International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Saturday, April 29, 2017

United Arab Emirates is 109th jurisdiction to bend to OECD will and sign OECD treaty against offshore tax evasion and tax avoidance

His Excellency Muadid Hareb Mughair Al-Khaili, Ambassador of the United Arab Emirates to France, signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters in the presence of the OECD Deputy Secretary-General, Rintaro Tamaki.  The Convention is the most powerful instrument for international tax cooperation. It provides for all forms of administrative assistance in tax matters: exchange of information on request, spontaneous exchange, automatic exchange, tax examinations abroad, simultaneous tax examinations and assistance in tax collection. It guarantees extensive safeguards for the protection of taxpayers' rights.

United Arab Emirates become the 109th jurisdiction to join the most powerful multilateral treaty against offshore tax evasion and avoidanceMuadid Hareb Mughair Al-Khaili, Ambassador of the United Arab Emirates to France and OECD Deputy Secretary-General, Rintaro Tamaki during the signing ceremony
OECD Headquarters
Paris, 21 April 2017

The Convention's impact grows with each new signatory; it also serves as the premier instrument for implementing the Standard for Automatic Exchange of Financial Account Information in Tax Matters developed by the OECD and G20 countries. The Convention will enable the United Arab Emirates to fulfil their commitment to begin the first of such exchanges by 2018.

The Convention can also be used to swiftly implement the transparency measures of the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project such as the automatic exchange of Country-by-Country reports under Action 13 as well as the sharing of rulings under Action 5 of the BEPS Project. The Convention is also a powerful tool in the fight against illicit financial flows.

The Convention was developed jointly by the OECD and the Council of Europe in 1988 and amended in 2010 to respond to the call by the G20 to align it to the international standard on exchange of information and to open it to all countries, thus ensuring that developing countries could benefit from the new more transparent environment.

The 109 jurisdictions participating in the Convention can be found at: www.oecd.org/ctp/exchange-of-tax-information/Status_of_convention.pdf

April 29, 2017 in GATCA | Permalink | Comments (0)

Friday, April 28, 2017

Toward a Perspective-Dependent Theory of Audit Probability for Tax Compliance Models

The classic deterrence theory model of income tax evasion first articulated in 1972 has met significant criticism because it does not comport with the observed rate of tax compliance. This Jack.manhire article argues that the classic expected utility model and its various progeny, including nonexpected utility models, employ too general a notion of taxpayers’ probability of audit by equating the latter to the frequency with which the government audits tax returns. Given that audit probabilities vary significantly based on whether taxpayers underreport tax on their returns, these models should be revised to reflect the conditional nature of audit probability from the taxpayers’ perspective. If one applies this perspective-dependent definition of audit probability to both expected and nonexpected utility models, the theoretical results will more closely reflect the observed rate of tax compliance.

Manhire, Jack, Toward a Perspective-Dependent Theory of Audit Probability for Tax Compliance Models (April 18, 2014). 33 Virginia Tax Review 629 (2014). Available at SSRN: https://ssrn.com/abstract=2366325 or http://dx.doi.org/10.2139/ssrn.2366325

April 28, 2017 in Tax Compliance | Permalink | Comments (0)

Thursday, April 27, 2017

Tax Compliance as a Wicked System

This paper proposes a new typology and framework for tax compliance systems. Traditionally-competing approaches such as deterrence theory, behaviorist theory, and game theoretic Jack.manhiremodels taken together suggest that tax compliance is perhaps a new type of system — a “wicked system” — that is only partially comprehensible by understanding the traditional theories alone. If correct, previously competing theories become simply different limiting cases of the same underlying “wicked system.” The paper concludes with a discussion of the framework’s limitations and presents initial solutions and challenges for future work.

Manhire, Jack, Tax Compliance as a Wicked System (2016). 18 Florida Tax Review 235 (2016); Texas A&M University School of Law Legal Studies Research Paper No. 16-29. Available at SSRN: https://ssrn.com/abstract=2586556 or http://dx.doi.org/10.2139/ssrn.2586556

April 27, 2017 | Permalink | Comments (0)

Wednesday, April 26, 2017

Involving Students in Accreditation

Higher education is transforming internally and externally. The demographics of learners continue to shift drastically to be more inclusive of people of color, first generation, part-time, CHEA logoreturning and older students. Learners are more diverse than ever before. There is also an expansion of types of programs offered to students. Coding boot camps, microdegrees and MOOCs are providing exciting alternatives to learn and gain certain skills. Moreover, a shift in the character of accountability is occurring. Accreditation has been the traditional form of external evaluation of quality for the Academy, governed by the Academy and funded by the Academy. These changes call for an expansion of key stakeholders in the accreditation process – particularly employers and students.

This article focuses on the need for accreditors to engage students in fundamentally different ways in all stages of its process. Read it here.

April 26, 2017 in Education | Permalink | Comments (0)

Tuesday, April 25, 2017

EU reveals its hardball UK terms but welcomes UK back if it changes it mind about BREXIT

The British Bankers Association has included its daily press release that the Brexit negotiation guidelines have been revealed

Leaked European Commission negotiating guidelines reveal Brussels’ requirement that the UK remain subject to European Comision_Europea_logo.svgCourt of Justice laws post-Brexit (The Times, p1, £, online). Any exit deal that does not uphold EU citizen rights will be vetoed as part of this ‘hard line approach’, warned European parliament chief Antonio Tajani (Financial Times, £, online). The guidelines also say the UK must pay all Brexit costs and ‘bear the currency risk’ (Politico, online). Tajani added, however, that Britain would be welcomed back if a new UK government reversed Brexit after the general election (The Guardian, p1, online).

April 25, 2017 in Financial Regulation | Permalink | Comments (0)

Monday, April 24, 2017

FTC Staff Reminds Influencers and Brands to Clearly Disclose Relationship

Commission aims to improve disclosures in social media endorsements

After reviewing numerous Instagram posts by celebrities, athletes, and other influencers, Federal Trade Commission staff recently sent out more than 90 letters reminding influencers 1024px-US-FederalTradeCommission-Seal.svg and marketers that influencers should clearly and conspicuously disclose their relationships to brands when promoting or endorsing products through social media.

