ITS - International Tax Structures

News

• 22 Oct 2009

  French Finance Minister Considers New Tax On Banks

  French Finance Minister Christine Lagarde has announced her intention to create a new tax, specific to the banking sector, which will enable the country’s banks to assume costs associated with their regulation.
  
  Although vehemently opposed to the idea of increasing the existing rate of tax levied on banking profits, Finance Minister Lagarde has, nevertheless, expressed her belief that it is entirely “logical” that French banks assume the costs associated with the increased supervision of their sector.
  
  Determined to increase the attractiveness of France as a financial center, Lagarde has firmly ruled out the idea of a national initiative which would increase the burden on the country's banking sector, and further reduce the competitiveness of French banks, given that corporate taxation in France is already very high.
  
  Recently adopted by the National Assembly Finance Committee, an amendment put forward by the President of the Committee, Didier Migaud, aims to increase by 10% the tax currently levied on banking profits.
  
  Adopted by 20 votes to 11, the amendment is limited purely to 2010, applying to 2009 profits, and will be put to the vote shortly in the French National Assembly.
  
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• 22 Oct 2009

  EU And South Korea Initial Free Trade Deal

  European Union (EU) Trade Commissioner Catherine Ashton and South Korean Trade Minister Kim Jong-hoon have initialed a free trade agreement (FTA) heralded as the most important ever negotiated between the EU and a third country.
  
  The deal, estimated to be worth up to EUR19bn in new trade for EU exporters, will remove virtually all tariffs between the two economies, as well as many non-tariff barriers, and will create new market access in services and investment. The deal also makes major advances in areas such as intellectual property, procurement, competition policy and trade and sustainable development.
  
  South Korea and the EU concluded their free trade negotiations in July and have since had two rounds of legal reviews in July and September. The document initialed on October 15 represents the final version of the agreement.
  
  Speaking following the initialing in Brussels, Ashton said: "This is the first 21st century free trade agreement for the EU, creating deep economic ties with another developed economy. It will create new market opportunities for European companies in services, manufacturing and agriculture. This agreement is particularly important in the current economic climate, helping to fight the economic downturn and create new jobs."
  
  According to the initialed document, tariffs on industrial goods from South Korea and the EU will be eliminated within seven and five years, respectively. This will result in the removal of about EUR1.6bn of duties for EU-based exporters to Korea. The value of all goods traded between the EU and South Korea was about EUR65bn in 2008.
  
  The agreement also tackles key non-tariff barriers including regulations and standards in industries of European interest, like automotive, pharmaceutical, and consumer electronics. Services sectors such as telecommunications, environmental, legal, financial, and shipping are expected to see some of the greatest benefits, with substantial commitments from Korea to liberalize these sectors.
  
  The initialing of the FTA signifies the closing of negotiations and Kim and Ashton agreed to officially sign the FTA within the next year. The European Commission will formally present the legal text of the agreement to EU member states in early 2010. Following signature of the agreement by the EU Presidency and the Commission, the FTA will be presented to be approved by the European Parliament. Entry into force of the agreement would then be expected in the second half of 2010.
  
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• 22 Oct 2009

  US Treasury Urged To Report Revenues From Foreign Income

  A report by the United States Government Accountability Office (GAO) has recommended that the Treasury Department begin reporting revenues collected from the foreign income of US companies in preparation for reform of US international tax rules.
  
  The report commissioned by Senate Finance Committee leaders found several European countries, Canada and Australia confront similar risks and challenges to the United States with regard to their corporate international tax policies.
  
  The study was requested by the Senate in anticipation of tax reform and in consideration of the worldwide and territorial approaches to taxation. The study showed similar compliance risks and taxpayer burdens exist under both the worldwide and territorial approaches, including transfer pricing issues, anti-avoidance rules, foreign tax credits and domestic expense deductions.
  
  “This report makes clear there are significant inherent challenges in international tax policy reform, and the complexity of the issues requires us to move carefully and thoughtfully. Any tax reform must be focused on a healthy economy, job growth and increased US competitiveness worldwide,” said Finance Committee chairman Max Baucus.
  
  “We are committed to ensuring American competitiveness abroad and job-creation here at home while promoting fairness, efficiency and simplicity in tax reform. I urge Treasury to address the recommendation in this report right away, to help us better understand the implications of international tax policies on domestic companies with international operations and on the US tax base. This information could play an important role as Congress looks toward overall tax reform,” he noted.
  
  Ranking Republican Chuck Grassley added: “This report sheds light on the territorial, or exemption, system of corporate international taxation. That’s very different from the current US system of deferral. This report underscores that US international taxation is complex. It shouldn’t be changed without thorough review and consideration by the Finance Committee, and shouldn’t be done through the use of simplistic, rigid, and inaccurate ‘black lists’ of disfavored countries. When the Finance Committee does take up corporate international tax reform, any changes should maximize US economic well-being. Transactions shouldn’t be based on tax avoidance. Changing the game on multinational corporations doesn’t make sense if it means companies will ship more jobs overseas to avoid what they see as unfair or anti-competitive US tax rules.”
  
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