A senior Treasury Department official’s statement that any future digital-tax framework must be “evidence-based” sounds like a call for careful tax policymaking, given the apparent stalling of Pillar One. But the conflict there was never about a lack of evidence that US tech giants have economic presence in foreign markets. It was about whether Washington is willing to recognize that other countries might have a claim on US corporate profits.
For all its flaws, Pillar One targeted a real inequity in the international tax system. The old bargain, struck in a pre-digital economy, was that physical presence determined jurisdictional tax liability. A business would know where it could be taxed based on where it chose to place offices, factories, employees, and assets.
But digital businesses don’t need employees or brick and mortar to dominate local markets. A platform can sell ads, collect data, shape commerce, and build enormous local user bases without physical presence in the jurisdiction.
That isn’t an absence of economic substance. Users, data, network effects, and market access are all valuable. That these inputs don’t sit neatly on a balance sheet with a block and lot number doesn’t make them any less real; it just makes them difficult for local tax authorities to reach.
The Treasury Department’s position reflects a fight over distribution rather than methodology or bottom-line calculations. Market countries want more taxing rights over the profits that are generated from their residents and infrastructure.
The US wants to protect its tax base and insulate its corporate behemoths from over-taxing overseas—or maybe from being taxed at all. The next iteration of a digital-tax framework likely will run into the same impasse unless one side blinks.
—Andrew Leahey
Welcome to the Week in Insights for Bloomberg Tax’s latest analysis and news commentary. This week, experts analyzed Pillar Two compliance, state tax credits for renewable energy projects, and more.
Insights
Australia Inbound Distributor Update Is Mixed Bag for Taxpayers
The Australian Taxation Office’s changes to a transfer pricing practical compliance guideline introduce uncertainty by carving out some digital distributors while broadening the concept of an inbound distributor, Jones Day’s Niv Tadmore and Richard Keys say.
Stellantis Ruling Clarifies VAT and Transfer Pricing Interplay
In light of the Stellantis ruling, businesses must pay close attention to the wording of intragroup agreements and supporting transfer pricing documentation, say Grant Thornton practitioners.
Renewable Energy Projects Will Hinge on State Tax Incentives
After federal solar and wind tax credits expire, state and local incentives will determine winners and losers as renewables race to meet energy demands, says Leo Berwick’s Jan Skidds.
‘Last Mile’ of Pillar Two Compliance Challenges Multinationals
TMF’s Andrius Tamosiunas explains that multinationals need to establish central coordination to comply with Pillar Two reporting requirements and avoid the risk of penalties.
Kast’s Chile Tax Overhaul Wins Backing Beyond Ruling Coalition
Chile’s President José Antonio Kast has already succeeded in gaining approval for his tax package at its first legislative hurdle, says Ignacio Gepp of Puente Sur.
Nonlawyer-Owned Firms Fill Consumer Justice Gaps Left by Big Law
States that allow nonlawyers to own and run law firms will encourage legal innovation, improve access to legal services, and expand transparency in law firm structure and operations, ClaimsHero CEO Matt Freund says.
Trump’s NDAs for Federal Employees Would Hide Workplace Abuses
President Donald Trump’s proposed non-disclosure agreement for federal workers is a blatant attempt to conceal federal workplace abuse and silence federal workers who dare expose it, Cohen, Weiss and Simon’s Susan Davis says.
Five Questions With EY Americas Vice Chair of Tax Martin Fiore
Bloomberg Tax Insights & Commentary is featuring a recurring questionnaire of prominent tax professionals who are willing to share their thoughts about their work and the practice of tax these days. Today we feature Martin Fiore, EY Americas vice-chair of tax.
Technically Speaking
State lawmakers who use “wealth tax” rhetoric to promote high-income surtaxes overspend political capital on reasonable but relatively mundane proposals, Andrew Leahey argues in his latest Technically Speaking column.
Proponents of income-tax increases should describe such proposals clearly and defend them on their own merits, Andrew says. “Broaden the base, add a top bracket if necessary, and earmark or explain the revenue use without pretending the problem of accumulated capital is now solved,” he writes. Read More
News Roundup
IRS Can Fire More Positions at Will With Trump Executive Order
The IRS has the power to reclassify more than a dozen positions making them easier to fire after President Donald Trump signed a new executive order in his bid to shrink the federal government.
DeSantis Plan to Cut Florida Property Taxes Heads to Ballot
Florida lawmakers have approved a stripped-down version of a proposal from Gov. Ron DeSantis (R) to slash property taxes, removing local school districts from the plan.
Broadway Shows Backed by Disney, Billionaires Nab NY Tax Credits
A New York state tax credit program that began in 2021 to help Broadway productions during the pandemic is being used by billionaire producers and some of the longest-running shows, a Bloomberg Tax analysis shows.
Crypto Tokens Would Get New Tax Benefits Under House Bill
A House panel with jurisdiction over tax policy is preparing legislation that would grant cryptocurrency holders greater flexibility in reporting gains on investments, a potential boon for the digital asset industry.
Tax Management International Journal
Notice 2026-17 Simplifies and Resets §987’s Evolving Landscape
Notice 2026-17 brings the §987 currency regime back in a somewhat circular path to its 1991 proposed regulations roots, with an election to apply an earnings and capital methodology, Grant Thornton’s Cory Perry and Wei Fan say.
Reported FIFA 2026 World Cup Tax Deal Hasn’t Changed Fundamentals
KPMG’s Daida Hadzic and Rob Fagan say FIFA’s reported US federal tax deal may ease team-level tax exposure for the 2026 World Cup, but it doesn’t change the core tax, withholding, classification, and social security issues affecting players, coaches, and staff.
Tax Management Memorandum
Pension Exit Costs Are a Moving Target After Supreme Court Ruling
After the Supreme Court’s ERISA ruling in M & K Employee Solutions, the withdrawal-liability figure an employer receives before leaving a multiemployer pension plan may not be the number that controls after withdrawal, says Hall Benefits’ Samuel Krause.
Career Moves
Bracewell Brings Shell Lead Tax Counsel Perry to Houston Office
Allison K. Perry joined Bracewell as a partner in its tax department in Houston, the firm announced Monday.
Haynes Boone Adds Alexandra Ueno-Park as Tax Partner in London
Alexandra Ueno-Park joined Haynes Boone as a partner in its London office, the firm announced Monday.
Troutman Pepper Locke Adds Cheatham as Partner in DC Office
Ben Cheatham joined Troutman Pepper Locke’s tax and benefits practice group as a partner in Washington, DC, the firm announced Wednesday.
Aaron & Partners Appoints Wallace as Head of Wills, Trusts, Tax
James Wallace was appointed the new head of wills, trusts, and tax at Aaron & Partners, the firm announced Wednesday.
Ward Hadaway Adds Nicola Williams as a UK Corporate Tax Partner
Nicola Williams joined Ward Hadaway as a partner in its corporate tax and share incentives practice, the firm announced Thursday.