P. Morriss, Dean & Anthony G. Buzbee Dean’s Endowed Chairholder, Texas A&M University School of Law; and Drew Estes, a JD/MBA Candidate, Class of 2016, University of Alabama.

Posted in BEPS, OECD, Tax Policy | Tagged: , , | Leave a Comment »

FBME Bank (Cyprus) Permanently Denied Access to U.S. Financial System By FinCEN for Money Laundering

Posted by William Byrnes on July 24, 2015


The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) yesterday issued a final rule, pursuant to Section 311 of the USA PATRIOT Act, which imposes “special FINCENmeasure five” against FBME Bank Ltd. (FBME), formerly known as the Federal Bank of the Middle East. Special measure five prohibits U.S. financial institutions from opening or maintaining correspondent accounts or payable through accounts for or on behalf of FBME.  FBME was established in 1982 in Cyprus as the Federal Bank of the Middle East, Ltd., owned by Ayoub-Farid M. Saab and Fadi M. Saab.

What money laundering activities are FBME accused of facilitating?

read the full story of the money laundering activities at FinCEN Cuts FBME Bank from Access to U.S. Financial System

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Texas A&M University School of Law Hiring Multiple New Faculty in 2016

Posted by William Byrnes on July 23, 2015


see full announcement at International Financial Law Prof Blog.

In 2015, Texas A&M University School of Law hired 11 new faculty members (12 if counting Texas A&M University’s new President, Dr. Michael Young, who is a member of the law faculty).  Below is Texas A&M Law’s announcement for faculty recruitment for the 2016-17 academic year.

TEXAS A&M UNIVERSITY SCHOOL OF LAW seeks to expand its academic program and its strong commitment to scholarship by hiring multiple exceptional faculty candidates:

1)    Candidates who are interested in building synergies with Texas A&M University’s Mays Business School, with an emphasis on scholars engaged in international business law who focus on cross-border transactions, trade, and economic law (finance, investments, dispute resolution, etc.);

2)    Candidates who are interested in building synergies with the broad mission of Texas A&M University’s College of Agricultural and Life Sciences, which include but are not limited to scholars engaged in agricultural law (including regulatory issues surrounding agriculture), rural law, community development law, food law, ecosystem sciences, and forensic evidence; and

3)    Visionary leaders in experiential education interested in guiding our existing Intellectual Property and Technology Law Clinic (with concentrations in both trademarks and patents), Entrepreneurship Law Clinic, Family Law and Benefits Clinic, Employment Mediation Clinic, Wills & Estates Clinic, Innocence Clinic, Externship Program, Equal Justice/Pro Bono Program, and Advocacy Program, with a particular emphasis on candidates who may have an interest in participating in our Intellectual Property and Technology Law Clinic or developing an Immigration Law Clinic.

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UK Amnesty Not Leading to Disclosure of Tax Evasion in Channels. Is It “Much To Do About Nothing” ?

Posted by William Byrnes on July 22, 2015


In 2011, HMRC forecast that it would receive “billions” from the Swiss Disclosure HM_Treasury_logo.svgFacility.  In 2012, HMRC stated that this number would be 5 billion sterling, and another 3 billion sterling from the LDF.  This implies that a couple hundred thousand United Kingdom tax residents are non tax compliant by not disclosing income and income-producing assets overseas, in offshore countries.  As of that report of data up to 2012, 50,000 taxpayers had come forward through all offshore disclosure facilities, generating one billion in tax, interest, and tax penalties, thus on average 20,000 sterling per disclosure.

My tables and figures are available at International Financial Law Prof Blog.

The offshore noncompliance problem in the context of all non-tax compliance, and all taxpayers, requires first asking how many individual taxpayers file in the UK? see International Financial Law Prof Blog.

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OECD Launches Tax Inspectors Without Borders

Posted by William Byrnes on July 20, 2015


The Tax Inspectors Without Borders (TIWB) initiative enables the transfer of tax auditOECDknowledge and skills to tax administrations in developing countries through a real time, “learning by doing” approach. Experts – currently serving or recently retired tax officials – are deployed to work directly with local tax officials on current audits and audit-related issues concerning international tax matters, and to share general audit practices.

read the post at International Financial Law Prof Blog.

