TEI Roundtable No. 34: International Tax Issues and the Global Pandemic.

• Position: Tax Executives Institute

No area of tax has escaped the influence of the global pandemic, and that certainly includes international tax, the theme of this issue of Tax Executive. But what exactly has the impact of COVID-19 been, and what is likely to be its impact throughout 2021? To take a deeper dive into this and other issues in international tax, we assembled a roundtable of international tax experts, including Doug Poms, principal in the international tax practice of KPMG's Washington National Tax office; Jason Weinstein, director, tax planning and policy, at Amazon; and Joan Arnold, partner at Troutman Pepper Hamilton Sanders LLP and chair of its tax and benefits practice. Tax Executive's senior editor, Michael Levin-Epstein, moderated the discussion.

Michael Levin-Epstein: What are the most important issues from your perspective in the international tax space?

Doug Poms: I see that the top priority in international tax policy for the Biden administration is to determine what recommendations would be made for changing or updating the international tax rules, and particularly the new rules that were brought in with the Tax Cuts and Jobs Act [TCJA] just over three years ago, and whether to propose statutory changes to those rules, through the Treasury Green Book or otherwise, because of course Congress has to enact them. Particularly, there's been a lot of talk about the GILTI [global intangible low-taxed income] regime and the design of the GILTI regime, whether to change it to a country-by-country approach, whether to raise the rate, and whether to allow a deduction for ten percent of QBAI [qualified business asset investment], or perhaps reduce it. It has been noted by commentators, including new personnel and leadership at Treasury, that QBAI can result in an incentive to move tangible assets offshore, and that is problematic from a policy standpoint. So, I think we'll see proposals to address those concerns as well as concerns with the BEAT [base-erosion and anti-abuse tax] and the FDII [foreign-derived intangible income] regimes. There'll be attention to that at the legislative level and then to the extent things are not able to be handled at the legislative level, perhaps certain limited proposed changes at the regulatory level. The other big effort this year, of course, is the OECD [Organisation for Economic Co-operation and Development] work, and we know Secretary [Janet] Yellen has expressed that Treasury will be engaged in those discussions and is supportive of those discussions. So, the OECD has a goal to come to a consensus on Pillar One and Pillar Two by the middle of this year. That's ambitious, but certainly there will be a lot of effort put into that work by the Biden Treasury folks, and so that would be another priority this year. I'll leave it there.

Jason Weinstein: I think Doug certainly covered the the two big issues. Those would have been the two top of my list with a pretty strong emphasis as well. I think that maybe following on Doug's thoughts on OECD actions is seeing what's happening unilaterally in advance of or instead of OECD consensus, because we're certainly seeing countries move, be it with digital services taxes or other unilateral measures or rules more along the lines of GILTI- or BEAT-type regimes than strictly BEPS 1.0. Those unilateral movements, as well, are another thing that we're certainly looking at on the international stage.

Joan Arnold: From my perspective, I think that in 2021 it is going to be incredibly interesting to see how the United States starts to fit or not fit with the rest of the world. Jason mentioned the digital taxes. I think it's a whole lot more than that. We are finally going to have to decide if we are going to play in the sandbox with the rest of the countries around the world on how to allocate tax globally for our multinational corporations. To the public's view, we have been relatively insular in the past four years and haven't seemed to be engaged in a way that would make a meaningful change to our tax system. I do think that we're expecting to see a public engagement at a level that we haven't had in the past. It makes it a very uncertain time for multinationals who are attempting to do planning in the international arena. We still have the unfinished rules from the 2017 act layered on top of that. We have the potential for significant changes in how those rules apply if the Biden administration's proposals are adopted. And then you put on top of all of that the OECD's work and how we will interact with them. So, unfortunately, I think it's a time period of significant uncertainty for taxpayers and that, to me, is the most important element for the taxpayers to understand in the international arena this year.

Levin-Epstein: How do you think the pandemic changed the international tax space?

Poms: The effects of the pandemic I would characterize as twofold: one is just some of the practical issues that come up from the fact that individuals are being discouraged from traveling in many cases. Many people are working from home, many people are working from different locations where they want to be with their loved ones or maybe take care of loved ones, and therefore that can trigger some tax implications. For instance, if you have individuals that are conducting business activities in the US that are foreign individuals, they could meet residency standards to be a bona fide resident of the United States when they otherwise would not be met, or it can trigger a US trade or business for either the individual or the company the individual works for if they're a foreign...