Digital Services Taxes • CARES Act Downside • Retroactive Laws

This is a weekend roundup of Bloomberg Tax Insights, which are written by practitioners, featuring expert analysis on current issues in tax practice and policy. The articles featured here represent just a handful of the many Insights published each week. For a full archive of articles, browse by jurisdiction at Daily Tax Report, Daily Tax Report: State, and Daily Tax Report: International.

This week we look at digital services taxes, the CARES Act increasing state taxes, domestic deeming provisions and tax treaties, and more. We’ll hear from:

• David Klass of Hunton Andrews Kurth on how the digital services economy is seen as a potential source of post-Covid tax revenue
• Steve Wlodychak of Ernst & Young on how the CARES Act could increase your state taxes
• Open Weaver Banks, Ted Friedman, and Michael Hilkin of Eversheds Sutherland on a New York State Tax Appeals Tribunal decision on retroactive legislation
• Ashish Goel of Comtax AB on on domestic deeming provisions in the context of double tax treaties
• Asim Choudhury and Aesa Dey of Khaitan & Co. LLP on the inclusion of India’s equalization levy in the U.S. Trade Representative’s investigation of digital services taxes
• Suraj Nangia and Sandeep Jhunjhunwala of Nangia Andersen LLP on how other digital services tax provisions compare with the Indian equalization levy

The New York City skyline. The New York State Tax Appeals Tribunal has ruled that the Department of Taxation and Finance can’t retroactively apply new legislation after a taxpayer had relied on a prior tribunal decision.

Photographer: Michael Nagle/Bloomberg

David Klass of Hunton Andrews Kurth discusses how the digital services economy is being seen as a valuable potential source of tax revenue by governments in a post-Covid environment. Read: Why Taxation of Digital Services Continues to Occupy Center Stage

The CARES Act provided many tax breaks to businesses at the federal level, but it may have increased state taxes for many Americans. Steve Wlodychak of Ernst & Young provides examples of the areas where state conformity to (or decoupling from) the CARES Act will have a state income tax impact in the first part of a two-part series. Read: The CARES Act May Have Just Increased Your State Taxes. Wait. What? - Part 1

New York taxpayers should take some comfort from a recent decision by the New York State Tax Appeals Tribunal holding that the New York Department of Taxation and Finance could not retroactively apply new legislation after a taxpayer had relied on a prior decision from the tribunal. Open Weaver Banks, Ted Friedman, and Michael Hilkin of Eversheds Sutherland analyze the decision and the events leading up to it. Read: A Decision with Integrity—New York Tribunal Defends Its Decisions from Retroactive Changes in Law

Ashish Goel of Comtax AB looks at the second tax treaty-related case heard by the U.K. Supreme Court, in which the court provided guidance on domestic deeming provisions in the context of double tax treaties and ruled in favor of the U.K. tax authority. Read: U.K. Supreme Court Ruling on Deeming Fictions and Tax Treaty Interpretation

India was included by the U.S. Trade Representative in the list of countries that have adopted or are considering adoption of a digital service tax. Asim Choudhury and Aesa Dey of Khaitan & Co. LLP examine earlier investigations by the USTR and the structure of other countries’ DSTs and query whether India’s equalization levy can be categorized with those tax provisions. Read: Indian Equalization Levy Under U.S. Scrutiny—What Comes Next?

Many countries see DSTs as a way to collect taxes from companies that provide services inside those countries’ borders without any physical connection. Suraj Nangia and Sandeep Jhunjhunwala of Nangia Andersen LLP compare proposed and adopted DST provisions with the Indian equalization levy. Read: Digital Taxes—A Quick Fix or a Detriment to Global Economies

Corporate Tax Chat: Intel

Sharon Heck, chief tax officer and treasurer at Intel Corp., talked to Bloomberg Tax about how the chipmaker’s tax team is adjusting to the coronavirus pandemic, which regulations Intel is most eagerly awaiting from IRS this year, and her quest for a decent cup of coffee. Read: Corporate Tax Chat With Sharon Heck of Intel Corp.

From the Archive

Bloomberg Tax contributors haven’t been shy about expressing their opinions on digital service taxes and the effect they believe such taxes will have on the global economy, as well as the effect of unilateral DSTs on multilateral negotiations.

Jeff VanderWolk of Squire Patton Boggs examined the effect of the U.S. Trade Representative’s investigations on the ongoing OECD efforts to develop a multilateral policy on taxing the digital economy.

David Klass of Hunton Andrews Kurth considered the measures being taken by tax authorities to ease the burden on taxpayers during the Covid-19 outbreak, and looked forward to the post-crisis fiscal landscape. Will the U.K.’s digital services tax provide an effective way to offset the cost of the measures?

The new Spanish Digital Services Tax Bill was made public on Feb. 28. Javier Esaín of Baker McKenzie analyzed its content and considered what the future may hold for this tax.

Stefano Simontacchi, Marco Adda, and Francesco Saverio Scandone of BonelliErede provided a critical analysis of the new Italian digital services tax, and explained their concerns over its relationship with the OECD Unified Approach.

And once you’re all caught up on those, WATCH: Trump’s New Trade War: Digital Taxes Explained (Video)

Beyond Tax

What’s happening outside the world of tax?

Audrey Strauss is taking over as the new U.S. Attorney in the Southern District of New York after Geoffrey Berman initially refused to leave. Former New York prosecutor Joel Cohen says she will likely prosecute cases in the same manner as Berman, even though the office has unfortunately been drawn into national headlines by Attorney General William Barr’s actions. Read: Will It Matter Who Runs the U.S. Attorney’s Office in Manhattan?

Our civil justice system needs fixing so low-income people and the middle class can get the legal help they need. Justice Deno Himonas, of the Utah Supreme Court, and Scott Bales, former Chief Justice of the Arizona Supreme Court, urge court leaders—and the legal profession and the public—to embrace experimentation and reform to allow new ways of providing legal services. Read: It’s Time to Allow New Legal Service Providers

CEOs want their general counsel to improve on business strategy, new market expansion, and industry knowledge, according to a new BarkerGilmore LLC and Chief Executive Group survey. GCs should be encouraged to move outside of the legal environment by learning about products, competitors, and customers and use that knowledge to contribute to senior leadership discussions, BarkerGilmore advisers say. Read: CEOs Want More Strategic Advice From General Counsel

DOJ’s recent corporate compliance update calls for a trusted, confidential reporting and investigation process. Ethics Suite’s Juliette Gust and Tricia Fratto say that in evaluating your confidential reporting process, consider the three questions that DOJ prosecutors will ask: Is it well designed, is it applied in good faith, and does it work? Read: Confidential Reporting of Misconduct Is Key Under DOJ Guidance

Exclusive Content for Bloomberg Tax Subscribers

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Proposed Treasury Regulations would apply the anti-conduit rules to hybrid equity funding. Jose Murillo and Craig Hillier of Ernst & Young discuss the proposed regulations that would extend the reach of the conduit financing regulations to transactions that use hybrid instruments to access treaty benefits to reduce withholding taxes on U.S.-source interest payments.

Bloomberg Tax Insights articles are written by experienced practitioners, academics, and policy experts discussing developments and current issues in taxation. To contribute, please contact Erin McManus at emcmanus@bloombergtax.com.