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UK HMRC Releases New Policy Documents to Tackle Offshore Evasion

Posted by William Byrnes on July 20, 2015


The government announced four consultations as part of its publication Tackling Evasion andHM_Treasury_logo.svgAvoidance.  These take forward HMRC’s strategy for tackling offshore evasion, No Safe Havens.

The four consultations are:  see International Financial Law Prof Blog.

Posted in Compliance, FATCA, Financial Crimes | Tagged: , , , | Leave a Comment »

Haydon Perryman & William Byrnes’ June FATCA GIIN Update

Posted by William Byrnes on July 1, 2015


The FFI GIIN List Update (Lists from June 1, 2014 through June 1, 2015)

On 1 June 2015 the IRS published its thirteenth FATCA GIIN list of “approved FFIs” (a list of theFATCA_rollfinancial firms that have registered on the IRS FATCA portal).

Total approved FFIs reached 165,461, and increase of only 2,851 during the month of May.  This FATCA registration trend since January has been described as lethargic, with April’s increase just 2,600 additional firms joining, 3,734 additional during March, and 2,479 in February.  But when compared to what was forecast by the IRS, by industry, and by the UK, it’s a troubling low figure.

In its FATCA FAQs, the IRS suggested a 500,000 potential FFI registration figure.  Many industry stakeholders suggested that 800,000 – 900,000 firms fall under the expansive definition of financial institution.

Given the broad definition of a financial institution that must register for a GIIN, the UK HMRC estimated that, even with its IGA and its accompanying local regulations, 75,000 UK entities probably are impacted.  Yet, only the UK GIIN population is only 23,256.

If the UK HMRC is correct that 75,000 entities are impacted in the UK, then extrapolated among other large and sophisticated financial service economies like Japan, China, India, and Germany, the IRS estimate of 500,000 may be low.

90 countries and dependencies have entered into a FATCA IGA with the U.S. based on Model 1A (reciprocal), or are awaiting local ratification, accounting for 100,190 of the registrations.  A further eight countries signed a Model 1B (non-reciprocal), accounting for a further 39,564 GIINs.  A final 14 countries signed a Model 2 version IGA, adding 18,458 FFI registrations covered by an IGA.  Thus in total, 158,212, representing 96% of FFI registrations, are from the 112 IGA states and their dependencies.

The 131 countries and dependencies without an IGA have only registered 6,295 FFIs to date, a surprising low number given that the initial implementation of the 30% withholding for non-compliance with FATCA began 1 July 2014.

The UK and its ten dependencies and overseas territories comprised 74,694 of the GIINs, representing 45% of the total, or without the UK included, 49,898 for 30.6%.  The 34 OECD members have produced 79,057 GIIN registrations.

Cayman remains the FFI registration global leader, with 30,868, throughout the entire FATCA registration process.  Ironic that the EU Commission just black listed it last week.

The major financial industries of the four BRIC countries have only led to 8,254 FFI registrations, which is seen as a worrying point for FATCA acceptance among non-OECD states.  BRIC registrations are now just dripping in, up from 8,186 in May, 8,060 in April and 7,962 in March.

OECD Common Reporting Standard signatories for the a multilateral competent authority agreement to automatically exchange information has reached 61.  But a notable holdout of a signatory that has not yet actually ratified the agreement is the U.S.  88 countries and dependencies are signatories to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, the latest being Mauritius which signed June 23.

FATCA IGA Scenarios GIINs Jurisdictions
Model 1A IGA  100,190  90
Model 1B IGA  39,564  8
Model 2 IGA  18,458  14
No IGA  6,295  131
US  886  1
US Territories  68  6
Total  165,461  250

Want to read more GIIN analysis and statistics?  See the International Financial Law Professor blog

I am beginning my new faculty position with Texas A&M University School of Law in a week.  With the resources of Texas A&M Law, my research colleague Haydon Perryman (who is now with UBS Investment Bank where he is responsible for global regulatory reporting of FATCA and the CRS) and I will be able to expand our FATCA and CRS research capacity.  Any readers that want to assist in such research, please contact us at Haydon Perryman or William Byrnes.  Please download my FATCA SSRN article here.

