This week in tax: Cisco urges investors to reject public CbCR
US technology company Cisco Systems hopes shareholders will reject a proposal to make its CbCR public, while the UK approves an extradition case connected to the ‘cum-ex’ scandal.
Cisco Systems will hold a shareholder vote on the Global Reporting Initiative and whether to adopt its tax transparency standard, but the company has recommended investors reject the motion because it may have an adverse impact on the business.
Shareholders will decide whether or not to make the company’s country-by-country reporting publicly available as part of the GRI.
Large multinational companies have implemented CbCR going back to 2014. However, these files have remained unavailable to the public. This may be set to change as a group of investors continues to raise demands for greater tax transparency.
The GRI is a voluntary standard companies can use to address issues of sustainability and transparency.
Public CbCR may become a reality even if shareholders continue to reject the GRI. The European Commission is moving ahead with plans to impose public CbCR across the EU.
The date of Cisco’s 2022 AGM has yet to be announced.
UK approves extradition of hedge fund trader to face ‘cum-ex’ trial
A UK court has given approval for a hedge fund trader to be extradited to Denmark over an alleged involvement in the £1.5 billion ‘cum-ex’ dividend tax scandal.
Anthony Mark Patterson can be extradited to Denmark to face charges of defrauding the Danish tax authority, Skat, ruled Westminster Magistrate Court on Tuesday, September 20.
The Danish authorities claim that Patterson was a participant in the cum-ex dividend tax fraud, in which European governments were tricked into paying dividend tax refunds.
Tax authorities were deceived into believing that the claimants, who were acting on behalf of international companies and investors, had paid the taxes when in fact they had not.
The controversy takes its name from the Latin term, which means “with without” – a reference to the opaque nature of those with and those without rights to dividend payments.
The cum-ex scandal hit European nations including Denmark, France, Germany and Italy, leaving Skat with losses of approximately Kr8.5 billion ($1.1 billion).
Patterson worked at hedge fund Solo Capital Partners in London. The hedge fund itself has been accused of involvement in the scam, along with its founder Sanjay Shah, who has avoided extradition from the UAE.
A local court in the UAE rejected the Danish government’s application to have Shah extradited on September 12. It is alleged that between 2012 and 2015, the firm duped authorities into repaying a levy on dividends.
Skat has initiated civil proceedings in the High Court of Justice in London to recover £1.5 billion from more than 100 financial companies.
Patterson has denied any wrongdoing in the matter.
Companies prioritising high-risk countries for VAT registration
As ITR reported this week, digital services companies are increasingly selective about the countries where they register for VAT, basing their choices on revenues and risks of penalties.
Tax leaders told ITR that more businesses are considering their sales and risks of fines as the key factors when selecting where to register for VAT on digital services.
Alex Baulf, senior director for global indirect tax at tax technology firm Avalara in the UK, said the rapid changes in indirect tax regulations have forced companies to prioritise high-risk jurisdictions.
He says that as more countries introduce VAT regimes for digital services, businesses will likely place even more focus on the potential financial impact of non-compliance.
“They will prioritise registering in countries where they have the most revenue and where they think there’s the most risk of penalties or interest [charges],” said Baulf.
Another potential driver is limited resources for compliance, he added.
ITR TP Forum: Speakers hail benefits of operational TP
In other news, panellists at ITR’s Global Transfer Pricing Forum USA said operational transfer pricing can improve corporations’ forecasting and data usage.
“Having that OTP down will get you better at forecasting. With your data, you’ll be able to tell your own story,” said Troy Siegfried, director of global TP at manufacturing company FMC Corporation, during a panel at the New York conference on Wednesday, September 21.
Siegfried ran into an issue in Asia in which products were stopped due to TP issues and it took an extended period of time for the items to be released. This presented a risk for the business as it could have had an impact on sales.
“Not only will your CFO visit you, but your CEO as well,” he said.
However, OTP could have minimised that risk, according to Siegfried.
While OTP relates to the management of data, processes, and governance through the use of technology – all these features can enable businesses to gain better forecasts on their operations.
Other ITR headlines this week include:
Next week in ITR
ITR will be taking a look at the UK ‘mini-budget’ and the likely tax implications for businesses. The budget includes the cancellation of the planned corporate tax increase from 19% to 24%. The new Liz Truss government argues the tax cut will help boost growth.
ITR will also get market reaction to a New Zealand bill that shifts indirect tax obligations from accommodation and transport providers to online platforms such as Uber and Airbnb. This could be a new trend in digital tax.
Next week ITR will also be holding its European Transfer Pricing Forum and its Managing Tax Disputes Summit in Amsterdam.
Readers can expect these stories and plenty more next week. Don’t miss out on the key developments. Sign up for a free trial to ITR.