taxation (4)

Original Post by National Director, Dee


1. The G20 has been at the forefront of efforts to establish a more effective, efficient and fair international tax system since they declared the era of bank secrecy over at the G20 London Summit in April 2009. In an increasingly borderless world, strengthening international cooperation in tax matters is essential to ensuring the integrity of national tax systems and maintaining trust in governments.

2. The Global Forum on Transparency and Exchange of Information for Tax Purposes has
played a critical role in ensuring that the international standard of exchange of information 
on request endorsed by the G20 is implemented effectively around the world. Since the 
Global Forum responded in 2009 to the G20’s call to ensure rapid implementation of its
standards of transparency and exchange of information, the Global Forum has completed 113peer review reports and has issued over 600 recommendations for improvement, with more than 300 of those recommendations having been acted upon to date. The number of 
jurisdictions that have committed to implement the standards and have joined the Global 
Forum has increased to 120. All but 14 of the jurisdictions reviewed have advanced to Phase 2 reviews, thus demonstrating the effectiveness of the peer review process in achieving the 
implementation of the standards. Those 14 jurisdictions are urged to implement the Global 
Forum’s recommendations without further delay. In July 2013, G20 Finance Ministers and 
Central Bank Governors asked the Global Forum to give overall ratings of exchange of 
information on request at its meeting in November 2013. The Global forum will draw on the 
work of FATF on beneficial ownership and ensure that all countries have information regarding the beneficial ownership of entities operating in their jurisdictions.

3. The G20 has now endorsed the development of a new global tax standard: to 
automatic exchange of information. At the Cannes Summit in 2011,the G20 agreed to consider exchanging information automatically for tax purposes on a voluntary basis. In 2012, the Los Cabos Summit welcomed the OECD report on automatic exchange and encouraged all countries to join this practice. Given the developments in the Global Forum and other recent advances, 
it is now time to migrate to a more ambitious, more efficient and higher standard, which is automatic exchange of information. Recent developments involving undisclosed foreign bank accounts have also highlighted the urgent need to move to this new standard which the Global Forum will monitor to ensure its effective implementation. In July 2013, G20 Finance Ministers and Central Bank Governors fully endorsed the ambitious OECD proposal for a truly global model for multilateral and bilateral automatic exchange of information for tax purposes and declared their commitment to automatic exchange of information as the new global standard. The OECD has initiated work with G20 countries to develop the new single global standard for automatic exchange of information. G20 Finance Ministers and Central Bank Governors have mandated the OECD to provide a progress report at the October Finance Ministers’ meeting, including a timeline for completing this work in 2014. The new standard (included in a Model Competent Authority Agreement) will be presented at G20 Finance Ministers and Central Bank Governors’ meeting in February 2014.There is a clear need for the practical and full implementation of this new tax standard on a global scale. The Global Forum will establish a mechanism to monitor and review the implementation of the new standard on automatic exchange of information and will be working with the OECD Task Force on Tax and Development, the World Bank Group and others to help developing countries identify their need for technical assistance and capacity building.

4. The next challenge regarding automatic exchange of information is now to get all 
jurisdictions to commit to this standard and put it into practice. Calling on all other 
jurisdictions to join us by the earliest possible date, we are committed to automatic exchange of information as the new global standard, which must ensure confidentiality and the proper use of information exchanged, and we fully support the OECD work with G20 countries aimed at presenting such a new single global standard for automatic exchange of information by February 2014 and to finalizing technical modalities of effective automatic exchange by mid-2014. In parallel, we expect to begin to exchange information automatically on tax matters among G20 members by the end of 2015. The multilateral Convention is key to ensuring rapid implementation of the new standard and to enabling developing countries to benefit from the new more transparent environment. In 2009 the OECD and the Council of Europe swiftly responded to the G20’s call for a multilateral instrument by amending the Convention on Mutual Administrative Assistance in Tax Matters in 2010 to meet international standards and to allow all countries with domestic laws that are sufficient to uphold the confidentiality of tax information to join. All G20 countries have led by example in signing this Convention and to date more than 70 countries and jurisdictions are covered or are likely to be covered by the Convention, including significant financial centres. The Convention is a powerful tool in the fight against tax evasion and allows for all forms of cooperation in tax matters, including automatic exchange of information. We expect all jurisdictions to join the Convention without further 