The letters were informed by petitions filed by Public Citizen and affiliated organizations regarding influencer advertising on Instagram, and Instagram posts reviewed by FTC staff. They mark the first time that FTC staff has reached out directly to educate social media influencers themselves.

The FTC’s Endorsement Guides provide that if there is a “material connection” between an endorser and an advertiser – in other words, a connection that might affect the weight or credibility that consumers give the endorsement – that connection should be clearly and conspicuously disclosed, unless it is already clear from the context of the communication. A material connection could be a business or family relationship, monetary payment, or the gift of a free product. Importantly, the Endorsement Guides apply to both marketers and endorsers.

In addition to providing background information on when and how marketers and influencers should disclose a material connection in an advertisement, the letters each addressed one point specific to Instagram posts -- consumers viewing Instagram posts on mobile devices typically see only the first three lines of a longer post unless they click “more,” which many may not do. The staff’s letters informed recipients that when making endorsements on Instagram, they should disclose any material connection above the “more” button.

The letters also noted that when multiple tags, hashtags, or links are used, readers may just skip over them, especially when they appear at the end of a long post – meaning that a disclosure placed in such a string is not likely to be conspicuous.

Some of the letters addressed particular disclosures that are not sufficiently clear, pointing out that many consumers will not understand a disclosure like “#sp,” “Thanks [Brand],” or “#partner” in an Instagram post to mean that the post is sponsored.

The staff’s letters were sent in response to a sample of Instagram posts making endorsements or referencing brands. In sending the letters, the staff did not predetermine in every instance whether the brand mention was in fact sponsored, as opposed to an organic mention.

In addition to the Endorsement Guides, the FTC has previously addressed the need for endorsers to adequately disclose connections to brands through law enforcement actions and the staff’s business education efforts. The staff also issued FTC’s Endorsement Guides: What People are Asking, an informal business guidance document that answers frequently asked questions. The staff’s letters to endorsers and brands enclosed copies of both guidance documents. The FTC is not publicly releasing the letters or the names of the recipients at this time.

April 24, 2017 in Financial Regulation | Permalink | Comments (0)

Sunday, April 23, 2017

OECD discusses solutions for challenges in the design and operation of VAT systems

Tax experts gather at the OECD to discuss solutions for common challenges in the design and operation of VAT systems

Approximately 300 participants, representing over 100 delegations from countries, jurisdictions and international organisations, as well as representatives from the business community and academia, gathered in Paris for the fourth meeting of the OECD Global Forum on VAT on 12-14 April 2017.  

In his introductory speech, the OECD’s Deputy Secretary-General Rintaro Tamaki announced the release of the Recommendation of the Council on the Application of Value Added Tax/Goods and Services Tax to the International Trade in Services and Intangibles (the VAT/GST Recommendation). This Recommendation is the first OECD Act in the area of VAT and it is open to "adherence" by non-OECD members. The VAT/GST Recommendation incorporates the International VAT/GST Guidelines, which were developed with the active involvement of a wide range of countries beyond the OECD and the global business community. 

 
Belize and the Cayman Islands join the Inclusive Framework on BEPS

Following the second meeting of the Inclusive Framework on BEPS held in Paris on 26-27 2017, and recent regional meetings, more countries and jurisdictions are joining the framework. The Inclusive Framework on BEPS recently welcomed Belize and the Cayman Islands.  

April 23, 2017 in OECD | Permalink | Comments (0)

Saturday, April 22, 2017

Foreign National Extradited and Pleads Guilty to Human Smuggling Conspiracy

A Pakistani citizen pleaded guilty today for his role in a scheme to smuggle undocumented migrants from Pakistan into the United States. 

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, U.S. Attorney Channing D. Phillips of the District of Columbia and Special Agent in DHS Investigations Charge Angel M. Melendez of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) in New York made the announcement.

Sharafat Ali Khan, 32, a Pakistani citizen and former resident of Brazil, pleaded guilty to one count of conspiracy to smuggle undocumented migrants into the United States for profit before U.S. District Judge Reggie B. Walton of the District of Columbia.  Khan was extradited to the United States from Qatar on July 13, 2016.  Judge Walton scheduled Khan’s sentencing hearing for July 6, 2017. 

According to admissions in the plea agreement, between March 2014 and May 2016, Khan and other co-conspirators organized and arranged the unlawful smuggling of large numbers of undocumented migrants to the United States.  For their smuggling operation, Khan admitted that he and his co-conspirators used a network of facilitators to transport undocumented migrants from Pakistan and elsewhere through Brazil and Central America and then into the United States by land, air or sea travel.  Khan further admitted that he was responsible for managing safe houses for the migrants and arranging a network of associates in other countries to serve as escorts during different legs of the smuggling route.  Khan also admitted that voyage included harsh conditions that caused a substantial risk of serious bodily injury or death – including lengthy foot hikes with little food and water through the Darien Gap, a dangerous tropical forest area in Panama.

The investigation was conducted under the Extraterritorial Criminal Travel Strike Force (ECT) program, a joint partnership between the Justice Department’s Criminal Division and HSI. The ECT program focuses on human smuggling networks that may present particular national security or public safety risks, or present grave humanitarian concerns. ECT has dedicated investigative, intelligence and prosecutorial resources. ECT coordinates and receives assistance from other U.S. government agencies and foreign law enforcement authorities.

HSI New York investigated this case, with assistance from HSI Brazil, Mexico, Panama and Washington, D.C. field offices, the South Florida Joint Terrorism Task Force, FBI-Miami, the Human Smuggling Cell, the Diplomatic Security Service-Brazil, the Brazilian Federal Police and the U.S. Customs and Border Protection’s National Targeting Center.  The Criminal Division’s Office of International Affairs provided significant support with the defendant’s extradition and foreign legal assistance requests.   The Justice Department thanks the Government of Qatar for their assistance with the extradition in this case.  Senior Trial Attorney Michael Sheckels of the Criminal Division’s Human Rights and Special Prosecutions Section and Assistant U.S. Attorney Richard DiZinno of the District of Columbia are prosecuting the case.  

