WEEKEND INSIGHTS: OECD Amount B and Maryland’s Digital Tax Bill

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, Transfer Pricing Report, and Financial Accounting.

This week we look at: the neglected “Amount B” in the OECD’s Pillar One, Maryland’s proposed digital tax, killing the unclaimed property golden goose, the Indian budget, and more. We’ll hear from:

• Harlow Higinbotham, Niraja Srinivasan, Vladimir Starkov, and Nihan Mert-Beydilli of NERA Economic Consulting, and Lorraine Eden of Texas A&M on the OECD’s “Amount B”
• Michael J. Semes of Villanova University and BakerHostetler on why the proposed Maryland digital advertising gross revenues tax shouldn’t be enacted
• Sara Lima, Freda Pepper, and Ashley Rivera of Reed Smith on states’ aggressive pursuit of unclaimed property through private contractors
• Sunil Gidwani of Nangia Andersen LLP on the red carpet welcome for foreign investors in India’s 2021 budget
• Jimmy Sexton of Esquire Group on why the U.S. is the leading jurisdiction for trusts
• Jack Mintz of the University of Calgary on tax policy and fiscal sustainability post-Covid
• Michael Hilkin and Chelsea Marmor of Eversheds Sutherland on some of 2020’s most noteworthy New York administrative and judicial decisions
• Andy Spencer of Sovos on the trade agreement between the EU and the U.K.
• Alan Lederman on the Corporate Transparency Act’s effect on inbound tax planning
• Alpa Bhakta of Butterfield Mortgages Ltd. on the tax measures that may appear in the U.K.'s 2021 spring budget

Maryland state capitol building in Annapolis.

Photographer: Jim Watson/AFP via Getty Images

The Amount B proposal in the Pillar One Blueprint released by the OECD/Inclusive Framework (OECD/IF) on Oct. 14, 2020, is designed to standardize the return to certain baseline distribution and marketing activities that take place in a market jurisdiction. Harlow Higinbotham, Niraja Srinivasan, Vladimir Starkov, and Nihan Mert-Beydilli of NERA Economic Consulting, and Lorraine Eden of Texas A&M address the question: Do facts and circumstances matter for “baseline marketing and distribution activities?” Read: Amount B: Facts and Circumstances Matter—Even for Routine Distributors

In March 2020, the Maryland General Assembly passed the Digital Advertising Gross Revenues Tax (MDAGRT). While Gov. Larry Hogan (R) subsequently vetoed the bill on May 7, 2020, the General Assembly may consider overriding the veto. Michael J. Semes, a professor at the Charles Widger School of Law at Villanova University and of counsel at BakerHostetler, explains why they shouldn’t override the veto and identifies some of the legal and economic problems with the legislation. Read: Maryland’s Proposed Digital Advertising Gross Revenues Tax Should Not Be Enacted

States are becoming ever more zealous in their pursuit of unclaimed property. Sara Lima, Freda Pepper, and Ashley Rivera of Reed Smith warn that this aggressive pursuit—especially through private contractors compensated through a contingency fee—may kill the golden goose. Read: Killing the Golden Goose: The Declining Health of State Unclaimed Property Programs

The India 2021 budget announced this week includes several provisions intended to increase foreign investment. Sunil Gidwani of Nangia Andersen LLP walks through several of the provisions and explains what they mean for those seeking to invest or increase their investment in India. Read: Indian Red Carpet Welcome For Foreign Investors

Jimmy Sexton of Esquire Group highlights how America’s rejection of OECD tax initiatives, its economic might, and specific tax rules combine to make America the leading jurisdiction for asset protection trusts settled by foreigners. Read: Why America Is the Leading Jurisdiction For Trusts

Professor Jack M. Mintz of the University of Calgary considers how governments will address the rising public debt levels caused by the Covid-19 pandemic, and how tax policies may evolve to encourage economic recovery. Read: Tax Policy and Fiscal Sustainability Post-Covid

