PWC’s WNTS insight reports:
“Collaboration among revenue authorities around the globe is increasing. In addition to traditional information exchange under tax treaties and agreements, many countries now engage in other collaborative activities, including bilateral advance pricing agreements, Competent Authority agreements, and multilateral tax information exchange programs (e.g., the Joint International Tax Shelter Information Centre (JITSIC)). Countries also have been engaging in simultaneous tax audits, in which two or more countries examine a taxpayer simultaneously, each in its own territory, when there is a common or related interest and a view to exchange the information they obtain.
This collaboration has continued to evolve into more sophisticated methods and strategies. One emerging audit trend is the pursuit of so-called joint audits, in which an individual or business is subject to a coordinated audit using a single audit team comprised of representatives from two or more jurisdictions.
This new approach stands in contrast to the more typical situation in which the same taxpayer is subject to separate audits by two or more countries with respect to the same transaction or items of income or deduction. Joint audits are the next step to even greater cooperation between taxing authorities — a new era of coordinated action.”
IRS Tax Tip 2011-08 lists tax evasion due to hiding of income offshore as the top tax scam. We would like to remind all US citizens and permanent residents that their worldwide income is subject to tax in US. Heavy penalties can be enforced if the income is not reported to IRS. Due to increased cooperation between all countries, don’t take your chances by not declaring worldwide income. There are also stringent requirements to report your controlled foreign entities, foreign trusts, foreign inheritance or gifts and not to forget foreign financial accounts. It is still not too late to take advantage of the IRS offshore voluntary disclosure initiative that expires August 31, 2011. Here is an excerpt from the tax tip:
“Hiding Income Offshore: The IRS aggressively pursues taxpayers involved in abusive offshore transactions and the promoters who facilitate or enable these schemes. Taxpayers have tried to avoid or evade U.S. income tax by hiding
income in offshore banks and brokerage accounts, or by using offshore debit cards, credit cards, wire transfers, foreign trusts, employee-leasing schemes, private annuities or life insurance plans.
In February, the IRS announced a second voluntary disclosure initiative to bring offshore money back into the U.S. tax system. The new voluntary disclosure initiative will be available through Aug. 31, 2011.”
U.K. based AstraZeneca plc announced that it will pay the Internal Revenue Service $1.1 billion to settle all transfer pricing issues for 2000-10, according to a March 28 statement released by the company.
Tax authorities in the U.S. and the U.K. agreed on an advance pricing agreement regarding transfers between AstraZeneca’s international subsidiaries for the period from 2002 through 2014, the company said. AstraZeneca also agreed with U.S. tax authorities on a related valuation matter stemming from the integration of its U.S. businesses after the merger that created the company in 1999.
Mutual agreement procedure as negotiated by tax treaty partners was at its best when IRS and National Tax Authority of Japan recently agreed that Japan should not have imposed certain transfer pricing adjustments in case of Capcom, a leading game software company. As a result of mutual agreement Japan has agreed to refund 1.8 billion Yens (around $20 million) to Capcom as stated by Company spokesman and reported by BNA.