5. International collective efforts must also address the tax base erosion resulting from 
international tax planning. Base erosion and profit shifting (BEPS) relates chiefly to instances
where the interaction of different tax rules result in tax planning that may be used by 
multinational enterprises (MNEs) to artificially shift profits out of the countries where they are earned, resulting in very low taxes or even double non-taxation. These practices, if left 
unchecked, undermine the fairness and integrity of our tax systems. They fundamentally 
distort competition, because businesses that engage in cross-border BEPS strategies gain a 
competitive advantage compared with enterprises that operate mostly at the domestic level.
Fair, transparent and efficient tax systems are not only key pillars for sound public finances,
they also provide a sustainable framework for dynamic economies. For these reasons, G20 
Leaders identified the need to address BEPS as a priority in their tax agenda at the Los Cabos 
Summit in June 2012. Additionally, 
we must achieve better international coordination on taxes. In this regard, we must move forward in fighting BEPS practices so that we ensure a fair contribution of all productive sectors to the financing of public spending in our countries.

6. International tax rules, which date back to the 1920’s, have not kept pace with the 
changing business environment, including the growing importance of intangibles and the 
digital economy. In response to a G20 mandate, the OECD Secretary-General provided a report in February 2013 outlining the issues related to BEPS, and has now presented an ambitious and comprehensive Action Plan developed with G20 members aimed at addressing BEPS, with a mechanism to enrich the Plan as appropriate. Countries will need to examine how their domestic tax laws contribute to BEPS and to ensure that international and domestic tax rules do not allow or encourage multinational enterprises to reduce overall taxes paid by artificially shifting profits to low-tax jurisdictions. A G20/OECD BEPS Project has been established through which all non OECD G20 countries will participate on an equal footing to develop proposals and recommendations to tackle the 15 issues identified in the Action Plan. G20 Leaders commit 3 themselves to a swift implementation and they also have a vital role to play in urging other countries to join with us and to take the necessary individual and collective actions to implement these proposals and recommendations in a timely manner. G20 Leaders appreciate the swift and effective response by the OECD in advancing the BEPS agenda and urge the OECD to work closely with G20 countries for the proper implementation of this Project.

7. The Action Plan aimed at addressing BEPS sets forth an ambitious agenda to examine the 
following fundamental aspects of the international tax rules:

Ø First, changes to international tax rules must be designed to address the gaps between 
different countries’ tax systems, while still respecting the sovereignty of each country 
to design its own rules. Instruments will be developed to neutralise hybrid mismatches
and arbitrage; recommendations will be developed regarding best practices in the 
design of domestic legislation to protect the tax base of countries against shifting of
profits to no or low taxation jurisdiction (through strengthening or introducing so called 
“CFC” rules – Controlled Foreign Companies); and recommendations will be developed 
regarding rules to prevent base erosion through interest deduction.

Ø Second, the existing international tax rules on tax treaties, permanent establishment,
and transfer pricing will be examined to ensure that profits are taxed where economic 
activities occur and value is created. The action plan is designed to establish anti-treaty 
shopping provisions and develop changes to the definition of the permanent 
establishment (that is, whether there is sufficient nexus to allow a charge to tax) to 
prevent BEPS. Three actions are identified in the area of transfer pricing to put an end to 
the divorce between the location of profits and the location of real activities.
Importantly, there is recognition that although the existing transfer pricing rules 
appropriately allocate income in many instances, special measures, either within or 
beyond the arm’s length principle, may be required to address certain specific 
difficulties arising in the current system.

Ø Third, more transparency will be established, including through a common template
for companies to report to tax administrations on their worldwide allocation of profits
and tax. It also requires more transparency between governments, with the need for 
countries to disclose rulings and other tax benefits to their partners, and disclosure by 
taxpayers of aggressive tax planning arrangements. The Action Plan also provides 
mechanisms to collect better data so as to be able to measure BEPS and carry out the 
relevant economic analyses.

Ø Fourth, all the actions are expected to be delivered in the coming 18 to 24 months. To
ensure that the recommendations may be implemented quickly, the OECD will be 
developing a multilateral instrument for interested countries to amend their existing
network of bilateral treaties.

8. Developing countries must reap the benefits of the G20 tax agenda. The G20-led 
efforts can advance efforts to improve domestic resource mobilisation. The Global Forum on 
Transparency and Exchange of Information, the OECD Task Force on Tax and Development, the World Bank Group and other international organizations are key partners who can assist
developing countries identify their needs for technical assistance and capacity building in
implementing of the transparency and exchange of information standards, including through 
the multilateral Convention and automatic exchange of information. These efforts will help 
developing countries secure the corporate tax revenue they need to foster long-term 
The OECD’s Tax Inspectors Without Borders initiative to assist tax 
administrations of developing countries plays a useful role in this regard. Finally, we are 
committed to continue to assist developing countries, including through the IOs, in identifying individual country needs and building capacity in the area of tax administration (in addition to automatic exchange of information) and encourage such support to be developing country led.