April 22, 2017 in AML | Permalink | Comments (0)

Burdensome Accreditation System Needs Overhaul

Voluntary, nongovernmental regulation has long been a hallmark of the American approach to quality assurance in higher education.  Unfortunately, while the concept remains valid, the CHEA logo U.S. accreditation system’s actual operations have become overly burdensome. It’s time for an overhaul. In recent years, several detrimental changes to this model have occurred.   Read the full CHEA op-ed here.

 

April 22, 2017 in Education | Permalink | Comments (0)

Friday, April 21, 2017

OECD Seeks to Hire by Summer Head of Tax Treaty Unit - Tax Treaty, Transfer Pricing and Financial Transactions Division

The CTPA is looking for a highly qualified and dynamic international tax expert to head its Tax Treaty Unit. Treaty-related OECD issues form a significant part of the G20/OECD Project on Base Erosion and Profit Shifting (BEPS), which reflects the importance of tax treaties in the international tax field. The successful candidate will provide technical expertise and strategic guidance in further developing the OECD’s work in this area, both from a policy and tax administration perspective. A key component of the next phase of the BEPS work is ensuring effective and consistent implementation of the BEPS treaty-related outcomes. Apply via OECD here....

Leadership and management

  • Provide strong technical and strategic leadership and vision to the Unit's work on treaty-related issues.

  • Exercise critical oversight of the analytical and policy work of the Unit, respond quickly to new priorities and emerging challenges, and present creative proposals for improving the content and management of the Unit’s work.

  • Draft analytical reports to be shared with Delegates in advance of meetings.

  • Lead the discussion with Delegates on these reports at relevant meetings with a view to achieving consensus among Delegates.

  • Organise consultations with the private sector and other stakeholders to seek input into the work.

  • Finalise the documents taking account of country views expressed by Delegates.

  • Manage and motivate the team working in the Treaty Unit to deliver high quality results and contribute to their professional development.

  • Assist in mobilising and securing funding to support the programme.

  • Provide strategic direction to the Working Party on Tax Conventions and Related Questions and related bodies, and oversee and deliver their work programmes in a timely manner.

  • Develop and execute a strategic programme for strengthening relationships with non-OECD economies in the tax treaty area.

  • Provide strategic guidance and technical support on the tax treaty aspects of the Global Relations and Development Programme, including the development of practical toolkits.

Representation, communication and liaison

  • Liaise with and support the work of other working groups and subsidiary bodies of the CFA on matters relating to tax treaties.

  • Ensure effective communication with key stakeholders, the media and the general public in order to maximise the value, visibility and impact of the work of the Unit.

  • Represent the OECD at high-level meetings and conferences involving senior tax policy makers, tax administrators and representatives of business, labour, academia, NGOs and the media.

  • Lead high-level missions to OECD and non-OECD economies.

  • Build collaborative working relationships throughout the OECD and across other international organisations. Establish and maintain close contacts with national authorities, the private sector, academia, research institutes, civil society and the media. 

Other

  • Contribute to the wider development of the CTP’s work on taxation.

Ideal Candidate profile

 

Academic Background

  • An advanced university degree in law, economics, accountancy, public finance or equivalent qualifications, preferably an LLM or equivalent degree in International Taxation.

Professional Background

  • A minimum of eight years’ experience in the field of international taxation gained in a national government, the private sector or in an international organisation.
  • Experience in conceptualising and analysing complex issues and in providing strategic leadership in the international tax area.
  • Experience in leading and working as part of a multicultural team.
  • Practical experience in the negotiation of tax conventions would be an important asset.

Tools

  • Fluency in the use of standard software applications such as Word, Excel, PowerPoint.

Languages

  • Fluency in one of the two OECD official languages (English and French) and knowledge of the other, with a commitment to reach a good working level.
  • Knowledge of Spanish would be an asset.

Core Competencies

  • For this role, the following competencies would be particularly important: Achievement focus, Analytical thinking, Drafting skills, Flexible thinking, Teamwork and Team leadership, Diplomatic sensitivity, Negotiating, Developing talent, Strategic thinking.

  • Please refer to the level 4 indicators of the OECD Core Competencies.

Contract Duration

  • Ideal start date July 2017

  • Two-year fixed term appointment, with the possibility of renewal.

What the OECD offers

  • Monthly base salary starting from 8200 EUR, plus allowances based on eligibility, exempt of French income tax.

April 21, 2017 in OECD | Permalink | Comments (0)

Quis custodiet ipsos custodes? “Who will guard the guards themselves?”

All of us are accountable. Religions hold us accountable to God. Santa Claus makes a list of who has been naughty and who has been nice. Freud tells us about the super ego. Everyone has a watchdog.

Enter accreditation. These organizations are the overseers of the public yet at the same time they are often “family” — faculty and staff from one school looking into the affairs of another CHEA school, and vice-versa. It is this closeness that has drawn the attention of the public and the government. As tuition rises and the ease of employment diminishes, the public wonders what return is gained from the enormous expenditures and high debt. And entrepreneur Peter Thiel is paying young people $100,000 not to matriculate. Read the full CHEA op-ed here.

April 21, 2017 in Education | Permalink | Comments (0)

Thursday, April 20, 2017

Cyber Crime Causes 1.8% Permanent Drop in Corporation's Share Price

 

CITY A.M. (London) reports that: Severe cyber attacks have cost global investors at least £42bn in recent years according to a new in-depth study published this morning.

Security breaches directly correlate with lower share prices, according to a report from CGI Group and Oxford Economics.  It reveals that share prices fall by an average of 1.8 per cent on a permanent basis following a severe breach.

