We’ve been saying it for quite some time, the global tax environment is turning sour. Not just in Europe, but in various countries across the world. Now, the United States is looking to crack down on global corporate tax avoidance. The American Treasury department has released new guidance to limit the scope in which companies can apply foreign tax credits.

This move is in response to the EU forcing Apple to pay 13 billion euros in “backed” taxes to Ireland. For its part, Ireland has made it clear that it doesn’t want the money. The EU, however, felt that the tax arrangement between Ireland and Apple was unfair, and hurt the EU as a whole.

Interestingly, the USA and EU have come to blows over who has the right to tax what. The USA accused the EU of attacking American tax revenues during the recent ruling against Apple.

Globally, governments have been looking to crack down on tax breaks and tax havens. Why? Public debts have now reached extraordinary levels in many countries. In the USA, for example, public debt is now at 104%, while in the UK it is at 89%. In other words, governments need to raise tax revenues so that they can pay down their debts.

“Tax War” Coming?

Arguably, the most interesting thing about the EU ruling is that it is forcing the USA to examine its tax policies. This raises a serious question of whether or not a “tax war” might be coming. Remember, governments need to raise tax revenues. Soon, they could be fighting over these revenues on an international scale.

In the past, most companies were tied heavily to their country. Corporate taxation was relatively easy and straightforward. Now it is complex because companies operate in so many countries. Who has a right to tax what? Governments now appear to be looking for the answers.

Pretty soon, multiple governments could be coming after the same revenues. This would increase burdens on the companies themselves.

Low Tax Locales Coming Under Attack?

So is the move against Apple a simple one off attack? Or does it hint at a larger effort to crack down on tax safe havens? It’s hard to tell, but wealth managers should definitely be worried. Corporate taxes, and especially loopholes, are coming under close scrutiny.

Of course, the recent Panama Papers leak certainly hasn’t helped things. The leaks showed how many people were using offshore havens for illicit purposes. Offshoring, however, does not mean using illegal tactics. There are many legal ways to offshore.

With scrutiny rising, however, it’d be a wise idea to offshore now. Governments may soon start restricting offshoring, and to demand more reporting. They may even tax revenues. Once you’re offshore, however, it is more difficult for governments to come after you.