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SSRN Tax Professor Rankings Released – William Byrnes ranks in top 20

Posted by William Byrnes on June 25, 2015


Paul Caron, publisher of the Law Professor Blog Network, and editor of TaxProf Blog, released the SSRN rankings of 3,000 law professors for the area of taxation for total downloads and for the year ending June, 2015.

Professor William Byrnes (Texas A&M University Law) ranked #15 among tax professors.

previous TaxProf article about William Byrnes joining Texas A&M University Law.

Posted in Uncategorized | 1 Comment »

international financial law professor headlines

Posted by William Byrnes on June 25, 2015


OECD v. EU blacklists. Has the EU Blacklist made the OECD’s irrelevant?

Is the Commission acting beyond the expressions of the member states? Or are the member states establishing a form of double standard, one that applies to the internal market and another that applies to non-members?

Five Days Left! File FBAR Report (Foreign Bank and Financial Accounts) to FinCEN by June 30 or Pay Large Fines
Swiss release national report on money laundering and terrorist financing risks

The Swiss Federal Department of Finance released its first report on the national assessment of the money laundering and terrorist financing risks in Switzerland.

OECD releases Implementation Package for BEPS country-by-country reporting

Pushing forward efforts to boost transparency in international tax matters, the OECD today released a package of measures for the implementation of a new Country-by-Country Reporting plan developed under the OECD/G20 BEPS Project. The Country-by-Country Reporting Implementation Package will facilitate…

Is Exit Charge a Tax or a Regulatory Fee? Billionaire Space Tourist Mark Shuttleworth Case Final Decision!

A BEPS Commentary by Dr. Andrew Morriss

The rapidly shifting world of international financial and tax regulation – from the OECD’s BEPS to FATCA – is reshaping the world.

Does Treasury Have Authority to Impose OECD BEPS on US Companies?

Senate Finance Committee Chair Orrin Hatch and House Ways and Means Committee Chair Paul Ryan sent a letter to Treasury Secretary Jack Lew on 9 June expressing their general concern about BEPS, as well as singling out several specific BEPS proposals.

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ABA task force’s reform of legal education !

Posted by William Byrnes on June 22, 2015


see the reforms at International Financial Law Prof Blog

 

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TaxProf Blog: William Byrnes Leaves Thomas Jefferson For Texas A&M

Posted by William Byrnes on June 18, 2015


TaxProf Blog: William Byrnes Leaves Thomas Jefferson For Texas A&M.

Posted in Courses | 1 Comment »

U.S. Persons Foreign Assets and Entities Reporting for the FATCA, FBAR and BE-10 Forms Due in June (Part II) | Kluwer International Tax Blog

Posted by William Byrnes on June 17, 2015


http://www.kluwertaxlawblog.com/blog/2015/06/17/u-s-persons-foreign-assets-and-entities-reporting-for-the-fatca-fbar-and-be-10-forms-due-in-june-part-ii/

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U.S. Persons Foreign Assets and Entities Reporting for the FATCA, FBAR and BE-10 Forms Due in June

Posted by William Byrnes on June 15, 2015


full article on Kluwer International Tax Blog By , Texas A&M University Law

Three significant filing deadlines fall in June, one today and two more on the last day of the month.

(1) The 15 June FATCA Form 8938 filing deadline (with the income tax return) with the IRS for a U.S. person who lives abroad and has specified foreign assets of at least $50,000 on the last day of the tax year or at least $75,000 at any time during the tax year.

(2) The 30 June FBAR filing deadline with FINCEN for a U.S. person that has a financial interest in, or signature authority over, a foreign financial account whereby the aggregate value of all the persons foreign financial accounts exceeds $10,000 during the calendar year.

