One small detail in Shell’s £47bn takeover of BG Group to consider: Stamp Duty. HM Treasury can look forward to a £235m windfall once the deal concludes.
Corporate buyers used to avoid the 0.5 per cent tax by using schemes of arrangement, where shares in the target company would be cancelled, followed by the issue of new shares by the bidder. However a change to company law last month closed the loophole.
The measure was announced in December’s Autumn Statement, but hasn’t attracted much attention since, possibly because it was only forecast to bring in about £65m per year. Read more
Over on Lex this week we’ve been pondering the finer points of what shareholders get out of tax inversions.
So… from the text of AbbVie’s planned £32bn merger with Shire, announced on Friday: Read more
The attempt by US drug company Pfizer to buy AstraZeneca, the crown jewel of Britain’s pharmaceutical industry, has prompted entirely predictable reactions.
There is outraged huffing and puffing from the left and from vested interests about the loss of the UK science base. Even the FT has joined in with the pseudo-dirigism more usual in the Guardian or Le Monde, calling for an independent assessment of takeovers which might damage UK science… Read more
And so to the Irish government’s international tax strategy, fresh out on Tuesday and making Ireland “part of the solution to this global tax challenge, not part of the problem” according to Michael Noonan.
Ireland has incidentally guided its 12.5 per cent corporation tax rate through its bailout. It even outlived Sarkozy’s presidency. Read more
For all the gnashing and wailing about the dangers of quantitative easing from some of the super rich, the fact remains that owners of capital (ie the rich) have done very well from QE.
Now, as we’ve noted before, plenty of serious people are paying attention to the inequality question, and its not clear what monetary policy can do about inequality even if it should do something about it. But news that US housing is turning frothy again, with San Francisco prices up 25 per cent over the last year, has Albert Edwards of Societe Generale reaching for the exclamation marks. Read more
Financial maze du jour — can you get tens of billions of pounds in cash through this corporate structure to a big, tax-free investor payout? Start from the bottom, find your way to the top. Read more
What to make of the 7 per cent levy which Hungary is imposing on bank holdings of local government debt?
This is debt that is being assumed by the central government. So, it was curious to see the government insist on Tuesday that its $219m tax collection isn’t a hidden write-down. (We should in any case preface this post by noting that Hungarian bonds have been bullet-proof lately.) Read more
There are 13 ‘shoulds’ in the Lough Erne Declaration which has come out of the G8 summit:
1. Tax authorities across the world should automatically share information to fight the scourge of tax evasion.
2. Countries should change rules that let companies shift their profits across borders to avoid taxes, and multinationals should report to tax authorities what tax they pay where.
3. Companies should know who really owns them and tax collectors and law enforcers should be able to obtain this information easily.
As part of its worthy attempt to herd the tax authorities of the world towards some form of global coordination on the taxation of multinational companies, the OECD offers us some examples of tax planning structures currently in use.
Skip to page 73 of this document. Can you guess who might be using an “E-commerce structure using a two-tiered structure and transfer of intangibles under a cost-contribution arrangement“? Read more
International transfer pricing might not win any awards for sexy topic of the year, but it is what’s at the heart of the debate around low corporate tax payments by the likes of Starbucks, Google, and Amazon.
To explain why, consider Mr Potato Head… Read more
Social media strategy is more of an art than a science, as HM Revenue and Customs was busy proving Monday morning as it tried to encourage people to file their taxes online by the end of next month… Read more
Corporations appearing to not pay their fair share of tax in the UK is a running theme. Starbucks, Google, Amazon, and now water companies, are all having their turn in the limelight. Let’s have a brief tour around each.
Firstly, sorry to be the bearer of bad news — but it turns out that you aren’t paying enough for your extra hot single-shot caramel skinny latte (as per a Starbucks press release, emphasis ours): Read more
And so to HMRC to examine the UK’s “tax gap” — the difference between tax actually collected and the tax that could theoretically be collected. Click to read.
The ‘gap’ in Britain is put at £32bn. Read more
We’re scratching our heads.
The Romneys donated $4,020,772 to charity in 2011, amounting to nearly 30% of their income. Read more
“I’m really sick of this government giving away our taxes to those corrupt Greeks,” said the owner of a pet shop in Amsterdam who asked not to be identified by name because he does not declare all his income to the authorities.
How on Earth did we miss this last week, via Reuters? (H/T Pawelmorski) Read more
Just in case you missed it earlier — we thought it worth posting the full letter from Bob Diamond, Barclays chief executive, to Andrew Tyrie MP, Treasury Committee chairman, regarding HMT’s blocking of two tax schemes (one on buybacks of debt). This involved a rare use of retroactive legislation, if you recall.
Anyway, the letter (click image for full doc): Read more
The investment that Hewlett-Packard made in an entity called Foppingadreef back in 1996, thinking that it would give rise to significant tax benefits over the next seven years, was not typical of so-called “foreign tax credit generators”.
Barclays’ structured trust advantaged repackaged securities (Stars) are perhaps the most well-known FTC generators and they have allowed multiple US banks to reduce their tax liabilities — though the Internal Revenue Service is challenging this in the courts. Read more
In our last post, we presented the genesis of a transaction set up by AIG Financial Products in 1996 that stood to reap significant tax benefits by generating an abundance of foreign tax credits (FTCs) as well as a deduction arising from a capital loss.
