Daily Tax Update - August 5, 2014: JCT Releases Estimates of Federal Tax Expenditures

JCT Releases Estimates of Federal Tax Expenditures:  The Joint Committee on Taxation released “Estimates of Federal Tax Expenditures for Fiscal Years 2014–2018” today, prepared for the House Ways and Means Committee and Senate Finance Committee.  This annual report describes, and estimates the revenue effects of, tax expenditures—special tax provisions that reduce the income tax liabilities of particular persons relative to a baseline of “normal income tax law.”  Although part of federal income tax law, tax expenditures have a similar effect as direct spending provisions.  According to the report, the employer-provided healthcare insurance exclusion continues to be the largest tax expenditure, projected to cost the government $785.1 billion in 2014 through 2018.  The report also shows the distribution of benefits among different levels of income for certain tax expenditures.

The report can be accessed here.

OECD Releases Report Regarding the Effects of BEPS on Developing Countries:  The Organization for Economic Cooperation and Development (OECD) released a report on August 1 on the impact of base erosion and profit shifting (BEPS) on low income countries.  At the G20’s request, the OECD has created an action plan of 15 actions that can be taken to combat BEPS, which allows certain multinational enterprises (MNEs) to shift profits to low-tax jurisdictions or to create “stateless income” that is not taxed in any jurisdiction.  This report, the first of two concerning developing countries, identifies particular BEPS issues that are most relevant in developing countries.  The report focuses on the difficulties that developing countries have in adopting legislation, gathering information ,and developing the administrative capacity necessary to combat BEPS.  The report concludes that these difficulties leave the door open to simpler, but potentially more aggressive, tax avoidance than is typically encountered in developed economies.  Part 2 of the series will address the steps that the G20 can take to help developing countries overcome these challenges.

The report can be accessed here.