(3) The 30 June BE-10 form filing deadline with the Department of Commerce, Bureau of Economic Analysis, for a U.S. person who is a first time BE-10 filer and had a direct or indirect ownership or control of at least 10 percent of the voting stock of an incorporated foreign business enterprise, or an equivalent interest in an unincorporated foreign business enterprise at any time during the U.S. person’s 2014 fiscal year.

read the discussion at Kluwer International Tax Blog

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Texas A&M School of Law Adds 12 New Faculty, Expands IP Program

Posted by William Byrnes on June 12, 2015


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Several FIFA Executives Plead Guilty to Accepting Bribes, Many More Charged

Posted by William Byrnes on May 27, 2015


http://lawprofessors.typepad.com/intfinlaw/2015/05/fifa-officials-arrested-in-100-million-world-cup-bribery.html

excerpt – The Defendants Include Two Current FIFA Vice Presidents and the Current and Former Presidents of the Confederation of North, Central American and Caribbean Association Football (CONCACAF); Seven Defendants Arrested Overseas; Guilty Pleas for Four Individual Defendants and Two Corporate Defendants Also Unsealed …

read full story at http://lawprofessors.typepad.com/intfinlaw/2015/05/fifa-officials-arrested-in-100-million-world-cup-bribery.html

Posted in Financial Crimes | Tagged: , , | 1 Comment »

Fulbright Awards and Fellowships for Law – Deadline August 3

Posted by William Byrnes on May 26, 2015


With over 80 Fulbright awards  available in countries around the globe for U.S. law professors, researchers and professionals, now is the time to refresh your thinking, and learn about law in a context other than that of the United States.  International Financial Law Prof Blog.

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Hiring Distance Education Director

Posted by William Byrnes on May 14, 2015


Texas A&M is seeking to hire a distance education full time position to execute upon and manage such programs.  Please refe Texas r any potentially interested distance education persons to the Texas A&M link:   https://jobpath.tamu.edu/postings/83039

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FinCEN releases new FBAR filing procedure !!!

Posted by William Byrnes on May 12, 2015


See the complete post at http://lawprofessors.typepad.com/intfinlaw/2015/05/fincen-provides-additional-e-filing-method-for-fbar-individual-filers.html

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New Policy Restricts Use of Asset Forfeiture in Structuring Offenses

Posted by William Byrnes on May 7, 2015


justice logo

Under the new policy, in the absence of criminal charges, judicially authorized warrants to seize bank accounts involved in structuring can only be obtained if the prosecutor first develops probable cause of additional federal criminal activity and that determination is approved by a supervisor.  Otherwise, a prosecutor may ask a judge to issue a seizure warrant only if either the U.S. Attorney or the Chief of the Criminal Division’s Asset Forfeiture and Money Laundering Section personally determines that seizure would serve a compelling law enforcement interest.

In addition, the new policy imposes important protections after a seizure has taken place.  Read the full Attorney General’s Memorandum and the Structuring Policy Directive and story

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How Do Tax Rates Effect Innovation and Inventors ? Empirical evidence provides an answer!

Posted by William Byrnes on May 4, 2015


http://lawprofessors.typepad.com/intfinlaw/2015/05/how-do-tax-rates-affect-where-the-worlds-top-inventors-choose-to-live.html

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TJSL Ranks #13 in the Nation for Top Graduate Program | Thomas Jefferson School of Law

Posted by William Byrnes on May 1, 2015


TJSL Ranks #13 in the Nation for Top Graduate Program | Thomas Jefferson School of Law.

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OECD Releases BEPS Proposed Action 8 on Cost Contribution Arrangements & Transfer Pricing

Posted by William Byrnes on May 1, 2015


Logooecd_enPublic comments are invited on a discussion draft which deals with work in relation to Action 8 of the Action Plan on Base Erosion and Profit Shifting (BEPS).

Action 8 (“Assure that transfer pricing outcomes are in line with value creation: Intangibles”) requires the development of “rules to prevent BEPS by moving intangibles among group members” and involves updating the guidance on cost contribution arrangements. The discussion draft sets out a proposed revision to Chapter VIII of the Transfer Pricing Guidelines and is intended to align the guidance in that chapter with the other elements of Action 8 already addressed in the Guidance on Transfer Pricing Aspects of Intangibles released in September 2014.