April 20, 2017 in AML | Permalink | Comments (0)

Wednesday, April 19, 2017

ECB Advises Banks For Their Exodus from London to EU

European Central Bank Q&A About Banks Relcoating from London to EU

In the context of Brexit, the ECB and several national supervisors have been approached by banking groups with questions about the supervisory approach in the euro area and about ECBrequirements by ECB Banking Supervision for banks potentially relocating business.

Who supervises banks in the euro area?

In the euro area, banking supervision is conducted by the ECB and the national supervisors of the participating countries – known as the national competent authorities (NCAs) – within the framework of the Single Supervisory Mechanism (SSM).

The supervisory roles and responsibilities of the ECB and the national supervisors for banks in the euro area are allocated on the basis of the significance of the supervised entities.

  • A bank that meets a set of significance criteria (significant institution (SI)) will, as a rule, be supervised directly by the ECB.
  • A bank which does not meet these criteria (less significant institution (LSI)) will be supervised directly by the national supervisor of the country where that bank is located. (The ECB has an oversight role to ensure the consistency and quality of supervision across such institutions and over the entire system).

The ECB is also responsible for granting licences for credit institution (as defined in CRR) and approving the acquisition of qualified holdings and other common procedures for all supervised credit institutions within the context of the SSM Regulation (see also Section 2 "Authorisations and licences to carry out banking activities in the euro area" of the FAQs).

What if my bank is part of a larger group? Would the ECB directly supervise all entities in the group? Would this affect the significance status of my bank?

Where a bank is part of a group, for the purpose of determining significance the situation of the group at the highest level of prudential consolidation within the euro area will be taken into account (not the individual situation of each entity). For example, if the group’s assets exceed €30 billion at the above-mentioned consolidated level, then all supervised entities within that group are considered as significant, even if they do not meet the threshold of €30 billion of assets at an individual level.

Where a bank is part of a significant group directly supervised by the ECB, the supervision of that bank is conducted both individually and on a consolidated basis. In order to conduct both layers of supervision, the SSM Regulation and the SSM Framework Regulation (the ‘regulations’) grant the ECB specific supervisory powers, not only over banks but also – for example – over (mixed) financial holding companies, as long as they are located within euro area countries and according to the specific rules of the regulations. If the group includes other financial institutions such as investment firms, these institutions would not be supervised by the ECB on an individual level, but would be included in the supervision of the group on a consolidated basis.


According to Article 2 (20) of the SSM Framework Regulation, ‘supervised entity’ means any of the following: (a) a credit institution established in a participating Member State; (b) a financial holding company established in a participating Member State; (c) a mixed financial holding company established in a participating Member State, provided that it fulfils the conditions laid down in point (21)(b); (d) a branch established in a participating Member State by a credit institution which is established in a non-participating Member State.


Will the choice of euro area country in which I establish result in more or less stringent supervision requirements?

The ECB is completely neutral regarding the location chosen and ensures consistent supervision throughout the euro area. All significant institutions are supervised directly by the ECB, using a single set of supervisory standards, irrespective of the country in which they are located. Less significant institutions are supervised directly by the national supervisor of the country where that bank is located. The ECB has an oversight role to ensure the consistency and quality of supervision across such institutions and over the entire system.

Do these FAQs only apply for significant institutions under the direct supervision of the ECB?

No. The ECB and national supervisors have agreed to apply consistent approaches across the euro area, to both significant and less significant institutions.

To whom do I submit my licensing application?

In the euro area, the procedure for granting or extending a banking licence (where relevant) is one of what are known as “common procedures”. The ECB and the national supervisors are involved in different stages of these procedures. In a common procedure, the entry point for all applications is the national supervisor of the country where the bank will be located, irrespective of whether the significance criteria are met or not. The national supervisors and the ECB cooperate closely throughout this procedure, which is completed for all supervised credit institutions, with the ECB taking the decision.

Therefore, in all cases, your licence application should be submitted directly to the relevant national supervisor, so that the common procedure can be triggered. In line with Article 22 of the Capital Requirements Directive (CRD), the same procedure should be followed in the event of an acquisition of a qualifying holding in a bank.

Common procedures

Can I approach the ECB/national supervisors to have pre-application discussions, even if my application file is not complete?

Yes. The ECB and the national supervisors see value in having preparatory discussions with banks interested in establishing or increasing their presence within the euro area. Such discussions are encouraged on issues around your application as soon as you have defined the fundamental elements and narrowed down any options of your transformation or reorganisation plan. In any case, the ECB and the national supervisors start communicating with each other on such applications at an early stage, in order to ensure a smooth process.

How long does the authorisation process take? Should I assume a shorter period if I only apply for the extension of an existing licence?

It usually takes six months from the applicant providing a complete application for a decision to be taken regarding a licence application. This period may be shorter in cases where the applicant asks for an extension of an existing license, provided that the national framework provides for such an extension and that there are no supervisory concerns over the existing SSM entity. In any event, a decision must be taken within 12 months of the date of the application. (For detailed information on the common procedures, see Articles 14 and 15 of the SSM Regulation, as well as Part V of the SSM Framework Regulation.) Submitting a complete file of high quality at the outset is in any case crucial to make sure that your application is processed as smoothly as possible.

Would the duration and assessment criteria differ depending on which euro area country I choose as my location?

No. All licensing applications are processed according to the common procedure described above, regardless of the country in which the application is filed (see also the question on how to submit a licensing application).

There is uncertainty around the exact time when I could lose my rights for cross-border provision of services and/or establishment within the EU, due to a potential loss of the passporting regime. Do you have a specific timeline according to which applications or extensions are expected to be submitted?

Applications will be processed as they are submitted, and within the legal timelines. The duration of the assessment will depend on the complexity of the individual case and the completeness and quality of the application (see also the question above). You should plan accordingly, in order to be sure to obtain your license on time.

What happens if a decision to restructure the group results in a change in the holdings of a bank directly supervised by the ECB? Do I notify the ECB directly?

