Talking Tax

As part of its bid to join the OECD, Brazil is working on a major overhaul of its rules governing transfer pricing—the way a group’s related entities value transactions between themselves.

Historically, Brazil’s transfer pricing rules have relied on a system of fixed margins. But officials have now committed to moving Brazil to the arm’s length standard, the basis of the Organization for Economic Cooperation and Development's guidelines, and many countries’ approaches to transfer pricing.

Romero Tavares, a partner at PwC in Brazil, talks to Bloomberg Tax’s Isabel Gottlieb about what the changes mean for multinationals operating in Brazil, benefits and challenges companies will face under the new system, and what to expect as the government moves ahead with the project.

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Have you noticed digital works of art with names like Cool Cats, CryptoPunks, and Bored Ape Yacht Club while surfing the web or posting a snarky tweet?

They’re all examples of non-fungible tokens, or NFTs, unique digital assets serving as certificates of authenticity for digital products including works of art, music, and collectibles. NFTs are also a surging new industry, expected to reach global sales of $80 billion by 2025.

Despite this booming market, state revenue agencies haven’t figured out how to tax or even characterize these digital assets. More than 30 states arguably have authority to collect sales tax on NFTs, but none of them have issued guidance on the subject.

Bloomberg Tax took a deep dive into how states might choose to tax NFTs by speaking with two professionals steeped in digital economy tax issues.

Wendy Walker, a solutions principal at the tax software company Sovos, talked about the evolution of blockchain technology and the tax treatment of products and services living on blockchains. Kirk Phillips, a member of the American Institute of CPAs’ virtual currency task force, focused on the challenges associated with imposing state sales taxes on NFTs. Wendy and Kirk spoke with Michael Bologna, a senior reporter at Bloomberg Tax covering state and local taxes.

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The IRS is struggling.

As millions of Americans completed their annual tradition of filing taxes earlier this week, they again connected with a sprawling government agency besieged by issues that money alone can't solve. The IRS is still working through a backlog of unprocessed tax returns and can't keep up with a flood of phone calls from taxpayers looking for help.

Bloomberg Tax took a deep dive into the IRS's longstanding structural deficiencies, from an over-reliance on paper documents and outdated technology to a less-than-stellar public perception. We asked current and former government officials, agency watchdogs, and tax professionals to offer their strategy for fixing the IRS.

To round out the Fixing the IRS series, former IRS Commissioner John Koskinen and Carlos Lopez, founder of the Latino Tax Professionals Association, join the latest episode of our Talking Tax podcast. They discuss what the agency can do to get back on the right track.

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The quick pace of consultations into complex new rules from the OECD is keeping tax practitioners busy.

The Paris-based institution has already in 2022 launched several consultations into the “building blocks” of a new international tax system. Pillar One of the plan would reallocate a sliver of the profits of the largest and most profitable businesses to countries where they make sales. Pillar Two would establish a 15% global minimum tax.

Tim Sarson Partner, U.K. head of tax policy at KPMG U.K., talks with Bloomberg Tax’s Hamza Ali about the emerging rules in the latest episode of Talking Tax.

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The OECD's Inclusive Framework on Base Erosion and Profit Shifting is aiming to help developing countries implement a global agreement to change how multinational companies are taxed, according to the co-chair of its steering committee.

The agreement, which more than 130 countries signed up to in October, has two pillars. Pillar One reallocates a portion of the largest multinationals’ profits to market jurisdictions, while Pillar Two creates a global minimum tax rate of 15%.

The two pillars come with enormous complexities, meaning some countries will need help to keep up with the pace of implementation, says Marlene Nembhard-Parker, chief tax counsel for legislation, treaties, and international tax matters at Tax Administration Jamaica and co-chair of the Inclusive Framework Steering Group.

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The OECD released a draft framework March 22 that would standardize how global tax authorities regulate and share tax information related to cryptocurrency assets.

The draft—called the Crypto-Asset Reporting Framework, or “CARF”—includes model technical rules and a commentary written for wide adoption and data-sharing among tax administrations.