Interested parties are invited to submit written comments by 29 May 2015 (no extension will be granted) and should be sent by email to TransferPricing@oecd.org in both PDF and Word format. They should be addressed to Andrew Hickman, Head of Transfer Pricing Unit, Centre for Tax Policy and Administration.

Check out William Byrnes’ Lexis’ Practical Guide to U.S. Transfer Pricing, available within LexisNexis, which is updated Book Coverannually to help multinationals cope with the U.S. transfer pricing rules and procedures, taking into account the international norms established by the Organisation for Economic Co-operation and Development (OECD). It is also designed for use by tax administrators and tax professionals, corporate executives, and their non-tax advisors, both American and foreign.  Fifty co-authors contribute subject matter expertise on technical issues faced by tax and risk management counsel. Chapter 13 covers Cost Sharing Arrangements.

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Fiscalidad Internacional: las obligaciones FATCA – Friday May 8 in Madrid

Posted by William Byrnes on April 30, 2015


CEF UDIMAFecha: Viernes 8 de mayo a las 19.00 horas
Date: Friday, May 8th at 19:00
LugarCEF.- Paseo General Martínez Campos, 5, Madrid
Ponentes: Professor William H. Byrnes. Author, Lexis Guide to FATCA Compliance 2015
RSVP Requiredhttp://acef.cef.es/FATCA

Programa:

  1. Summary of FATCA Obligations
  2. Determine Status of Foreign Entity
  3. Withholdable Payments
  4. Documentation and Due Diligence
  5. Withholding
  6. Reporting
  7. IGA Update and Global Information Exchange

Cuando el Congreso de EE UU promulgó la Ley Fatca, dijo que fue el resultado de la necesidad de ingresos adicionales William H. Byrnes Wide Banner 3para costear la ley de empleo.  La mayoría de la gente sabe que EE UU incurrió en déficit año por año, pero, en Derecho, técnicamente, hay un precepto conforme al cual todas las normas que implican un gasto deben tener una disposición correspondiente que genere el ingreso tributario para financiarlo. El Congreso manifestó, expresamente, que esta Ley FATCA aumentaría el recaudo tributario en 150 billones de dólares por año.

La norma era necesaria para financiar una ley de empleo, que incluía beneficios para afrontar el desempleo, problema que surgió como consecuencia de esa crisis financiera. Sin embargo, las cifras actuales de recaudo tributario adicional que se han producido después de la ley están entre 300 y 500 millones de dólares por año. Parece mucho dinero, pero, en realidad, solo es el 0,003 % de la previsión de 150 billones de dólares.

Además, la Ley FATCA va a significar el aumento del recaudo en un solo momento, porque si se tienen 100.000 evasores, cuando estos se vuelvan cumplidores de la ley tributaria, a raíz de la Fatca, se va a registrar un aumento del recaudo, pero no de ahí en adelante con relación a esas mismas personas. Estadísticamente, es un hecho que no hay muchos contribuyentes estadounidenses que estén evadiendo tributos mediante otros países. El número de evasores, aunque uno nunca puede estar totalmente seguro, está entre 100.000 y 150.000. Pero es más probable que sean 100.000. Sin embargo, solamente en el 2014, se entregaron 150 millones de declaraciones tributarias en EE UU por parte de individuos. O sea que no estamos hablando, ni siquiera, del 1%.

La evasión fiscal es mala, aunque también lo es el homicidio y nunca vamos a poder evitar todos los homicidios, ni toda la evasión tributaria. De manera que la pregunta de política pública que se debe formular es, desde la perspectiva del contribuyente, ¿cómo vamos a utilizar los recursos limitados para atacar o limitar al máximo la evasión tributaria? La peor forma de lograr el cumplimiento tributario y de la ley, en general, es la amenaza con la sanción. No se puede eliminar la sanción de la ley, pero la mejor forma de promover su cumplimiento es mediante incentivos acordes con lo que la sociedad acepta.

