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breakthroughs, breakups, BEPS, Barnier, blacklists, Bitcoin, and blockchain

Kitty Miv, Editor
04 January, 2018

I wrote last week on 2017, which was a far from boring year in the world of tax. Let's start where it ended, with lawmakers in the US Congress merging two tax reform bills into one and the President passing it into law.

Depending on where you are on the political spectrum, the US tax reform bill has either created a fiscal and social disaster for the US or transformed it into an economic utopia. Undeniably the tax reforms have been divisive. Not a single Democrat in Congress contributed to their formulation or voted in their favor.

While 2017 was punctuated with occasional periods of high excitement, with great progress on reform in some areas, uncertainty continued to linger in the background, particularly surrounding BEPS and Brexit.

In one sense, BEPS has almost become part of life for multinational taxpayers, and the wider BEPS project is now tightly woven into the fabric of the international tax system.

But we shouldn't ignore the BEPS movement's propensity to surprise. Indeed, the ever-present threat of unilateral responses by jurisdictions to the BEPS proposals, like the UK's incoming royalty withholding tax, or the diverted profits tax before it, is keeping taxpayers in a constant state of high alert. Indeed, they can barely afford to put a foot wrong these days for fear of falling down new tax trapdoors or being exposed in the next corporate tax avoidance scandal. And, in such a high-risk environment, it comes as little surprise to learn that increasing numbers of multinational companies are playing it safe tax-wise.

Brexit, on the other hand, has become altogether harder for businesses to come to terms with, both those in Britain and beyond. And, even though December saw UK and EU negotiators reaching a tentative agreement on the first phase of talks, in reality this ship has barely left port.

As far as businesses are concerned, the negotiators have only scratched the surface of the issues they are most worried about, like customs, potential trade taxes, VAT, regulatory divergences, product standards, etc., etc.

You would think that regimes in the UK and the EU have so much in common that there would be no need to wipe the slate clean and start again from scratch. But that would be too easy, wouldn't it? After all, the EU doesn't do things the easy way – I'm not sure if it even knows how. So bespoke Brexit it will be, at least according to Barnier.

Appropriately enough, we now move from Brexit and Barnier to Brussels, which, as ever, had a big say in international tax affairs in 2017. Lately, even more so than usual. Perhaps you could say that 2017 was the year that the EU took over the international tax transparency and anti-avoidance agenda, rather than just providing its usual unstinting support for it. Its bluster on the issue of taxing the digital economy, and blacklisting jurisdictions from Samoa to South Korea helped make sure of that. It'll be interesting to see, therefore, if the OECD ups its game in 2017.

But what else of the future?

The pace at which digital technology is growing and evolving, spreading its binary tentacles into virtually all areas of life is frightening, and I wouldn't like to make predictions. But, judging by recent developments involving a certain virtual currency, I would hazard a guess that regulators will continue to increase their oversight of the digital realm. Indeed, several governments and tax authorities have already referenced "blockchain" as the future of tax administration.

So, there you have it. 2017 – 12 months of breakthroughs, breakups, BEPS, Barnier, blacklists, Bitcoin, and blockchain. Not quite an A-list year perhaps but certainly a busy one.

Ciao

Kitty



About the Author


Kitty Miv, Editor

Kitty was born in Argentina in 1960 to a Scottish cattle rancher and his Argentine wife. Educated in Edinburgh and at Princeton, Kitty worked for the World Bank as an economist, where she met and married an emigre Iranian banker. During her time with the Bank, Kitty worked in a number of emerging markets, including a spell in the ex-USSR as a Transition Economies Team Leader. Kitty is now a consultant in Brussels and has free-lance writing relationships with a number of prominent economic publications. kitty@lowtax.net

 

 

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