The acquisition of, or increase in, a qualified holding in a credit institution – as defined in the Capital Requirements Directive – is subject to prior authorisation by the ECB. Like the assessment for granting a banking licence, this assessment is carried out under a common procedure. Therefore, the national supervisor is the entry point to which you should submit a notification. Following close cooperation and consultation with the national supervisor, the ECB will take a supervisory decision on the acquisition of the holding. For a smooth process, applicants should consider engaging in a dialogue with the respective NCA and the ECB prior to the official submission of the application.

April 19, 2017 in Financial Regulation | Permalink | Comments (0)

Prof William Byrnes speaks at 16th Annual Security Conference (Las Vegas April 18-20)

On May 19th 10.30 AM – 12.00 PM Professor William Byrnes of Texas A&M University School of Law is a featured speaker of the 16th Annual Security Conference.  Featured speakers of the 16th Annual conference include national security government experts such as: 

  • Noël Richards, National Security Agency (NSA)
  • Preston Ackerman, Federal Bureau of Investigation (FBI)
  • Pamela Sydelco, Global Security Sciences Division, Argonne National Laboratory

2 cropSession Chairs – Dr. Spiro Samonas & Dr. Dionysis Demetis
Featured Speaker: William Byrnes, Texas A&M University Law
Topic: Incentivizing Good Tax Administrations among the World of Black Hat and Grey Hat Governments: A Carrot & Stick Policy Proposal

Paper Published by the Emory International Law Review, Vol. 31, No. 1, 2017. Available at SSRN: https://ssrn.com/abstract=2916444

PowerPoint Presentation:  Download Byrnes Security Vegas 4-19-2017

April 19, 2017 in AML | Permalink | Comments (0)

Tuesday, April 18, 2017

What Does Voluntary Tax Compliance Mean?: A Government Perspective

One of the IRS’s principal goals is to maximize voluntary compliance. Yet, there is often a great deal of confusion and consternation when taxpayers discover that the IRS refers to the Jack.manhireannual filing and payment ritual as “voluntary;” especially since most taxpayers do not believe they have a choice when it comes to filing and paying their taxes. What does voluntary compliance mean? Does it mean taxpayers can volunteer to file returns and pay taxes, much as one might volunteer to make a charitable donation? Does it mean taxpayers don’t have to comply with the tax laws if they don’t feel like it? How can it be a federal crime to not file or pay taxes if compliance is voluntary? This essay offers a government perspective as to why the IRS uses this sometimes perplexing term. After investigating (and dismissing) a possible literal defense, the essay surveys the IRS’s history to see why voluntary compliance is such a critical part of the U.S. tax system. The essay then recommends changing the term from voluntary to cooperative compliance to retain the government’s meaning while lessening taxpayer confusion.

Manhire, Jack, What Does Voluntary Tax Compliance Mean?: A Government Perspective (2015). 164 University of Pennsylvania Law Review Online 11 (2015); Texas A&M University School of Law Legal Studies Research Paper No. 16-58. Available at SSRN: https://ssrn.com/abstract=2601613

April 18, 2017 in Tax Compliance | Permalink | Comments (0)

Monday, April 17, 2017

OECD tax rates on labour income continued decreasing slowly in 2016

Taxes on labour income for the average worker across the OECD continued to decrease for the third consecutive year during 2016, dropping to 36% of labour costs, according to a new OECD report.

Taxing Wages 2017 measures the level of personal income tax and social security contributions in each OECD country by calculating the ‘tax wedge’ - the total taxes on labour income paid by employees and employers, minus family benefits received, as a percentage of the labour costs of the employer. The tax wedge is calculated for a range of different family types and at different income levels.

The tax wedge on the income of the average worker decreased slightly, to 36%, in 2016. Last year’s decline follows a multi-year trend, partially reversing tax wedge increases reported in the years immediately following the global economic crisis.

The decrease in the average tax wedge seen since 2013 is partly explained by reforms in some countries to reduce taxes on labour income. For example, in 2016 Belgium and Austria both experienced significant reductions in their tax wedges as a result of labour tax reforms.

 

© OECD

<download the data as an Excel file>    ‌‌

Taxing-wages-2017-infographicAlthough the OECD average tax wedge decreased slightly in 2016 relative to 2015, the tax wedge actually increased slightly in 20 OECD countries, while it declined in 14 others. Most of the changes were driven by changes in personal income tax.

Taxing Wages 2017 also finds that taxes on families with children are lower than taxes on single earners without children in all but two countries (Chile and Mexico), where they are the same.. In 2016, the OECD average tax wedge for one-earner families with children was 26.6%, nearly 10 percentage points lower than the tax wedge on the average single worker. On average across OECD countries the gap between the tax wedges of families and single earners increased slightly between 2015 and 2016.

Taxing Wages provides unique cross-country comparative data on the amounts of personal income taxes, social security contributions, payroll taxes and cash benefits for eight family-types, which differ by income level and household composition. It also presents the resulting average and marginal tax wedge for these family types. Average tax wedges show the part of gross wage earnings or labour costs which are taken in personal income taxes (before and after cash benefits), social security contributions and payroll taxes. Marginal tax wedges show the part of an increase of gross earnings or labour costs that is paid in these levies.

The 2017 edition of Taxing Wages contains a special feature examining the impact of tax on the incentives for workers to invest in their skills. For a typical worker undertaking a short course of training, the combined impact of personal income taxes and employee social security contributions reduces the incentive to invest in skills training, lowering the value of a skills investment by 24.9% on average across the OECD.

“Taxes on labour income for the average worker across the OECD are still falling slightly, although this decline is partly driven by reforms in a handful of countries,” said Pascal Saint-Amans, Director of the OECD’s Centre for Tax Policy and Administration.  “Boosting the work incentives of low and middle income earners by reducing the tax wedge on labour incomes continues to be an important way of encouraging inclusive growth.”