Countries that adopt the Organization for Economic Cooperation and Development's standards would require individuals and entities that “provide services to exchange crypto-assets against other crypto-assets, or for fiat currencies” to identify their customers and report the aggregate values of the exchanges and transfers on an annual basis.

Buchanan Ingersoll & Rooney PC international tax attorney Sahel Assar called the draft proposal a “tsunami” of regulation coming for cryptocurrency and related industries. Regulation, she says in our latest podcast, helps to legitimize the crypto industry.

The OECD is gathering public comments on the draft through the end of April. It aims to update the proposal and present it at the October meeting of the Group of 20.

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Recent court rulings striking down two Internal Revenue Service reporting requirements suggest the agency may need to change its procedures so that its rules will hold up in court.

The U.S. Court of Appeals for the Sixth Circuit struck down a tax reporting requirement on March 3 in Mann Construction, Inc. v. United States. That decision was cited by the U.S. District Court for the Eastern District of Tennessee when it struck down a separate reporting requirement on March 21 in CIC Services, LLC v. IRS.

The decisions come as the Treasury Department, and the IRS within it, face increasing scrutiny over whether their tax rulemaking procedures have met legal requirements.

On the latest episode of Talking Tax, Melissa Wiley, Member in Caplin & Drysdale's D.C. office, and Kristin Hickman, law professor at the University of Minnesota, discuss what the decisions could signal about how courts will approach federal tax rulemaking procedures. They speak with Bloomberg Tax's Aysha Bagchi and Jeff Leon.

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Gasoline prices have reached record highs in recent weeks, spurring lawmakers across the country to look for ways to offer some relief.

A popular target: the excise taxes the federal government and states collect to fund transportation programs. Some congressional Democrats have floated a suspension of the 18.3 cent-per-gallon federal gas tax, while many governors are pursuing state holidays that could provide some temporarily relief to drivers.

Temporarily ditching the gas tax would offer some obvious political benefits for lawmakers running for re-election this year. But how much would it actually help consumers with the national average for regular gasoline up to well over $4 a gallon and gas prices nearing $6 a gallon in California?

Lucy Dadayan and Howard Gleckman of the Urban-Brookings Tax Policy Center appear on the latest episode of our weekly Talking Tax podcast to talk about proposed gas tax holidays. Gleckman argues that suspending the federal excise tax could actually fuel further price increases, while Dadayan suggests states should instead look at targeted tax rebates to help low-income families struggling with inflation.

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The accounting profession offers career options that go beyond working for a CPA firm or corporate finance.

George Azih found that his years of working in both arenas built the perfect launch pad to start his own business, and solve some complex financial accounting problems along the way.

Azih is the founder and CEO of LeaseQuery, an Atlanta-based company that provides lease accounting software to businesses. In just a decade, Azih turned his startup into a business that Deloitte ranked among the 100 fastest-growing tech companies.

On today’s episode of our weekly podcast, Talking Tax, Azih talks with reporter Amanda Iacone about why he got into accounting and his experience as a Black entrepreneur. He also talks about the value of diversity in accounting and of searching for your diversity blind spots.

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Courts in Canada have been making high-profile rulings on a key area of corporate tax law in recent years and the federal government could be making even more changes.

Transfer pricing—the rules governing how entities within the same corporate group must make transactions as if they were arm’s length—represents a sizable chunk of the money the Canada Revenue Agency collects in tackling aggressive tax avoidance by companies. A court submission by the agency in 2021 said adjustments from transfer pricing over the three previous years increased government revenue by C$11.84 billion ($9.3 billion).

But judges have been dismissing the agency’s arguments when companies have decided to fight those adjustments in courts. Two decisions, one dealing with the uranium miner Cameco Corp. and a second with herbicide supplier Agracity Ltd., have grabbed tax practitioners’ attention because of how the courts interpreted Canada’s transfer pricing laws.

The federal government has promised a reform of the underlining legislation in light of its courtroom losses, but Ottawa’s options for rewriting the rules are anything but simple. On the latest episode of Talking Tax, David Hogan, partner at Richter LLP, talks about the impact the latest court decisions have had on transfer pricing and where the legal fight could be headed.

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