Law360 Quotes Peter Barnes on New International Tax System

As the 2017 tax overhaul inches further toward complete implementation and the world's powers debate a new international tax system, the global tax picture could look substantially different by the end of 2019.

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"It's only when you really get your hands on the numbers, and the impact of the provisions on all of your foreign income, your foreign operations, that you can understand what the bill will do," said Peter Barnes, a professor of tax at Duke University School of Law and a former international tax counsel at General Electric Co. [Mr. Barnes is also Of Counsel to Caplin & Drysdale.] "At this point, we've got most of the guidance from most of the provisions, so the real challenge is looking at them against your facts."

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Barnes said immediate changes are unlikely, but companies are going to get a better sense of what specific problems, or opportunities, the new international landscape presents.

"It's going to be a very strong indicator of what companies need to be thinking about in terms of ownership of their IP, merging companies, acquiring new companies - because they now understand what their foreign effective tax rates are," he said. "Doing that sort of thinking and planning in the abstract is impossible."

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Barnes noted that an OECD proposal likely would need to satisfy all parties while also raising as much revenue as those national taxes.

"It's going to be hard for a country to switch to a global proposal if the global proposal raises less revenue than their interim measure," he said.

U.S. companies hit by the digital service taxes are likely to pass the cost onto the customers in those jurisdictions, Barnes said.

"Countries think this is a free lunch, that they're going to be collecting revenue from American tech companies," he said. "I think, in a lot of cases, the economic burden is going to fall on their own consumers."

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Excerpt taken from the article “US International Tax Policy To Watch In The 2nd Half Of 2019” by Alex Parker for Law360 Tax Authority.