Trust Bloomberg Tax's Premier International Tax offering for the news and guidance to navigate the complex tax treaty networks and business regulations.
By Ben Stupples
A senior U.K. official has suggested that some of the world’s largest economies could follow the U.S.’s move to slash its corporate tax rate, highlighting the effect of the country’s sweeping reforms.
“Countries will most reflect on the U.S. tax rate cut, particularly those with rates distinctly above 26 percent,” Mike Williams, the U.K. Treasury’s director for international and business tax, said at a July 9 conference in London. “Some quite significant large economies” fit this category, he added.
Four members of the Group of Seven forum of the world’s largest industrialized economies—including Germany, with 30 percent, and France, set at 33 percent—have corporate tax rates above 26 percent. Signed into law December, the 2017 U.S. tax act ( Pub. L. No. 115-97) has forced businesses to reassess their finances after it cut the federal U.S. corporate rate to 21 percent from 35 percent.
Since then, pressure has been mounting on countries in Europe and elsewhere to keep tax rates competitive.
The actual U.S. corporate rate is about 26 percent, due to the extra levies that its states impose on companies, Williams said. “However you look at it, it’s clearly very significant, and it takes the U.S. closer into the international mainstream, which is probably a good thing,” he added.
Alongside the corporate tax rate reduction, the act introduced a global intangible low-taxed income (GILTI) scheme that effectively enforces a minimum levy on U.S. companies’ offshore income.
Williams’s comments at the conference, organized by the U.K.’s Institute for Fiscal Studies think tank and the European Tax Policy Forum, come as countries also take note of the U.S.’s GILTI scheme. The scheme’s minimum 10 percent tax aims to reduce the incentive for U.S. companies to hold their lucrative intellectual property, such as trademarks or patents, outside of the country.
John Peterson, head of the OECD’s aggressive tax planning unit, said July 2 at a University of Oxford conference that “other countries are interested” in the scheme as part of their attempts to refine the taxation of internet-based businesses like Facebook Inc. and Alphabet Inc’s Google.
Some countries “are looking at it and thinking, ‘Can we get away with the same thing?’” he told Bloomberg Tax at the Oxford University Centre for Business Taxation summer conference. The measure “has fundamentally changed the conversation” on new taxes for digital companies, he said.
While GILTI’s minimum 10 percent tax makes it less appealing for businesses to hold intellectual property offshore, businesses can alternatively receive a deduction for this category of income through the U.S. tax act’s scheme for foreign-derived intangible income (FDII).
Alongside these measures, the U.S. also enforced this year a base erosion and anti-abuse tax (BEAT) that limits how much businesses can use cross-border payments to shift profits to low-taxed jurisdictions.
“With the BEAT and the FDII provision, they are freely acknowledged by U.S. tax professionals to discriminate against foreign-owned groups with foreign activities,” Williams said.
“There, I think what I can say is that the U.K. remains committed to free trade and against protectionism. I don’t think they are the sort of measures we’d want to copy,” he added.
To contact the reporter on this story: Ben Stupples in London at email@example.com
To contact the editor responsible for this story: Penny Sukhraj at firstname.lastname@example.org
Copyright © 2018 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)