Curated by Daniel Xu
Investigations across eight European countries culminated late last month in the arrest of a ringleader in an AirPods “carousel” tax fraud worth 85 million euros (about $93 million).
Those committing carousel frauds, also known as missing trader intra-community frauds,sell goods to a purchaser-importer in another member state that doesn’t charge a tax. The purchaser-importer must perform a “reverse charge,” informing its taxing authority that it has imported the goods, and pay the requisite value-added tax—obviously, fraudsters never do. The purchaser-importer then sells the goods to a third party, collecting VAT on that transfer.
The purchaser-importer disappears without ever remitting the collected VAT to the government. The third party can also recoup the tax paid on its purchase as a credit if it isn’t the final consumer. When it does so, it receives a refund of a VAT that was never paid. The third party then cycles the goods back to the original fraudster, with a new purchaser-importer ready to play the role of the missing trader.
The European Public Prosecutor’s Office investigation uncovered a string of involved companies, all designed to ship AirPods, collect tax, receive credits for input taxes never paid, and vanish with stolen public revenue.
Whenever a VAT system is proposed in the US, concerns highlighted in this case give some policymakers and tax experts pause. The difficulty in curtailing fraud, which has been used to fund terrorism, presents itself even in established VAT systems.
At Bloomberg Tax, we’ll keep our ears perked for the latest developments in carousel frauds and similar schemes. Our coverage aims to stay as in tune as the finest in-ear audio technology, ensuring that readers are always up to date on international tax.
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State Insights
Tax practitioners who are wading through complex compliance obligations in a new federal corporate transparency law may have another murky layer to navigate in a similar New York law, say CPAs Orumé Hays and Philip London.
Federal Insights
Greenberg Glusker’s Zachary Nolan calls for the IRS to clarify a section of the tax code affecting qualified small business stock, noting that language on significant redemption rules could unfairly harm some entrepreneurs.
Marcia Hook, Sam Kamyans, and Tatiana Monastyrskaya of Kirkland & Ellis advise how to identify and manage risks when drafting offtake agreements for low-carbon ammonia projects, which are growing with the Inflation Reduction Act’s production tax credit.
Financial reporting rules that combat tax evasion can lead to major consequences for noncompliance, says Arielle Tucker of Connected Financial Planning. She shares steps taxpayers can take to stay compliant.
As plans move ahead to implement a global minimum tax, Global Business Alliance’s Jonathan Samford explains the challenges that US-based businesses are facing due to complications in the plans and some congressional opposition to them.
A plan that would furlough about two-thirds of IRS employees in the case of a government shutdown next year would hamper recruitment, modernization, and compliance efforts, says former IRS Commissioner Charles Rettig.
Global Insights
Diego Andrés Almeida, Marco Moya, and Ignacio Jijón of Almeida Guzmán Asociados say significant trade agreements signed by Ecuador can open new opportunities in foreign trade, sustainable development, and investment.
Ahmed Altawyan explains the steps that Saudi Arabia is taking to improve its international tax environment, including recently updated rules for important tax committees and their impact for prospective investors.
Columnist Corner
The UK government has announced that it will continue in 2024 its enforcement strategy on electronic sales suppression established in November last year. In this week’s Technically Speaking, Andrew Leahey argues that HMRC’s expansive definition of ESS tools places a heavy compliance burden on small businesses, discourages technological innovation, and sets a bad example for other members of the Joint Chiefs of Global Tax Enforcement.
Legal insider David Lat analyzes news, trends, and personalities shaping law and the legal profession. In this week’s Exclusive Jurisdiction, he considers the potential impact of a new legal group—divided into a 501(c)(3) and a 501(c)(4)—that aims to counter Donald Trump’s influence over courts and rule of law.
Save the Date
The tax and legal professions are infamous for being among the most stressful lines of work, and during the holidays, that tension can be compounded by more family and social obligations than usual.
Learn more about how to manage and channel stress on Dec. 7 from noon to 1 p.m. ET by joining “How to Make Stress Work to Your Advantage,” the latest installment of our free virtual Lunch & Learn series.
We’ve recruited Stinson’s director of well-being to describe strategies from the science of positive psychology for rethinking stress, boosting well-being, and cultivating resilience during challenging times.
Career Moves
Michael Rodgers has joined Linklaters as a partner in the energy and infrastructure and tax practices in Washington, D.C.
Debbie Y. Chin has joined Fox Rothschild as a partner in the taxation and wealth planning department in San Francisco.
Peter Farrell has joined Brown Rudnick as a partner in the tax group in Washington, D.C.
If you’re changing jobs or being promoted, email your submission to TaxMoves@bloombergindustry.com for consideration.
News Roundup
It’s been another busy week in tax news from state capitals to Washington. Here are some stories you might have missed from our Bloomberg Tax news team (login required).
- Canada introduced legislation to enact a 3% digital services tax targeting global tech giants, triggering a swift rebuke from US lawmakers.
- Newly formed companies will have additional time to report information about who owns them to the government under new requirements that take effect Jan. 1, 2024.
- Hong Kong’s Legislative Council passed legislation Wednesday amending its foreign income tax system to make it compliant with the EU’s anti-tax avoidance and transparency standards.
- PepsiCo must pay an undisclosed amount of diverted profits tax for payments for intellectual property, the Australian Federal Court ruled in a landmark decision on DPT.
Tax Journals
(Bloomberg Tax login required)
Tax Management International Journal
MNEs should re-evaluate the recognition and measurement of transfer pricing-related tax positions due to recent IRS litigation wins and an increased likelihood of transfer pricing penalties, say Steven Wrappe and April Little of Grant Thornton.
Tax Management Memorandum
Shortcut thinking toward viable decisions is a practical necessity in accounting in the face of tax uncertainties, says Disney’s Michael Salama. He explains how practitioners may recognize their biases and refine their skills at mitigating them.
Our Wish List
For December, we’re looking ahead to 2024. What should tax professionals do now to prepare for next tax season, and what will they be talking about in the regulatory space? We’re looking for a thoughtful take that will get tax professionals talking about next year—even before the calendar flips over.
If you have an interesting, never-published article for publication, contact the Insights team at TaxInsights@bloombergindustry.com.
Our Team
We talk about tax a lot. But you would hear much more if you popped into one of our Teams meetings. Here’s a quick look at what some of us are watching, reading, and listening to this week.
Watching
Rebecca Baker (Editor-at-Large): “The Holdovers,” one of the best movies I’ve seen in a long time. Paul Giamatti should get an Oscar nomination for his performance.
Reading
Melanie Cohen (Content Editor): Brian Allen Carr’s “Sip,” a dystopian novel about people who eat shadows to survive.
Listening
Daniel Xu (Content Editor): Lately I’ve been checking out Steely Dan. Their third album, “Pretzel Logic,” has gotten the most play so far.
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