tax notes international - Tuck School of Business - Dartmouth College

y Cathy Phillips
The news that Sarah Palin’s shoes recently sold for
more than $2,000 on eBay shouldn’t fool anyone
into thinking the economic crisis is over. If you believe
the pundits, the worst is yet to come as the global
economy continues its precipitous slide. Recovering
will be an agonizingly slow process.
But how did we get here? Contributing editor Joann
Weiner has some ideas, and tax policymakers should
take heed. As Weiner explains, financial transactions
are at the root of the crisis. But for too long, she says,
policymakers have failed to see the impact of financial
transactions on the economy at large. Both the accounting
community and tax policymakers should focus
on financial accounting. Together they might see
how differences in book and tax accounting have allowed
companies to skew their financial statements
and tax filings — and engage in the kind of shenanigans
that got us in trouble in the first place (p. 371).
Squandering Stimulus?
Big pharmaceuticals, software companies, and financial
intermediaries are holding vast amounts of profits
offshore in anticipation of another repatriation tax
holiday. As you can imagine, battle lines are forming
over whether these companies deserve another chance
to bring back the dough. Contributing editors Lee
Sheppard and Martin Sullivan make no bones about
their opposition to the idea, arguing that a second repatriation
‘‘would constitute frittering of stimulus of a
high order’’ (p. 376).
In the News
U.S. prosecutors have increased their scrutiny of
Swiss bank UBS, and now believe that the bank helped
far greater numbers of U.S. clients hide income in offshore
accounts than originally thought (p. 380). U.K.
telecom giant Vodafone hit another roadblock in its
ongoing challenge of a $2 billion capital gains tax
claim. India’s Supreme Court refused to hear
Vodafone’s appeal in the case, which stemmed from
Vodafone’s 2007 merger with Indian telecom Hutchison
Essar (p. 381). Canada has managed to escape the
worst of the global economic downturn, but its 2009
budget nevertheless contains substantial stimulus measures.
The budget also features improvements to Canada’s
outbound regime, as well as corporate and individual
income tax relief measures (p. 383).
Commentary
Our first report, by Carlos Eduardo Costa M.A.
Toro, deconstructs article 7 of the OECD model convention,
which deals with business profits, in an attempt
to clear up uncertainties on the tax consequences
of setting up a business involving an agency PE (p.
421). Jim Fuller’s U.S. tax review returns this week
with his expert analyses of the final contract manufacturing
regs, the temporary branch rules, and the revised
cost-sharing regs. He also discusses recent U.S. treaty
developments and offers an alternative to reinstating
section 965 (p. 447).
Do banks matter in an age of government takeovers?
Trevor Johnson contends that U.K. business
owners needing a loan to pay the tax bill might as well
go directly to the government for the money, rather
than ask a bank for a loan that likely won’t be approved
(p. 411).
A practice article by Sonia Velasco and Ana Colldefors
discusses Spain’s advantageous new tax rules on
valuing intangible assets (p. 417). Another practice article,
by Marko Wohlfahrt and Katrin Köhler, reviews
German law on the deductibility of school fees (p.
419).
Chris Edwards and Daniel J. Mitchell of the Cato
Institute have written a book on tax competition that
even a liberal could love. So says Gary Clyde Hufbauer
in his review of The Global Tax Revolution: The Rise of
Tax Competition and the Battle to Defend It. Hufbauer characterizes
the book as ‘‘entertaining’’ and a good resource
for policy wonks (p. 415).
♦ Cathy Phillips is editor of Tax Notes
International.
TAX NOTES INTERNATIONAL FEBRUARY 2, 2009 • 369
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