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Taxpayer Advocate Proposes Reduced FBAR Penalties, One FATCA Reporting Form

Posted by William Byrnes on April 24, 2015


Irs_logoFOREIGN ACCOUNT REPORTING: Legislative Recommendations to Reduce the Burden of Filing a Report of Foreign Bank and Financial Accounts (FBAR) and Improve the Civil Penalty Structure

excerpts below…

A U.S. citizen or resident with foreign accounts exceeding $10,000 can be subject to disproportionate civil penalties for failure to report the accounts on a Report of Foreign Bank and Financial Accounts (or FBAR) by June 30 of the following year.  Another penalty may apply if the accounts exceed $50,000 and the person does not report them on Form 8938, Statement of Specified Foreign Financial Assets, which is part of the tax return.

Even those who inadvertently failed to file an FBAR (i.e., “benign actors”) are afraid they could be hit with the elevated penalties applicable to willful violations because the government may rely on circum­stantial evidence of willfulness or willful blindness. Such fears have prompted some to enter the IRS’s offshore voluntary disclosure (OVD) programs and agree to pay penalties of such severity that they appear to have been designed for bad actors. The median penalty applied to taxpayers with the smallest ac­counts (i.e., those in the 10th percentile with accounts of $17,368 or less) under the 2011 OVD program, is more than eight times the unreported tax—over ten times the 75 percent penalty for civil tax fraud.

In June 2014, the IRS reduced the amount it requires certain benign actors to pay under its settlement programs. However, it did not allow those who have already signed closing agreements to receive the same, more reasonable program terms, in effect punishing them for addressing the problem quickly. Unexpected and disproportionate FBAR penalties may violate a taxpayer’s rights to be informed and to a fair and just tax system.  Because they cause some people to agree to excessive OVD settlements, they may also erode the rights to pay no more than the correct amount of tax, challenge the IRS’s position and be heard, and appeal an IRS decision in an independent forum, as discussed in prior reports.

For small accounts, the maximum penalty may be an even greater percentage. For example, someone with a total of $10,000 in five different foreign accounts ($2,000 in each) could be subject to a non-willful FBAR penalty of $300,000 (six years times five accounts times $10,000) or 30 times the account balance. If the IRS deems the violation willful, the penalty could rise to $3 million (six years times five accounts times $100,000) or 300 times the account balance.

Other information reporting penalties are more proportionate than FBAR penalties. For example, there is no penalty for failing to file a U.S. income tax return if there is no unpaid tax. The penalty for failure to file most information returns and payee statements is generally $100 per return, rising to 10 percent of the unreported amount for intentional violations. By contrast, the FBAR penalty may apply even if the FBAR is one day late and even if the taxpayer has no net underreported tax (e.g., because of foreign tax credits) as a result of underreporting income from the account.

RECOMMENDATIONS

To address the disproportionality of the civil FBAR penalty, the National Taxpayer Advocate recommends legislation to:

Cap the civil FBAR penalty at the lesser of

(a) Ten percent of the unreported account balance or five percent for non-willful violations (similar to the IRS’s mitigation guidelines), and

(b) Forty percent of the portion of any underpayment attributable to the improperly undis­closed accounts (similar to the penalty for undisclosed foreign financial assets (e.g., assets not reported on Form 8938) under IRC § 6662(j)).

Eliminate or waive the civil penalty for failure to report an account on an FBAR if there is no evidence the account was used in connection with a crime and:

a. The account information was already provided to the IRS, for example, on a Form 8938, Statement of Specified Foreign Financial Assets, or by a third party (e.g., a financial institution or government);

b. The amount of unreported income from the account does not create a substantial under­statement under IRC § 6662(d); or

c. The taxpayer resides in the same jurisdiction as the account.

One form would be better than two, if confidentiality concerns are addressed.

If it aligns the FBAR and Form 8938 thresholds and deadlines, Congress should also consider consolidat­ing the reporting requirements. Indeed, between 1970 and 1977, the Treasury Department only required taxpayers to report foreign accounts under the BSA on tax returns using Form 4683, U.S. Information Return on Foreign Bank, Securities & Other Financial Accounts.