9. International taxation issues do not stop at addressing double non-taxation. We encourage continued discussion on other tax matters among tax administrators. 
ANNEX - The 15 Actions to Address BEPS ACTION 1 – Address the Tax Challenges of the Digital Economy. Identify the main difficulties that the digital economy poses for the application of existing international tax rules and develop detailed options to address these difficulties, taking a holistic approach and 
considering both direct and indirect taxation. Issues to be examined include, but are not limited to, the ability of a company to have a significant digital presence in the economy of another country without being liable to taxation due to the lack of nexus under current international rules, the attribution of value created from the generation of marketable location-relevant data through the use of digital products and services, the characterisation of income derived from new business models, the application of related source rules, and how to ensure the effective collection of VAT/GST with respect to the cross-border supply of digital goods and services. Such work will require a thorough analysis of the various business models in this sector.

ACTION 2 – Neutralise the Effects of Hybrid Mismatch Arrangements. Develop model treaty 
provisions and recommendations regarding the design of domestic rules to neutralise the effect (e.g., double non-taxation, double deduction, long-term deferral) of hybrid instruments and entities. This may include: (i) changes to the OECD Model Tax Convention to ensure that hybrid instruments and entities (as well as dual resident entities) are not used to obtain the benefits of treaties unduly; 
(ii) domestic law provisions that prevent exemption or nonrecognition for payments that are deductible by the payor; (iii) domestic law provisions that deny a deduction for a payment that is not includible in income by the recipient (and is not subject to taxation under controlled foreign company (CFC) or similar rules); (iv) domestic law provisions that deny a deduction for a payment that is also deductible in another jurisdiction; and (v) where necessary, guidance on co-ordination or tie-breaker rules if more than one country seeks to apply such rules to a transaction or structure. Special attention should be given to the interaction between possible changes to domestic law and the provisions of the OECD Model Tax Convention. This work will be co-ordinated with the work on interest expense deduction limitations, the work on CFC rules, and the work on treaty shopping.

ACTION 3 – Strengthen CFC Rules. Develop recommendations regarding the design of 
controlled foreign corporation rules. This work will be co-ordinated with other work as 

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A States-based system to pay for Federal

expenditures that ends the Federal Government’s

power to tax and borrow money

The States of the USA, and the People, have granted the U.S. Federal Government, through Congress, the power to tax, borrow and

create money. (Article I, Section 8, Paragraphs 1, 2, and 5 of the U.S. Constitution plus the 16th Amendment. The "Big Four.") The Federal Government has monopoly control over its own financing. Has this monopoly control worked out well?

On December 31, 2000, the U.S. National Debt was $5.662 trillion. December 31, 2008, $10.700 trillion. December 31, 2011, $14.025 trillion. And, despite the November 2010 election results, $15.785 trillion on June 19, 2012. A 279% increase in less than eleven years, six months. ((Source: www. Debt to the Penny (Daily History/Search.))

It can arguably be said that these taxation, borrowing and money creation powers, have been seriously and shamefully misused.

Changes need to be made to end this misuse. However, the needed changes go far beyond electing more responsible congressional and Presidential representation, as necessary as these steps may be.

The misuse, and potential for continued future misuse, will not be curtailed until the monopoly financing control created by the Big Four to pay for Federal expenditures is replaced by a States-based system. The CONSTITUTIONAL SUPPORT TAX (the CST, www. should be that States-based system.

In summary the CST will do the following:

  1. The power to lay and collect Taxes, Imposts and Excises will be repealed from Article I, Section 8, Paragraph 1 of the Constitution along with the 16th Amendment. The power to lay and collect Duties will remain with Congress.
  2. Article 1, Section 8, Paragraph 2, authorizing Congress’ power to borrow will also be repealed.
  3. Once Congress sets the Federal Budget each year, the dollar amount of the Budget will be divided among the States by a formula that is fair to all States. This five-part formula is explained in the HOW IT WORKS section of the website.
  4. It will then be up to the People of each State, and state and local officials, to decide how their State will pay its mandatory share of the Budget. This is similar to Article VIII of the Articles of Confederation.

With the power to raise money through taxation, borrowing in the credit markets and through the Federal Reserve ended, Congress will have a powerful incentive to prepare yearly budgets that are well within the bounds of what the Constitution will allow. The States and People will be very skeptical about paying for anything beyond providing for the "common defence" stated in the Preamble to the Constitution. The Founding Fathers intended such non-defense expenditures be handled and financed at the state or local levels. GSA Las Vegas outings and more should become closed history, never to return. Think about this fully, and you will correctly conclude that the CST is the only way to end the Federal overspending problem.

