US lawmakers have urged the Biden administration to crack down on crypto tax evasion and enforce tax reporting guidelines for crypto-asset traders.
Democratic Senators Elizabeth Warren, Bernie Sanders, Bob Casey and Richard Blumenthal sent a letter on Tuesday, August 1, to the Department of the Treasury and the Internal Revenue Service (IRS) recommending that they quickly implement rules to close crypto tax loopholes that are allowing firms to siphon taxable revenues elsewhere.
According to the letter, the IRS risks losing out on around $1.5 billion in tax revenue in 2024, and the losses may amount to $28 billion over the following eight years.
Research conducted by Barclays last year stated that crypto investors were not paying the IRS roughly half of the taxes they owed. The IRS extrapolated from 2017 data that it comes to about $50 billion lost in tax revenue per year, making up 10% of all unpaid taxes in the US.
“Nearly two years have passed since the law was enacted, and the implementation deadline is less than six months away – but Treasury has yet to publish proposed rules,” wrote the senators.
“Without quick action, your agencies are at risk of failing to meet their congressionally mandated deadlines for implementation of a final rule.”
PwC breakaway firm Scyne Advisory appoints interim CEO
Scyne Advisory has appointed former PwC partner Richard Gwilym as interim chief executive, reported the Australian Financial Review on Wednesday, August 2.
Gwilym will serve as chief executive while Scyne Advisory establishes itself. He previously worked at PwC Australia for more than 20 years, where he was a partner for almost a decade before the firm decided to sell its government consulting wing following the tax leaks scandal.
Private equity firm Allegro Funds secured a deal to buy the entity for just A$1. As part of the acquisition, 130 partners moved with the new firm and it was named Scyne Advisory. Allegro Funds agreed to invest A$100 million ($67 million) for transition costs.
The new firm will only advise public sector clients, but this could be lucrative business. PwC Australia has agreed to divest from all government advisory work – at state and federal levels – conceding approximately 20% of the firm’s 2023 revenue.
India goes ahead with gaming tax despite fears
Indian authorities are pushing ahead with their plan to implement an online gaming tax despite fears from investors and companies that it will kill the fast-growing industry, reported the FT.
The country’s Goods and Services Tax (GST) Council met on Wednesday, August 2, to finalise what would be a 28% levy on online gaming, according to industry estimates.
The GST Council has said that the tax is likely to come into effect in October 2023 and will be reviewed after a period of six months.
Roland Landers, chief executive of industry group the All India Gaming Federation, said that the sector and its companies will be hit hard.
“The larger ones may scrape through, but the mid to smaller players would be finding it extremely difficult – in fact, they would be on the verge of shutting down,” said Landers.
India’s gaming market had an estimated total size of $2.6 billion in the year ending in March 2022, according to a report by Lumikai, a gaming-focused venture capital fund.
Uber pursued by HMRC for unpaid VAT
HM Revenue and Customs (HMRC) is pursuing Uber for £386 million ($490 million) extra in VAT, after the company paid £615 million to conclude a tax dispute last year.
In Uber’s statement on Tuesday, August 1, the firm said that “UK tax authorities had disputed the amount and manner in which we were applying VAT to our UK business.” This comes after it restructured its business in March last year.
The firm has been required to pay VAT since a High Court ruling last year determined that Uber’s drivers were employees and not self-employed contractors, meaning that from March 2022 VAT was added to each individual driver's revenue.
This is the latest in a list of tax controversies Uber has faced in recent years.
Israel seeks to boost high-tech sector with tax incentives
The Israeli government is hoping to attract more investors to its high-tech sector through new tax benefits, reported The Times of Israel on Sunday, July 30.
Investors may be concerned over the political turmoil and uncertainty in Israel over judicial reform, but the government hopes to allay those concerns with the tax incentives just approved by the Knesset.
The Law for Encouragement of Knowledge-Based Industry, known as the ‘Angel’s Law’, will introduce a package of tax incentives such as postponement of capital gains taxes and tax credits for research and development investment.
Companies acquiring local firms will be able to claim tax relief for up to five years. It will also recognise stock purchases as expenses and provide tax exemptions on interest for foreign investors.
After years of haggling over tax reform, the Knesset finally voted to approve the law last week and Prime Minister Benjamin Netanyahu hailed it as the key to “jump-start the Israeli high-tech industry”.
US energy companies lobby for hydrogen tax incentives
US energy companies have begun lobbying the US government to widen its tax incentives for the hydrogen industry, reported the Financial Times on Sunday, July 30.
As a result of the Inflation Reduction Act (IRA), green hydrogen producers currently receive tax incentives, but firms are now lobbying for similar incentives to be extended to other hydrogen producers, including those who use fossil fuels in production.
A total of 32 companies and industry members signed a letter that was sent to President Biden last week, imploring him to widen the definition of “clean” hydrogen under Section 45V of the Clean Hydrogen Production Tax Credit.
The US Treasury Department is set to publish additional tax guidelines next month that will detail which hydrogen projects qualify for incentives under the IRA.
According to lobbyists, forcing hydrogen plants to operate from zero-carbon energy sources only would mean that plants would have to shut down when renewable energy is not available.
Canada closes consultation on TP reform
The Department of Finance Canada closed its consultation on proposals to reform transfer pricing (TP) rules on Friday, July 28.
Following the Cameco case, the Canadian government has set out its aims to clarify the use of the arm’s-length principle (ALP) and modernise the country’s TP regime. Tax policymakers are concerned that the rules are costing the government revenue.
The consultation brief cited the case of Her Majesty The Queen v Cameco Corporation as a recent example of the need for reform. Specifically, it noted the lack of detail on how the ALP should be applied.
ITR rated the Cameco case as one of the most important tax disputes in recent years. The Canada Revenue Agency lost any hope of winning its case to impose a TP reassessment on the mining company Cameco when the Supreme Court of Canada rejected its appeal request in 2021.
Next week in ITR
ITR will be running its full-length exclusive interview with Deborah O’Neill, Labor senator for New South Wales, who has become the key political figure handling the PwC Australia tax leaks scandal.
We will also be looking at an upcoming US Supreme Court case on the Tax Cuts and Jobs Act.
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.
