Mobility at its core is all about change management. Effectively managing change in a highly competitive, fast-paced global marketplace – with remote teams dispersed around the world – has never been more critical. Increasingly, innovative mobility programs are turning to the principles of design thinking to help better manage those changes.

The Change Resistance

The fact is, an organization’s employees lie at the center of organizational change – they either are being asked to change themselves, or the environment around them is changing. In fact, a recent Deloitte survey found an overwhelming 70 percent of business respondents said people management is the key to successful change management. The same study found 100 percent agree that successful organizational change hinges on effective staff engagement. Let’s face it: it’s simply human nature to be resistant to change.

Enter Design Thinking: Changing the Way We Manage Change

So what is design thinking, and how does it help?  In a nutshell, design thinking is approaching problems and innovating solutions by considering and involving the people affected by the change.

In its simplest form, says Colleen d’Offay, national professional services manager with global HR solutions provider Frontier Software, “design thinking is a mindset, the primary focus of which is to develop an understanding of the people for whom a solution is being designed. Design thinking is often referred to as “human-centric” because its focus is on the affected people; their feelings, knowledge, beliefs and attitudes.”

Long popular with innovative designers spanning the arts to science and engineering, design thinking is now being adopted by leading global brands and taught at schools like Harvard and Stanford. The results are speaking for themselves, says Linda Naiman, founder of Creativity at Work.

Several recent developments have taken place in the effort to enact taxes on digital services in Europe.

Reports in early February indicate that the EU finance ministers are near agreement on a digital advertising tax as an alternative to the digital services tax that has been proposed by the European Commission.  Led by Romania, the new proposal would tax revenues resulting from the placement of targeted advertising, including the sale of user data, in the jurisdiction to which the advertising is targeted.  

The revenue would be taxable in the state in which the users to whom the advertising is targeted are located.  If revenue cannot be attributed to such users, the revenue should be attributed on the basis of the number of times the advertisement has appeared on user devices in each place.  The proposed effective date is January of 2022.

The EU digital tax proposal targets companies who earn revenue from digital activities in countries in which they have no physical presence.  It is proposed as a 3% tax on an array of large digital companies.

Elsewhere in the EU, other countries are moving toward digital taxes.  

The Finance Committee of the Belgian Parliament has won general support from most political parties for a 3% digital services tax modeled on the EU proposal.  Belgium has said it may not wait for the EU to act.  

A new French program approved in December as a result of widespread worker unrest allows employers to pay bonuses of up to 1,000 euros free from any income tax or social charges.  Employees who earn less than 3,600 euros per month are eligible for the tax break.

The bonuses must be paid out by the end of March and will not count toward retirement.

According to reports, most listed companies have committed to paying the bonuses.  For example, IBM will pay 1,000 euros to all its employees in France earning less than 2,000 euros per month, and Michelin will pay bonuses to about half of its employees.  La Poste, the French national postal service, will pay bonuses or 200 or 300 euros to 200,000 of its employees.

The “exceptional purchasing power” program was put into place on 24 December 2018, as part of a package of emergency provisions seeking to respond to violent protests against tax increases on fuel and retirement income.

Worldwide ERC® members with employees in France may wish to take advantage of an opportunity to provide nontaxable compensation to some members of their workforce.

The state of Virginia enacted legislation on 15 February 2019, conforming Virginia’s tax law in general to the 2017 federal Tax Cuts and Jobs Act (TCJA).  S. B. 1372. The new law will reverse Virginia’s earlier 2018 legislation, generally “decoupling” from most of the federal changes.  Consequently, moving expenses are not deductible on 2018 Virginia tax returns, and company reimbursements/payments in 2018 for 2018 moves are not excludable from Virginia income of the employee.

The legislation repeals and supersedes earlier Virginia legislation that advanced the conformity date for Virginia tax law to February 9, 2018, but specifically excluded changes made by the TCJA.  The new law conforms Virginia tax law to federal law as of January 1, 2018.  As a result, federal changes limiting deductions for state and local taxes, mortgage interest, miscellaneous itemized deductions, and others will be effective for 2018 returns filed by Virginia taxpayers.