Please read the website. Give it some time to "mentally digest." If you like the CST, spread the word about it among the people you know. Questions can be submitted through the website or to me at the following contact information.

Thank you for your time and consideration.

Cy Mallinson 1311 Manor St. Kalamazoo, MI 49006-2143 269-342-0410 cmallinson

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If you think you pay enough taxes . . .

It’s an experience few ever expected would happen to them, not only surrendering their U.S. passport, but doing so gladly. Being an American in Paris, or anywhere outside our own borders is a very expensive proposition time- and money-wise. Oh, and then there’s the matter of aggravation. If this sounds like an utterly horrendous and impossible situation to you, American expatriates in foreign lands can assure you . . . it’s even more so to them as they live out some godawful scenarios day after day . . . .

It used to be that the number of Americans turning in their passports in any given year could be measured in the dozens. It used to be that except for a few political malcontents, it just never happened. Right now thousands of applications for renouncing American citizenship are filling up the in-boxes in U.S. embassies and consulates around the globe. Today 95% of these acts are because of taxes or aggravation or both. The United States, you see, is the nastiest nation in the manner it treats its expatriates among all the countries in the world. We are the only nation in the industrialized world that taxes its citizens overseas . . . making them subject to taxes where they live on top of back home and fewer and fewer of them given today’s climate see any long-term benefit to retaining their American citizenship. One of the main bugaboos has been recent attempts by the United States to pry into the finances of the expatriate citizens.

A lot of the aggravation expatriates feel, for example, is tied up with complex and time-consuming laws requiring expatriates to report all foreign bank accounts with balances in excess of $10,000 and exceedingly large penalties for those who don’t comply either on purpose or by accident. While these laws were aimed at the criminal element, the toll on the lawful expatriate can be devastating. One brother of a friend of Rajjpuut’s put it this way. “Just didn’t know the law and my $18,000 bank account could have landed me in prison or cost a huge fine, talk about a life-destroying slip up. I wonder how many big-crooks with accounts in Switzerland or the Cayman’s they catch with their crappy laws zero, I’d guess. I’m not sure how many times they’ve changed that law, but they were finally successful, they got me. They’ll nail lots of honest citizens for sure, well let ‘em stuff my *&%^$#(8@/? passport.

The biggest hassles, however, come from the compliance of foreign companies with American financial and savings laws. Americans living outside the country are quite often refused certain services because of all the hoop-jumping required for the foreign banks and financial institutions who just don’t want to be bothered for a miniscule number of American customers. The logistics of being an expatriate American is tiresome, at times costly and, many expatriates believe increasingly aggravating to the point of questioning the value of their citizenship. In a Time Magazine article the founder of the American Citizens Abroad (ACA) advocacy group Andy Sundberg speaking about America's attitude toward expatriates put it this way, “We have become toxic citizens.”

Sundberg says that unfortunately more and more expatriate Americans can help America and themselves by just renouncing their citizenship. Not only escaping the financial burden of double taxation but actually bettering the U.S. economy because without being Americans they’ll face fewer logistical nightmares and “it’ll become much easier for them to get a job abroad, and to set up, own and operate private companies promoting American exports.” Sad as it may seem, that ‘s the only win-win situation for many expatriates. The biggest downside is that they can only stay ninety days in the United States in a given year which tends to make the decision to surrender American citizenship difficult for many. But the sense of greater freedom and the huge financial relief drives more and more to do it. Sometimes families and friends tend to look upon the expat as a “Benedict Arnold” which complicates matters, but most understand. However, even when you hang up your U.S. passport for good, expatriates still get punched in the nose . . . you guessed it, there’s an “exit tax.”

Ya’all live long, strong and ornery,


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The Effects of Taxation


I post this, as it may be helpful to understand just how significant the effects of taxation are.

Mathematician that I am, Irecently worked out the dollar effect formulas. And I think it is very enlightening and educational. If a dollar is doubled each day for twenty days, at the end of that period, the amount held will be over a million dollars: $1,048,000. If taxes of 30% are taken out of the original dollar, and each amount of increase thereafter, after 20 days that same dollar yields only $28,449. Staggering, but real! My own blog comment where I've posted this is here, and the rigorous formulas are here.

$1,000,000,or $28,500. Taxes are a HUGE drain. I know we must always have some taxes; but it's incredibly helpful to understand just how much taxation really costs us, so that we may make better choices.

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