Comments (2)

By Matthew, March 10, 2010 2:09 pm

I have just been sent a link to a series of tax blog entries posted by US law firm, Sheppard Mullin, which heavily relies on or copies from materials I have written for this site.

Compare (from Instalment 1 of the Sheppard series) the following with a blog entry I wrote here on the general anti-avoidance rule (see the middle from where it says “The General Anti-Avoidance Rule”):

The introduction of the GAAR is contained in three documents: the Enterprise Income Tax Law (“EITL”), the EITL Implementing Regulations, and the Notice of the State Administration of Taxation on Issuing the Measures for the Implementation of Special Tax Adjustments (for Trial Implementation) (“Measures No. 2”). The SAT has also indicated that it will aggressively use the GAAR to target offshore transactions.

Article 47 of the EITL empowers the SAT to make a tax adjustment where a transaction results in a reduction in taxable income or has no reasonable business purpose. There is “no reasonable business purpose” as defined by Article 120 of the Implementing Regulations of the EITL where the main purpose of a transaction is to reduce, be exempt from, or defer the payment of taxes.

Anti-avoidance investigations, according to Article 92 of Measures No. 2, will target the following offenses:

1. Abusing tax preferences;
2. Abusing a tax agreement;
3. Abusing the corporate organizational form;
4. Avoiding tax through a tax haven; and
5. Any other arrangement without a reasonable business purpose.

Investigations will follow the principle of “substance prevails over form,” which is outlined in Article 93 of Measures No. 2 and requires that the following issues be considered:

1. The form and substance of an arrangement;
2. The time of conclusion and the period of execution of an arrangement;
3. The manners for realizing an arrangement;
4. The connections between different steps or components of an arrangement;
5. The changes of financial status of each party involved in an arrangement; and
6. The tax results of an arrangement.

Articles 94, 95, 96 and 97 elaborate on the methods through which investigations are conducted and tax benefits are canceled, and on other detailed issues.

The sentence I have highlighted in bold actually comes from a M&A tax article that I wrote.

Now compare that article on M&A Tax in China with Instalment 2 and Instalment 3 of the series. What you will notice is that, whilst the language has changed slightly, the exact same structure has been adopted, including names for headings and sub-headings. Despite the change in wording (which isnt great) a few things give the game away:

1. Firstly, Sheppards refer to the fact there are two types of mergers in China. This type of detail wasnt necessary and I only added it in my original article because I wanted to better illustrate the difference between a merger and asset acquisition. It really makes no sense to point this out otherwise and I highly doubt another person would have had the same thought.
2. Secondly, compare this sentence (from my article):

Recent DTA interpretations by the State Administration of Taxation placing considerable doubt upon previously conceived tax benefits obtained from incorporating special purpose vehicles in particular low tax jurisdictions.

with this sentence from Sheppard’s blog:

the new tax law also outlines specifics M&A and liquidation tax rules and places doubt on previously conceived tax benefits from incorporating SPVs in some low-tax jurisdictions

3. Thirdly, the Sheppard series doesnt mention demergers, a critical issue for M&A in China, and something that should be considered in any comprehensive analysis. So why doesnt Sheppard mention this? Because I didnt. I got a bit lazy and left this out of my article as I wanted to get it published asap.

Am I being paranoid with all this?

I dont think so. It seems fairly obvious that my work has been the source of, and copied, by Sheppard. This annoys me, particularly as Sheppard is a relatively large firm that is, presumably, generating significant revenues. By contrast, I work for a small firm with a marketing budget around 1/1000th of Sheppard’s marketing budget (probably even lower). I work hard (mainly on my own time) to make this site what it is and this kind of stuff makes me question if it is worthwhile.  So I can definitely say that I dont take this kind of thing as a compliment. Whether the changes are enough to get around my copyright is irrelevant – it is extremely bad form.

I have pointed out this similarity to the writer. I hope the firm has the good grace to take down these posts and to cease from copying my writing in the future. I accept that this is probably just a case of a young associate facing billable hours pressure trying to get their job done and that senior people within the firm had no knowledge of this.

UPDATE 19/3/2010: I had taken this post down since last weekend after I came to an understanding with Sheppard that the relevant posts would be revised. Sheppard has now posted the “revisions” and whilst some changes have been made, it is still substantially my work. In particular, Instalment 1 still copies a large slab of a post I did on this site as I mentioned above. Rather disappointing to be honest.