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Democrats Turn to Tax Reform to Reduce Wealth Disparity

Democrats Turn to Tax Reform to Reduce Wealth Disparity

The U.S. Federal deficit is expected to reach $1 trillion in 2019.  Meanwhile, a hedge fund billionaire recently purchased a New York City condominium for $238 million, and it is estimated that the top 0.1% possess almost the same amount of wealth as the bottom 90% of all households.  Clearly there are wealth disparities and funding needs in U.S.  When it comes to tax policy, Democrats have traditionally focused on tax relief, including a negative income tax, for poor and working-class families.  Several recent pronouncements and extensive press coverage indicate a new approach, designed to tax the wealthiest individuals at significant rates of tax. Nina Krauthamer explains how current Democratic Party policy makers are planning to even out the distribution of wealth. 

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Who’s Got the B.E.A.T.? Special Treatment for Certain Expenses and Industries

Who’s Got the B.E.A.T.? Special Treatment for Certain Expenses and Industries

Code §59A imposes tax on U.S. corporations with substantial gross receipts when base erosion payments to related entities significantly reduce regular corporate income tax.  The new tax is known as the base erosion and anti-abuse tax (“B.E.A.T.”).  In the second of a two-part series, Rusudan Shervashidze and Stanley C. Ruchelman address (i) the coordination of two sets of limitations on deductions when payments are subject to B.E.A.T. and the Code §163(j) limitation on business interest expense deductions, (ii) the computation of modified taxable income in years when an N.O.L. carryover can reduce taxable income, (iii) application of B.E.A.T. to partnerships and their partners, and (iv) the application of the B.E.A.T. to banks and insurance companies. 

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Can Tax Authorities Demand Access to Audit Workpapers? Canadian Experience Follows U.S. Rule

Can Tax Authorities Demand Access to Audit Workpapers? Canadian Experience Follows U.S. Rule

Recent victories in litigation have allowed the Canada Revenue Agency to review tax accrual workpapers of Canadian corporations, provided the request for access is not a “fishing expedition” attempting to find issues.In the U.S., the I.R.S. has enjoyed that power for many years. Sunita Doobay of Blaney McMurtry L.L.P., Toronto, examines the scope and limitations of the Canadian decisions. Stanley C. Ruchelman reviews case law in the U.S., the role of FIN 48, and the purpose behind Schedule UTP (reporting uncertain tax positions), which surprisingly is designed to limit examinations of tax accrual workpapers.

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O.E.C.D. on Digital Business – Seriously?!

O.E.C.D. on Digital Business – Seriously?!

On February 13, 2019, the O.E.C.D. issued a discussion draft addressing the tax challenges of the dig- italization of the economy and asked for feedback in a shockingly brief time- frame. Is the discussion draft – which, in many respects, mimics G.I.L.T.I.provisions and highlights the value of a market as a key determiner of profitallocation – a move away from value of functions? In a stealth way, it may be a precursor to a global B.E.A.T. Christian Shoppe of Deloitte Deutschland, Frankfurt, cautions that the ultimate destination of B.E.P.S. may be added complexity in tax laws and expanded opportunity for double taxation. Bad news for taxpayers; more work for tax advisers.

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Tax Authorities Eye GSK-HUL Merger: Could Attract Tax on Long-Term Capital Gains and Brand Transfer

Tax Authorities Eye GSK-HUL Merger: Could Attract Tax on Long-Term Capital Gains and Brand Transfer

GSK Consumer Healthcare India (“GSKIndia”) is in the process of merging with Hindustan Unilever Ltd (“HUL”) inthe biggest deal in India’s consumer packaged goods space, valued at ap- proximately $4.5 billion. Although the transaction is structured to be tax-free for shareholders, plenty of room exists for the Indian tax authorities to assert tax from the companies: The transfer of a brand owned outside India may generate Indian tax to the extent its value stems principally from India. In addition, arm’s length pricing for royalty payments and accompanying with- holding tax issues also come into play. Sanjay Sanghvi and Raghav Kumar Bajaj of Khaitan & Co., Mumbai and New Delhi, discuss the global tax issues surrounding the transaction.

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