Key findings

The average tax wedge in the OECD decreased in 2016 relative to 2015 

  • Across OECD countries, the average personal income tax (PIT) and social security contributions (SSCs) on employment incomes was 36.0% in 2016, a decrease of 0.07 percentage points relative to 2015.
  • In 2016, the highest average tax wedges for childless single workers earning the average national wage were in Belgium (54.0%), Germany (49.4%), Hungary (48.2%) and France (48.1%).  The lowest were in Chile (7%), New Zealand (17.9%) and Mexico (20.1%). 
  • Between 2015 and 2016, the tax wedge increased in 20 of 35 countries, fell in 14 and remained unchanged in Chile. Changes to the PIT were the main contributor to an increasing total tax wedge in 16 of the 20 countries.
  • There was an increase of more than one percentage point in the tax wedge in only one country; Greece (1.06 percentage points), which was driven by an increase in both PIT and SSCs.
  • A decline of one percentage point or more was experienced in two countries, which both implemented labour income tax reforms - Austria (2.47 percentage points) and Belgium (1.32 percentage points). The change in Austria was mainly due to lower PIT, whereas in Belgium it was caused by lower PIT and employer SSCs. 
  • Changes to PIT were also the primary contributing factor in most countries where the tax wedge fell in 2016. In Iceland and Switzerland, changes in SSCs also contributed. Decreasing employer’s SSCs were the main factor in France and Italy.  

Tax wedges for families with children 

  • In 2016, the highest tax wedge for one-earner families with two children at the average wage was in France (40.0%). Belgium, Finland, Greece, Italy and Sweden had tax wedges Taxing-wages-2017-brochure-COVERof between 38% and 40%. New Zealand had the lowest tax wedge for these families (6.2%), followed by Chile (7%), Ireland (8.3%) and Switzerland (9.1%). The average for OECD countries was 26.6%.
  • Between 2015 and 2016, the largest increase in the tax wedge for one earner families with children was in New Zealand (1.24 percentage points). The largest decreases were in Austria (2.68 percentage points), Portugal (2.50 percentage points), Belgium (1.73 percentage points), Hungary (1.60 percentage points) and Ireland (1.03 percentage points). 
  • The tax wedge for families with children is lower than that for single individuals without children in all OECD countries except in Chile and Mexico, where both family types face the same tax levels. No PIT is payable at the average wage level in Chile and no tax provisions for families with children exist in Mexico. The differences are particularly large in Canada, the Czech Republic, Germany, Ireland, Luxembourg and Slovenia. 

April 17, 2017 in OECD | Permalink | Comments (0)

Sunday, April 16, 2017

California Twice Convicted Felon Sentenced to Prison for Operating Fake Law Firms That Promised to Help Struggling Homeowners

An Orange County, California man was sentenced today in U.S. District Court in Santa Ana, California to serve 109 months in prison including the last 12 months in a halfway house for FBI DOJ logo his role as the owner and operator of a multi-million dollar fraudulent mortgage modification scheme that posed as a successful law firm, the Justice Department announced.

Bryan D’Antonio, 50, of Brea, California, pleaded guilty to conspiracy to commit mail and wire fraud on Aug. 9, 2016. In addition to the term of prison imposed by U.S. District Judge David O. Carter, Judge Carter ordered D’Antonio to pay $3,826,977.95 in restitution.

D’Antonio admitted that, between October 2008 and June 2009, he participated in a scheme with Ronald Rodis, Charles Wayne Farris, and others to induce homeowners to pay between $3,500 and $5,500 for the services of Rodis Law Group (RLG) and its successor entity, America’s Law Group (ALG). RLG and ALG advertised on radio stations nationwide, urging struggling homeowners to call a toll-free number and stating that the companies consisted of “a team of experienced attorneys” who were “highly skilled in negotiating lower interest rates and even lowering your principal balance.” In fact, RLG and ALG were telemarketing operations that never had teams of experienced attorneys, and that collected these payments from distressed homeowners, without providing anything of value to the overwhelming majority of them. During much of the scheme, Ronald Rodis was the only attorney at RLG.

“This defendant – a repeat telemarketing fraudster - took advantage of vulnerable homeowners facing foreclosure during the mortgage crisis,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “His two fake law firms promised homeowners assistance saving their homes and modifying their mortgages. The sad reality is both firms were nothing more than telemarketing scams.”

“While still under court supervision after serving a prison term in another telemarketing case, D’Antonio oversaw what was essentially a boiler room operation that preyed upon struggling homeowners,” said Acting U.S. Attorney Sandra R. Brown. “Hundreds of victims lost millions of dollars after D’Antonio’s employees told a series of lies that misrepresented nearly every aspect of the business. Today’s lengthy sentence will ensure that he will not have the opportunity to defraud unsuspecting victims for many years.”

D’Antonio was previously convicted of mail and wire fraud and sentenced to four years in federal prison for his participation in a medical billing scheme. He was also subject to a permanent injunction prohibiting him from having any involvement with any business that engaged in telemarketing or misrepresented the services it would provide. D’Antonio admitted that he started RLG while he was still on supervised release from his prior conviction. In violation of D’Antonio’s permanent injunction, RLG and ALG sold their services through an extensive telemarketing operation in which employees routinely misrepresented the services RLG and ALG would provide.

RLG and ALG telemarketers working for D’Antonio made numerous misrepresentations regarding the companies’ ability to negotiate loan modifications for homeowners. For example, the telemarketers stated that RLG and ALG had been in business for 11 years when in fact the company had only opened in October 2008. They falsely stated that RLG and ALG routinely obtained positive results for homeowners, including lower monthly payments, reductions in principal balance and lower interest rates. In fact, positive results were rarely achieved for any RLG or ALG clients. Telemarketers also falsely reiterated that homeowners would have a team of attorneys and real estate professionals assigned to their case. The telemarketers did not disclose to homeowners that RLG and ALG were owned and operated by Bryan D’Antonio, a convicted felon who was prohibited from engaging in telemarketing.

In connection with his guilty plea, D’Antonio admitted that the RLG and ALG schemes fraudulently obtained approximately $9 million from more than 1,500 victims.