Michael Hilkin and Chelsea Marmor of Eversheds Sutherland review some of 2020’s most noteworthy New York administrative and judicial decisions. Read: New York Slice—2020 Year-in-Review (Part Two)

Andy Spencer of Sovos looks at the practical issues that will impact businesses now that the trade agreement between the EU and the U.K. has been concluded, and how businesses can address the challenges to ensure they can continue to trade successfully. Read: How the EU-UK Trade and Cooperation Agreement Impacts Business

The additional reporting requirements imposed by the Corporate Transparency Act may influence some foreign investors’ choice of entity, writes Alan Lederman of Gunster, Yoakley & Stewart, P.A. Read: Corporate Transparency Act May Obscure Inbound Planning

Alpa Bhakta of Butterfield Mortgages Ltd. considers the tax measures that may be introduced in the U.K. Spring Budget to address the challenges of public debt incurred as a result of Covid-19, including a potential property tax. Read: What Can We Expect From The U.K.’s 2021 Spring Budget?

From the Archive

Bloomberg Tax contributors have been breaking down the OECD proposals and identifying potential problems and challenges.

The digital economy is growing two and a half times faster than global GDP, and governments are trying to tax the resulting revenue—mostly jurisdictions that are not home to the largest digital companies. Amie Ahanchian, Donald Hok, Philippe Stephanny, and Elizabeth Shingler of KPMG LLP summarized the various DST proposals globally and discussed potential duty mitigation strategies should the U.S. choose to respond with retaliatory tariffs.

Substantive progress on tax and digitalization faces many obstacles and the outlook isn’t promising as we enter 2021. Will Morris of PwC examined the challenges, considered the possible outcomes, and concluded that a workable (and improvable) multilateral agreement is preferable to a free-for-all of DSTs, tariffs, and revenue grabs.

Many parties outside of the U.S. argue the leading digital services businesses—most of which are U.S.-based—are not paying their “fair share” of taxes in jurisdictions where the services are used and want to impose a special tax on those services. Jeff VanderWolk of Squire Patton Boggs noted that heavier taxes are usually applied to activities that cause harm to society, and questioned whether it makes sense to penalize the services that have played a large part in keeping businesses, education, and social lives functioning during the pandemic.

Beyond Tax

What’s happening outside the world of tax?

Businesses should prepare for increased activity on multiple fronts, including increased civil antitrust enforcement, stepped-up merger enforcement, and an increase in criminal investigations and actions. Ballard Spahr practice leader Leslie E. John elaborates. Read: What to Expect in Antitrust Policy, Enforcement From Biden Administration

President Joe Biden has the chance to make good on his past statements condemning the use of noncompete clauses for American workers by making good appointments to the Federal Trade Commission, says Sandeep Vaheesan, legal director at the Open Markets Institute. Noncompetes limit workers’ exit options and suppress fair wages, he says. Read: Biden Can Free Millions From Coercive Employment Contracts

Insurance, reinsurance, and insurtech companies are including special-purpose acquisition companies (SPACs) in their strategic planning. Three Locke Lord partners discuss what type of insurance companies are potential SPAC targets, challenges SPACs face when acquiring an insurer, and possible uses of SPACs to demutualize mutual insurers. Read: Using SPACs in the Insurance Industry

The threat of cybercrime and ransomware is a reality for hospitals and health-care providers. Victims face the difficult choice of whether to pay the ransom or spend precious time repairing the damage and recent guidance suggests that paying cyber ransoms poses possible sanctions risks. Alston & Bird attorneys Brian Frey and Andrew Liebler discuss developments and how they might unfold in 2021. Read: To Pay or Not to Pay: Ransomware Threats and Risking Payment Sanctions

Exclusive Content for Bloomberg Tax Subscribers

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The IRS recently approved a state and local tax cap workaround. Philip Hirschfeld of Cole Schotz PC considers the IRS opinion on an approach by several states to allow or require a partnership or S corporation to pay a pass-through entity state income tax, in which entity level state tax is permitted as a deduction in computing the entity’s taxable income that is allocated to its partners or S corporation shareholders without any limit.

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