A&M Tax Advisor Weekly
In recent years, governmental entities, most notably the OECD, the United States, and the EU Commission, have driven massive changes to the once-stable field of international tax law. These changes have created uncertainty and challenges for all levels of taxpayers, tax practitioners, and (even) regulators. When the OECD began pushing these initiatives with the BEPS Project back in the earlier part of this decade, the EU Commission responded with its state aid investigations, sending not-too-subtle reminders of its legal authority to create extra-statutory tax laws.
These ongoing cases have induced responses from both tax authorities and taxpayer behavior.
ATAD and DAC6
Most recently, the EU introduced a requirement that its member states implement the Anti-Tax Avoidance Directive (ATAD) and the DAC6 (Directive on Mandatory Disclosure for Intermediaries) into their own national laws. For smaller EU member states and for those seeking to compete on a tax basis in the global economy, implementation of these directives, such as introduction of CFC legislation, represents significant (and potentially unwelcome) legislative and policy change.
Under these extra-national rules, EU member states must also create interest deductibility restrictions featuring a fixed ratio rule, exit tax provisions, and anti-hybrid rules, further introducing complexities and compliance burdens. No end appears in sight, either, as the EU Commission continues its tax juggernaut with further draft directives, the most prominent of which is the Digital Tax Directive—considering a potentially aggressive approach to taxation of non-brick-and-mortar business profits, a notably unpopular piece of regulation that many member states believe ought to be left to the OECD (although the UK seems to be trying to foment quick adoption with its recently proposed digital services tax).
Last year saw the hasty codification of U.S. international tax reform—something which had been many years in the making. Hailed by legislators as a simplification and territorial tax measure, this legislation brought further complexities to an already complex system and extended the reach of the US tax hand across the globe. The full effects of the legislative measures—and the regulations which are following—will not be entirely clear for years to come.