The Internal Revenue Service fought back when some of the benefits were claimed, and on May 14, 2012 they won in the US Tax Court, leading to the benefits being disallowed. This case, along with another won by the IRS in September last year, allows a rare glimpse into the world of international tax arbitrage. Read more
On May 14th, 2012, the US government won a case against Hewlett-Packard. The company was trying to reduce its tax bill by claiming certain foreign tax credits (FTCs) and a deduction on a capital loss that arose from a transaction it had entered into in 1996 with a Dutch entity called Foppingadreef. Both were claims disallowed in the ruling. The case may go to appeal.
The type of transaction can generally be classified as a so-called “FTC Generator” as one of the main benefits, if not the main benefit, concerns positive tax attributes created by it. Read more
Hewlett-Packard recently lost a big tax case with the US IRS. An intricate structure known as an FTC generator was at the heart of this dispute – and it’s left us wondering what the consequences might be for all those institutions so busy in this space over the past decade or two.
Hopefully, this four-part series will walk you through the basics, giving a glimpse into the world of international tax arbitrage…
While in some countries avoiding tax is a national pastime, in America the government offers all manner of mechanisms to reduce one’s bill.
From deductions on mortgage payments, to the low rates on long-term capital gains that private equity moguls benefit from, to generous accelerated depreciation methods on a wide range of property. Read more
Over the weekend, we were treated to (even more) pre-announcements about what’s going to be in this year’s budget in the UK. FT Alphaville’s interest was piqued by Chancellor George Osborne’s proclamations that there would be an end to stamp duty land tax avoidance schemes. The levy is currently up to 5 per cent on the purchase of a residential property.
To begin with, how are people avoiding stamp duty? What sort of structuring is involved? Read more
FT Alphaville has been very curious about exactly what went on in two tax schemes that the UK government legislated against this week. While Barclays wasn’t the only company that engaged in the types of transaction affected, it’s become clear that at least one transaction by the bank, involving buying back its own debt, prompted the government to act.
One of the things that’s especially dramatic about the action, is that it’s retroactive. Not that it catches all the instances this was done though — it only looks back as far as December 1st, 2011, but that is evidently far enough back to catch the transaction that Her Majesty’s Revenue & Customs was especially concerned about. Read more
Fifteen banks are signatories to the UK’s Code of Practice on Taxation.
BANK OF AMERICA/MERRILL Read more
Last Tuesday, the FT reported that three Swiss bankers had been charged with conspiring to help US citizens evade taxes on $1.2bn in assets by allegedly persuading them to move their accounts from UBS once the bank fell under scrutiny, the latest sign that US authorities are expanding their investigation into Switzerland’s private banking world. At the time, no accusations of wrong-doing had been made against the bank that the trio worked for. However, Reuters reports on Monday that US authorities are preparing to indict Wegelin & Co, one of Switzerland’s last pure private banks, according to two persons with knowledge of the case. The bank may be seeking a deferred prosecution agreement, which would be less damaging than an indictment.
On Tuesday night, the US House of Representatives voted 229-193 to reject a bill passed by the Senate that would have extended a cut in payroll taxes by two months. Failure to act will cause an increase in the taxes from 4.2 per cent to 6.2 per cent, affecting 160m workers, the WSJ reports. Senators have already left the capitol for the holidays, but members of the GOP-controlled House have demanded their return in order to hammer out a deal that would extend the cuts for a year. The short-term stopgap measure, designed to allow negotiations to continue in the new year, was deemed unacceptable. Senate majority leader Harry Reid has already stated that he has no plans to return to the negotiating table unless the stopgap measure is passed first.
The Treasury plans to slash the red tape faced by multinationals, in what is viewed as a key test of George Osborne’s bid to make the corporate tax system the most competitive in the G20 group of nations, says the FT. In an overhaul of anti-avoidance rules to be unveiled on Tuesday, the Treasury is expected to say that companies’ offshore operations will now only be caught by the British tax net in “situations that pose the highest risk of artificial diversion of UK profits”. The decision to exempt other situations comes after a consultation in which businesses said that increased compliance burdens might deter groups from basing their headquarters in the UK.
Dr Gloom (Tullett Prebon’s Tim Morgan) has just published the second part of his UK Reform trilogy.
With Coalition government’s deficit reduction plan doomed to failure, Morgan says tax cuts are the only policy left for the Chancellor and he must take it. Read more
As with UBS, there’s more than meets the eye to this Tuesday trading update from Deutsche Bank.
And we’re not talking about the missed €10bn pre-tax profit target (that’s no surprise) or another round of redundancies (again no surprise). Read more
A simple rule meant to cut paperwork for US companies has grown into one of the biggest multinational tax breaks around, an FT/ProPublica report says. The rule is known as “check-the-box.” It allows US companies to shift profits from operations in high-tax countries simply by marking an Internal Revenue Service form that transforms subsidiaries into what the agency calls a “disregarded entity”. It costs the US and other countries billions of dollars in lost taxes a year and thrives thanks to determined business support, including a campaign two years ago that forced the Obama administration to retreat from altering it, and tax professionals worldwide who exploit its benefits. Also in the FT, Coca-Cola chief executive Muhtar Kent has criticised US tax rules, saying China is now a more friendly place to do business. Meanwhile international policymakers are exploring the need to crackdown on global tax arbitrage, the FT reports, with experts at the OECD examining how successful past efforts have been.