WEEKEND INSIGHTS: Global Tax After Covid and Telecommuting Woes

This is a weekend roundup of Bloomberg Tax Insights, written by practitioners and 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, Daily Tax Report: International, and Financial Accounting.

This week we look at the broad implications for global taxation and an example of computing Pillar One amounts for one company, telecommuting double-taxation risks, PPP loan forgiveness uncertainty, and more. We’ll hear from:

• Will Morris of PwC on the clouds gathering on the international tax horizon
• Glenn DeSouza of Dentons on computing Pillar One amounts and what’s new in the blueprint
• Ross Robertson of BDO on what a delay in a global digital tax agreement means
• Frank Sennott and Win Grimm of Ropes Wealth Advisors and Scott Kaplowitch of Edelstein & Co. on the dangers of double taxation while telecommuting
• Lewis Horowitz and Eric Kodesch of Lane Powell on the SBA’s apparent presumption of foresight by PPP borrowers seeking forgiveness
• Michael Mahoney and Shivam Bimal of Ogletree Deakins on the complexity of Covid-19 relief programs
• Alan Lederman of Gunster, Yoakley & Stewart on the tax benefits of Mideast peace agreements
• Sunil Gidwani and Naitik Doshi of Nangia Andersen on the tax benefits of the new Indian investment fund regulatory structure

The Eiffel Tower in Paris. The OECD, which is pursuing a project on the taxation of the digital economy, is headquartered in the city.

Photographer: Christophe Archambault/AFP via Getty Images

Will Morris of PwC observes the clouds gathering on the international tax horizon, and asks if a storm is coming to the post-Covid world. He considers what governments, international organizations, and businesses should keep in mind to achieve beneficial solutions for everyone when this storm does strike. Read: The Gathering Storm? The Other Side of the Covid Portal

The just-released Report on Pillar One Blueprint incorporates comments from multinationals and the U.S. request for a safe harbor. Glenn DeSouza identifies what’s new and important in this release, and using public domain information on Apple he illustrates how Amounts A, B, and the newly-introduced safe harbor would apply. Read: Blueprint on Pillar One—What’s New and Important

BDO International Tax Partner Ross Robertson reacts following the OECD’s Oct. 12 release of more than 900 pages of documents regarding its ongoing effort to address the challenges of taxing the digital economy. Read: The OECD and the Ticking Clock—What a Delay in Global Agreement May Mean

Unsuspecting taxpayers who have been telecommuting from outside their home states since the Covid-19 lockdowns began in March could find that they have become residents of the other state as of September. Frank Sennott and Win Grimm of Ropes Wealth Advisors and Scott Kaplowitch of Edelstein & Co. look at which states are trying to help individual taxpayers avoid double taxation, which states don’t seem to care, and if there is any hope of help from Congress. Read: 2020 May Hold Unpleasant Tax Surprises for Telecommuters

The Small Business Administration has released draft questionnaires for review of Paycheck Protection Program loan forgiveness applications of $2 million or more. Lewis Horowitz and Eric Kodesch of Lane Powell analyze the forms and see problems with the approach the agency is taking, including its presumption of foresight by borrowers. Read: New Uncertainty About the Uncertainty Certification: SBA’s Draft Questionnaires for PPP Loans Over $2 Million

Federal Covid-19 relief programs for businesses are extremely complex. Employers should thoroughly consider their circumstances to understand which programs best address their needs, say Ogletree Deakins P.C. attorneys Michael Mahoney and Shivam Bimal, who discuss several of the programs. Read: Navigating the Covid-19 Federal Stimulus Programs

Normalization of relations with Israel by the UAE and other Arab League countries may reduce the incidence of U.S.-income-tax-disfavored agreements constituting participation or cooperation with the Arab League boycott of Israel. Alan Lederman of Gunster, Yoakley & Stewart looks at the U.S. tax implications. Read: Mideast Peace Dividend May Be Eligible for GILTI Deduction and Foreign Tax Credit

The new Indian International Financial Services Center Authority offers a more streamlined regulatory process and tax benefits for investment in India. Sunil Gidwani and Naitik Doshi of Nangia Andersen LLP explain the new regulatory regime and its tax framework. Read: New Indian Investment Fund Regulatory Structure Includes Tax Benefits

From the Archive

Bloomberg Tax contributors keep us up on the big picture and the details of Organization for Economic Cooperation and Development (OECD) talks on the taxation of the digital economy.

The OECD’s Inclusive Framework on BEPS will pursue its work plan on the tax challenges of digitalization until at least the middle of 2021. The cost of simply determining how the proposed rules would apply to a multinational group’s business could be substantial, wrote Jeff VanderWolk of Squire Patton Boggs. Dec. 14 is the deadline for written comment. The author says it would be prudent for businesses to take advantage of the opportunity for written comments now and speak at the scheduled January meeting.

The OECD is working on a plan to best tax the digital economy. Alok Khare and Sreevidhya Devarajan of FTI Consulting described the OECD’s approach, the unique transfer pricing challenges faced by digital companies, and what multinational enterprises could consider in the interim until OECD recommendations are finalized and generally accepted.

While many rules have “gone out the window” since the pandemic began, some are worth keeping. Lorraine Eden of Texas A&M University said transfer pricing’s arm’s-length principle remains robust and flexible and defends it against three popular criticisms.

Beyond Tax

What’s happening outside the world of tax?

The Department of Labor clarified in a September proposed rule when employers can classify workers as independent contractors. Chamberlain Hrdlicka attorneys look at the various test factors and guidance posts in the rule and say the DOL lowered the bar for businesses to classify independent contractors. Read: DOL Guidance Sheds Light on Employee vs. Independent Contractor Debate

A lack of diversity in the financial services industry, and at law firms, is a pervasive and persistent problem. Katten Muchin Rosenman LLP attorneys discuss solutions and ideas brought to the forefront in a recent panel discussion with top legal and financial services thought leaders and suggest concrete steps to move forward. Read: Increasing Diversity in the Financial Services Industry

DLA Piper attorneys look at a recent Eleventh Circuit opinion in a Medicare False Claims Act lawsuit that let stand a successful whistleblower’s outside funding agreement. They examine unanswered issues about FCA provisions on public disclosure of information, a qui tam relator’s rights to reassign interest to another party, and the government’s authority to dismiss FCA cases. Read: Should Third-Party Funders Be Able to Cash in on Whistleblower Cases?

Notre Dame Law School Professor Veronica Root Martinez says the legitimacy of the U.S. Supreme Court has been weakened over the last few years and by the recent Senate confirmation hearings. She calls on the justices to create a code of ethical conduct, like other federal judges have, to signal to the public that the justices are above reproach. Read: A Weakened Supreme Court Needs a Code of Ethics

Exclusive Content for Bloomberg Tax Subscribers

(*Note: Your Bloomberg Tax login will be required to read the following content.)

Branches give rise to difficult international issues under the tax law and under tax treaties. This is particularly so, because any two countries do not always agree on what a branch is and how it should be taxed. Kim Blanchard of Weil, Gotshal & Manges LLP discusses the final anti-hybrid regulations under tax code Section 267A, which contain two sets of rules dealing with branches.

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.