“Mr. D’Antonio preyed upon victims who were already experiencing difficult circumstances and robbed them of their remaining financial resources,” said Assistant Director in Charge Deirdre L. Fike of the FBI’s Los Angeles Field Office. “Homeowners seeking financial assistance should thoroughly investigate businesses before investing their money in advance of receiving services.”

D’Antonio’s co-defendants, Charles Wayne Farris and Ronald Rodis, both previously pleaded guilty to one count of conspiracy to commit mail and wire fraud. Farris and Rodis are scheduled to be sentenced on May 1.

April 16, 2017 in AML | Permalink | Comments (0)

Saturday, April 15, 2017

Justice Department Announces Actions to Dismantle Kelihos Botnet

The Justice Department announced an extensive effort to disrupt and dismantle the Kelihos botnet – a global network of tens of thousands of infected computers under the Fbi-cybercontrol of a cybercriminal that was used to facilitate malicious activities including harvesting login credentials, distributing hundreds of millions of spam e-mails, and installing ransomware and other malicious software. 

“The operation announced today targeted an ongoing international scheme that was distributing hundreds of millions of fraudulent e-mails per year, intercepting the credentials to online and financial accounts belonging to thousands of Americans, and spreading ransomware throughout our networks.   The ability of botnets like Kelihos to be weaponized quickly for vast and varied types of harms is a dangerous and deep threat to all Americans, driving at the core of how we communicate, network, earn a living, and live our everyday lives,” said Acting Assistant Attorney General Blanco.  “Our success in disrupting the Kelihos botnet was the result of strong cooperation between private industry experts and law enforcement, and the use of innovative legal and technical tactics. The Department of Justice is committed to combatting cybercrime, no matter the size or sophistication of the scheme, and to punish those who are engaged in such crimes.”

“Cybercrime is a worldwide problem, but one that infects its victims directly through the computers and personal electronic devices that we use every day,” said Acting U.S. Attorney Bryan Schroder for the District of Alaska.  “Protecting the American people from such a worldwide threat requires a broad-reaching response, and the dismantling of the Kelihos botnet was such an operation.  We are lucky that we have talented FBI agents and federal prosecutors with the skillsets to help protect Americans from this pervasive cybercrime.”

“On April 8, 2017, we started the extraordinary task of blocking malicious domains associated with the Khelios botnet to prohibit further infections,” said FBI Special Agent in Charge Ritzman. “This case demonstrates the FBI’s commitment to finding and eradicating cyber threats no matter where they are in the world.”

Kelihos malware targeted computers running the Microsoft Windows operating system.  Infected computers became part of a network of compromised computers known as a botnet and were controlled remotely through a decentralized command and control system.  According to the civil complaint, Peter Yuryevich Levashov allegedly operated the Kelihos botnet since approximately 2010.  The Kelihos malware harvested user credentials by searching infected computers for usernames and passwords and by intercepting network traffic.  Levashov allegedly used the information gained from this credential harvesting operation to further his illegal spamming operation which he advertised on various online criminal forums.  The Kelihos botnet generated and distributed enormous volumes of unsolicited spam e-mails advertising counterfeit drugs, deceptively promoting stocks in order to fraudulently increase their price (so-called “pump-and-dump” stock fraud schemes), work-at-home scams, and other frauds.  Kelihos was also responsible for directly installing additional malware onto victims’ computers, including ransomware and malware that intercepts users’ bank account passwords.
            
As with other botnets, Kelihos is designed to operate automatically and undetected on victims’ computers, with the malicious code secretly sending requests for instructions to the botnet operator. In order to liberate the victim computers from the botnet, the United States obtained civil and criminal court orders in the District of Alaska.  These orders authorized measures to neutralize the Kelihos botnet by (1) establishing substitute servers that receive the automated requests for instructions so that infected computers no longer communicate with the criminal operator and (2) blocking any commands sent from the criminal operator attempting to regain control of the infected computers.

In seeking authorization to disrupt and dismantle the Kelihos botnet, law enforcement obtained a warrant pursuant to recent amendments to Rule 41 of the Federal Rules of Criminal Procedure.  A copy of this warrant along with the other court orders are produced below.   The warrant obtained by the government authorizes law enforcement to redirect Kelihos-infected computers to a substitute server and to record the Internet Protocol addresses of those computers as they connect to the server.  This will enable the government to provide the IP addresses of Kelihos victims to those who can assist with removing the Kelihos malware including internet service providers.  

The efforts to disrupt and dismantle the Kelihos botnet were led by the FBI’s Anchorage Office and New Haven Office; Senior Counsel Ethan Arenson and Harold Chun, and Trial Attorney Frank Lin of the Computer Crime and Intellectual Property Section; and Assistant U.S. Attorneys Yvonne Lamoureux and Adam Alexander of the District of Alaska.  Critical assistance was also provided by foreign partners, and invaluable technical assistance was provided by Crowd Strike and The Shadow server Foundation in executing this operation.

The details contained in the civil complaint and related pleadings are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

The Government has and will continue to share samples of the Kelihos malware with the internet security community so that antivirus vendors can update their programs to detect and remove Kelihos.  A number of free and paid antivirus programs are already capable of detecting and removing Kelihos, including the Microsoft Safety Scanner(link is external), a free product.

The documents filed by the Government as well as the court orders entered in this case are available online at the following web address:

April 15, 2017 in AML | Permalink | Comments (0)

Friday, April 14, 2017

UK Fines PhD Student for Not Filing Tax Returns Though No Tax Due, Dissertation Changes Not Excuse For Delayed Filing

Dr. Olga Malinovskaya v HMRC [2017] UKFTT 245 (TC).

The appellant Dr. Olga Malinovskaya was born in Russia and is an academic. She has obtained degrees in the USA and France. She was a research student at Lincoln College, Oxford HMRC logofrom 15 January 2011 to 6 June 2016 successfully reading for the degree of Doctor of Philosophy in Medieval and Modern languages, and graduating on 22 July 2016. The appellant has provided evidence in support of the above.

