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Biden proposes a tax increase on stock buybacks

During his state of the union address on February 7, US President Joe Biden advocated for a higher tax on stock buybacks in order to discourage corporate share repurchases.

In August 2022, Congress passed the Inflation Reduction Act, which included a 1% tax on stock buybacks. The tax was implemented on January 1. In his annual address, the president expressed worry that the 1% tax is too low and urged for an increase to 4%.

Many U.S. firms, including Apple, Chevron, ExxonMobil, and Meta, have utilized their profits to repurchase their own stock. Apple's share repurchases amounted to $20 billion in the most recent quarter and approximately $90 billion in 2022, whereas Meta invested more than $40 billion in share repurchases.

Biden singled out Chevron and ExxonMobil because of the rising cost of living. Chevron authorized $75 billion in stock buybacks for 2022, whereas ExxonMobil spent $30 billion on dividends and stock buybacks in the same period .

ExxonMobil is committed to $25 billion in stock buybacks over the next two years, despite the 1% tax. Many Democrats view this as an inappropriate use of corporate profits at a time when high inflation is driving up energy costs across the United States.

The 1% buyback rate has not proven to be an effective disincentive, thus the Biden administration may seek to increase this rate in 2023. Nonetheless, the measure will face fierce opposition in Congress.

The United States has agreed to resolve French and German concerns that the Inflation Reduction Act could be detrimental to domestic industry, according to a report published by the Financial Times on February 7.

France and Germany are negotiating with the United States about its tax incentives for electric vehicle (EV) manufacture, but no agreement has been reached as of yet.

The IRA featured a $370 billion green technology development support package. However, an increasing number of governments perceive this as a danger to EV production in their own countries.

Bruno Le Maire, the French finance minister, and Robert Habeck, the German finance minister, flew to Washington, D.C. to present a united front on the tax credit problem. The European Commission is concerned that U.S. tax credits could be the beginning of a subsidy race.

This could result in further trade tensions between the EU and the US about EV production at a time when countries should be implementing measures to combat climate change.

Last year, HM Revenue and Customs' transfer pricing yield decreased by 31%, from £2.16 billion to £1.48 billion, according to a report released on Tuesday, February 7.

Enquiries, advance pricing agreements (APAs), advance thin capitalisation agreements (ATCAs), and mutual agreement procedure (MAP) cases will generate revenue during the 2021-22 tax year.

The number of settled MAP cases more than doubled last year (from 62 to 131) while the total number of ATCAs dropped dramatically from 23 to 7. In the meantime, the number of resolved enquiries increased from 124 to 175, while the number of APAs secured decreased from 24 to 20.

Similarly, case resolution times varied; enquiries and MAPs were concluded more quickly than in the prior fiscal year, whereas APAs and ATCAs required more time. The average wait time for ATCAs increased from 28.1 months to 44 months (almost four years), a significant increase.

HMRC recently disclosed that it is conducting 100 investigations into international corporations with profit-diversion agreements. As of the end of March 2022, the UK revenue service assessed the total tax at stake to be £2.4 billion.

On Monday, February 6, Puerto Rico Governor Pedro Pierluisi revealed a comprehensive plan to alter the US territory's tax code.

Pierluisi proposed lowering Puerto Rico's corporate tax rate from 37.5% to 33% for major enterprises and 17% for small businesses. Additionally, the proposal would reduce the maximum income tax rate from 33% to 30%.

Pierluisi stated, "My vision for the Puerto Rico of the future is that we will be a jurisdiction with low taxes that are easy to comply with."

These modifications to the tax code may provide taxpayers with $545,5 million. The Puerto Rican government intends to make the territory more alluring than other offshore jurisdictions.

Meanwhile, Puerto Rico will continue to give significant tax benefits to non-resident corporations on their investments, including a maximum corporate rate of 4%. Tax reform would cut and simplify the domestic tax burden.

Long ago, Puerto Rico positioned itself as a low-tax offshore jurisdiction for US multinational corporations. These corporations include Coca-Cola and Microsoft, among others.



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