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International Tax Law: What You Need to Know About How the Laws Are Changing


Posted in on October 7, 2016

Countries throughout the world are making increased efforts to collect revenue.  Leaks such as the Panama Papers and concerns about income inequality are driving countries to work harder than ever to make sure that wealthy people cannot evade tax obligations by moving money offshore. An increasing number of multinational corporations that can keep money in jurisdictions with favorable tax rules have also resulted in concerns about tax avoidance, as well as tax evasion.

As efforts are being made to make it easier for countries to collect taxes, individuals and businesses are being affected. Some of the shifts and changes in international tax law have substantially increased the risk of tax penalties being imposed. Individuals and companies who wish to protect their finances and avoid substantial consequences that can come with government investigations and unfavorable legal decisions should consult with a Virginia tax lawyer about their options.

How is International Tax Law Changing?

Some of the key ways that international tax laws are changing include:

  • More scrutiny for multinational corporations: Companies that do business across the globe and occasionally keep money in favorable jurisdictions are facing new pressure to pay their “fair share” of taxes. The European Commission has taken action against member states to question tax treatments that appear to provide multinational companies with state aid through offering tax benefits. The Commission also recently hit Apple with a multi-billion-dollar tax bill under an expanded definition of state aid, which was condemned by U.S. taxing authorities.
  • Tax law gaps are being closed: The Organization for Economic Cooperation and Development (OECD) launched a project in 2013 called base erosion profit shifting. The goal of this project was to close gaps in international tax laws that made it possible for corporations to artificially shift profits to jurisdictions where they would be taxed less -- even if there was not economic activity taking place in these jurisdictions. In total, more than 80 different nations took part in the base erosion profit shifting project and are now working together to implement the changes that were proposed as a result of it. 
  • Increased transparency. Confidential information is increasingly being shared among different countries, with more than 100 different jurisdictions agreeing to participate in a bilateral exchange of financial accountholder information for offshore accountholders by 2018. Recommendations from the base erosion profit shifting project also include mandating taxpayers report aggressive tax planning efforts.

As international tax laws are changing, efforts at tax reform are also being made in the United States. The U.S. treasury is trying to make it harder for tax inversion transactions to take place and allow companies to move permanent tax homes offshore to lower their corporate tax rate.

U.S. authorities have also been cracking down on foreign banks and bankers for their role in facilitating tax evasion, while also creating voluntary amnesty programs for banks to come forward and provide accountholder information to avoid criminal prosecution.

As changes are made globally and locally, consulting with tax attorney Kevin Thorn becomes more important than ever for individuals and businesses who need help complying with tax obligations, correcting past tax problems, and avoiding tax penalties.

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