In 1977, after taxpayer privacy laws were expanded under IRC § 6103, the IRS required people to report these accounts on a different form—not part of the return—so it could share the information with other federal agencies such as FinCEN.79 Therefore, if Congress requires the Treasury Department to combine these forms, it may also want to clarify that certain information on the combined form is not deemed part of the tax return and is not subject to IRC § 6103.

In connection with any such change, however, Congress should require the IRS to limit and prominently identify on the form, any information that may be disclosed to FinCEN.80 Without transparency and specificity, some taxpayers might withhold other information from the IRS based on a concern that it could be disclosed to other agencies. Foreign account information may be distinguished from other tax-related information because it is already required to be reported to FinCEN.

 

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International Financial Crimes News

Posted by William Byrnes on April 24, 2015


$4 billion in CFTC Fines for LIBOR and Euribor Manipulation: Deutsche Bank, Rabo, Citibank, RBS, JP Morgan, UBS, Barclays, HSBC

With this Order, the CFTC has now imposed penalties of nearly $2.7 billion on six financial institutions and two interdealer brokers for LIBOR, Euribor, and other interest rate benchmark abuses. In addition, for similar misconduct relating to foreign exchange benchmarks, the CFTC recently imposed $1.4 billion on five financial institutions, for a total of over $4.1 billion in penalties in the CFTC’s enforcement program focused on ensuring the integrity of global financial benchmarks. The fine imposed on Deutsche Bank represents the largest fine in the CFTC’s history.

Deutsche Bank’s Pleads Guilty, Pay $2.519 billion in Penalties & Disgorgement, for Manipulating LIBOR

Together with approximately $1.744 billion in regulatory penalties and disgorgement—$800 million as a result of a Commodity Futures Trading Commission (CFTC) action, $600 million as a result of a New York Department of Financial Services (DFS) action, and $344 million as a result of a U.K. Financial Conduct Authority (FCA) action—the Justice Department’s criminal penalties bring the total amount of penalties to approximately $2.519 billion.
FinCEN Issues Quarterly Update of SAR Stats

The Financial Crimes Enforcement Network (FinCEN) has issued the SAR Stats quarterly update, which provides information on Suspicious Activity Reports (SARs) filed through March 31, 2015. The updated statistics can be viewed at http://www.fincen.gov/news_room/rp/sar_by_number.html. Quarterly Update (April 2015) Depository Institutions…

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FATCA GIIN Registrations Update for April | Kluwer International Tax Blog

Posted by William Byrnes on April 23, 2015


FATCA GIIN Registrations Update for April | Kluwer International Tax Blog.

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Deutsche Bank’s Pleads Guilty, Pay $2.519 billion in Penalties & Disgorgement, for Manipulating LIBOR

Posted by William Byrnes on April 23, 2015


read the full story on International Financial Law Prof Blog.

A wholly owned subsidiary of Deutsche Bank AG (Deutsche Bank) has agreed to plead guilty to wire fraud for its role in manipulating the London Interbank Offered Rate (LIBOR), a leading benchmark interest rate used in financial products and transactions around the world.  In addition, Deutsche Bank entered into a deferred prosecution agreement to resolve wire fraud and antitrust charges in connection with its role in both manipulating U.S. Dollar LIBOR and engaging in a price-fixing conspiracy to rig Yen LIBOR.  Deutsche Bank and its subsidiary will pay $775 million in criminal penalties to the Justice Department.  Together with approximately $1.744 billion in regulatory penalties and disgorgement—$800 million as a result of a Commodity Futures Trading Commission (CFTC) action, $600 million as a result of a New York Department of Financial Services (DFS) action, and $344 million as a result of a U.K. Financial Conduct Authority (FCA) action—the Justice Department’s criminal penalties bring the total amount of penalties to approximately $2.519 billion.

download the documents at International Financial Law Prof Blog

Posted in Financial Crimes | Tagged: , | Leave a Comment »

 
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