In an attempt to fund her stay in Oxford she formed a film distribution business (Vintage Films Ltd) which was registered in October 2010. The company has never yielded any profit. It is still in existence but the appellant says it has been “dormant for HMRC purposes”.  The appellant worked full time at Gherson, an immigration and human rights law firm from January 2012 to May 2014 and from August 2016 to date. Whilst there she paid tax at source and was never asked to complete SA returns until February 2016.

In January 2016 the appellant was aware that she had received £500 from Oxford University in June 2015 so applied for self-assessment. The end result was that she was also asked to provide SA returns for years 2012-2013, 2013-2014, and 2014-2015.

In respect of reasonable excuse HMRC say that they consider the actions of a taxpayer should be considered from the perspective of a prudent person. Exercising reasonable foresight and due diligence, having proper regard for their responsibilities under the Tax Acts…. The test is to determine what a reasonable taxpayer, in the position of the taxpayer, would have done…….”.   In respect of the penalty being unfair HMRC say for a penalty to be disproportionate it must be “not merely harsh but plainly unfair.” They refer to the decision in International Transport Roth Gmbh v SSHD.  [HMRC] says special circumstances must be “exceptional, abnormal or unusual” (Crabtree v Hinchcliffe) or “something out of the ordinary run of events” (Clarks of Hove Ltd. v Bakers’ Union). HMRC consider that there are no special circumstances which would allow them to reduce the penalty.

Tribunal’s Observations

The Tribunal agrees with HMRC that it is the Appellant’s responsibility to submit SA returns on time.  The returns for the periods 2012-2013, 2013-2014, and  2014-2015 were due to be submitted by 9 May, 2016, 9 May 2016, and 18 May 2016 respectively, but they were all submitted late on 16 October 2016. Penalties totalling £2,250 are therefore due unless the appellant can establish a reasonable excuse for the delay as referred to in Paragraph 23(1) Schedule 55 Finance Act 2009.  A reasonable excuse is normally an unexpected or unusual event that is unforeseeable or beyond the taxpayer’s control, and which prevents them from complying with their obligation to file on time.

The appellant gives details of her appeals to HMRC against the penalties and requesting them to remove the notices to file self-assessment returns. She also gives evidence supporting telephone calls made to HMRC. She maintains there was no income that requires an SA return for the years 2012-2013, 2013-2014, and 2014-2015. She claims to have been wrongly advised that the only way she could cancel the notices to file and the late penalties would be to file SA returns. She says that it is within HMRC powers to withdraw or cancel notices to file.  After filing the returns she was advised there was no tax liability for the years 2012-2013 and 2013-2014 and that she was due a refund of £778.59 in respect of 2014-2015. That refund has been retained by HMRC pending the outcome of this appeal.  In the tribunal’s view HMRC are entitled to satisfy themselves that no tax is due in any tax year. This is what they set out to do by means of asking the appellant to complete SA returns for the periods in question. The appellant appears to take the view that because she is satisfied that no tax is due she does not need to complete a return. The appellant is responsible for meeting the deadlines for filing her tax returns whether or not she considers any tax is due.

The appellant points out that her viva (a defence of a PhD thesis) was scheduled for 18 February 2016. The result of that was that numerous corrections had to be made to her thesis by 6 June 2016. She states that this work consumed all her time and attention during the period.  In respect of reasonable excuse the appellant points out that she was very busy in writing and correcting a thesis for a PhD and all her time was focussed on that. Many people in many and varied walks of life are very busy but they recognise that other responsibilities can impinge on their time. Completing SA returns is one such responsibility. Completing a PhD, whilst an admirable achievement, does not provide the appellant with a reasonable excuse for the late completion of tax returns.

The appellant complains that she was given a short deadline to complete the returns. The notice to file was given in early February 2016 with dates for submission over 3 months later in May 2016. The Tribunal observes that the appellant considers that the returns show no taxable income from the film distribution business and that tax on income from Ghersons was paid at source which suggests that completion of the returns would be a straight forward task and would not consume a great deal of time. Thus the Tribunal considers the appellant was given ample notice to file the returns.

 

 

 

April 14, 2017 in Tax Compliance | Permalink | Comments (0)

Thursday, April 13, 2017

Australia Revenue To Report Tax Debts to Credit Agencies

The Government has announced that from 1 July 2017 it will allow the Australian Taxation Office (ATO) to disclose debt information to credit reporting bureaus of taxpayers that are ATOnot effectively engaged with the ATO to manage their debts.

Taxpayers are encouraged to pay taxation debts in a timely manner to avoid it affecting their credit rating.

Providing transparency of tax debts owed by disengaged taxpayers aims to influence taxpayer behaviour and reduce the unfair financial advantage gained by taxpayers that do not pay their tax on time. It will also help to provide visibility of tax debt information to other businesses (such as suppliers) and credit providers.

Taxpayers who effectively engage with the ATO to resolve their debt will not have it reported.

While the specific circumstances and exceptions for disclosure are being confirmed through the consultation and design process, tax debts will only be reported where:

  • the debt is for a taxpayer that has an ABN
  • the debt is over $10,000 and unpaid for over 90 days
  • the debt is not in dispute
  • no payment plan has been established or an existing payment plan has defaulted.

The ATO will notify a taxpayer that it intends to refer its tax debt to a credit reporting bureau before it passes on the information.

The ATO will establish agreements with credit reporting bureaus to manage the reporting and administration of tax debt information.

In conjunction with Treasury, the ATO is consulting with the community, including business, industry groups and associations (including the Australian Small Business and Family Enterprise Ombudsman), to ensure that the measure is implemented and administered effectively.

 

Legislation and supporting material

This measure is not yet law and is subject to the normal parliamentary process.

Subject to passage of the law, the ATO will issue further details on how the measure will be implemented and administered.

More information

April 13, 2017 in GATCA | Permalink | Comments (0)