For 2019, however, the law decouples from the $10,000 federal limitation on deductions for state and local taxes, and from the repeal of an overall limitation on itemized deductions, and from several corporate tax changes.  It also increases for 2019 the state’s standard deduction, which rises to $9,000 for married couples and $4,500 for singles.

With respect to moving expenses, the change will cause some re-examination of gross-ups for Virginia state taxes.  

If companies excluded Virginia moving expenses for state purposes, that position is no longer correct.  Virginia taxpayers will have to report their entire federal adjusted gross income (Virginia begins its tax computation with federal AGI), which will include moving expense reimbursements/payments, and will not be allowed to claim any state exclusion for such amounts.  They will have to pay Virginia tax on these amounts.  If companies did not gross up for these amounts, they will now need to consider doing so, because the additional Virginia tax owed could be considerable.

On February 25, 2019 President Donald Trump tweeted that trade negotiations between the U.S. and China are “in advanced stages” and he has therefore agreed to delay an additional tariff hike on China.  This extension comes as the 90-day deadline President Trump gave negotiators was approaching, and U.S. tariffs on imported Chinese goods were set to increase from 10% to 25% on March 2, 2019. An extension is welcome in the business community, as an additional 15% increase would be a big hit to businesses that import products from China.

In a subsequent tweet, President Trump went on to say that if talks continue to progress, “we will be planning a Summit for President Xi and myself, at Mar-a-Lago, to conclude an agreement.” Negotiations between the two nations are ongoing, and there is much to be decided before a final deal is reached. Prior to any conference at President Trump’s resort at Mar-a-Lago, U.S. negotiators are expected to make an additional trip to Beijing and continue working on an agreement. The Trump Administration has made negotiating a new trade deal with China a top priority, and it will be important to monitor these negotiations in the coming weeks.

China is an important market for workforce mobility, and its relationship with the U.S. has a direct impact on the decisions of companies as they consider where to operate and locate facilities and offices. The ongoing uncertainty over tariffs is prompting companies to rethink whether to base substantial segments of their business in one location. We are, therefore, likely to see shifts in business practices, immigration policies and, ultimately, workforce mobility as a result of the negotiations on trade and tariffs.

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On Friday, February 15, 2019, President Trump signed an agreement to avoid another government shutdown. Now that the threat of a government shutdown is over for this fiscal year, work at affected federal agencies is starting to return to normal. The agreement ends weeks of uncertainty following a three-week agreement to temporarily re-open the government after the longest federal government shutdown in U.S. history. In addition to $1.375 billion in funding for border “fencing and physical barriers” at the U.S. southern border, the deal also will fund nine federal departments through September 30, 2019.

In addition to signing this agreement, President Trump also declared a national emergency at the southern border in hopes this would allow the administration to reappropriate funds from other agencies to reach full funding for a border wall. A coalition of 16 states has already sued the Administration over this emergency declaration, challenging that it is unconstitutional. Congress has the “power of the purse,” or appropriations power, and the lawsuit alleges that President Trump is using this emergency declaration to circumvent what Congress has already legislated. This issue will now be held up in the courts for months to come.

It is good news that President Trump and Congressional leaders have avoided another government shutdown. Agencies important to mobility such as the Internal Revenue Service (IRS), State Department, and Department of Housing and Urban Development (HUD) are now returning to normal operation. With tax return season approaching, having the IRS fully funded should allow returns to be processed on the usual time table. The real estate sector will benefit having HUD and the Environmental Protection Agency (EPA) fully funded. This will prevent delays in new loans being approved and environmental regulatory programs will be fully operational.

While it is good news to have the federal government fully funded through September, the appropriations process for fiscal year 2020 will be starting soon. President Trump should be releasing his 2020 budget in the next few weeks, which will give an outline as to the administration’s priorities for the upcoming year. The appropriations process will need to be completed by September 30, 2019 in order to prevent a government shutdown this fall. Worldwide ERC® will keep members up to date once President Trump releases his budget and FY 2020 appropriations work gets underway.

This article originally appeared in the February 2019 edition of Mobility magazine.

Regardless of all the negative press Facebook and other social channels are bearing the brunt of these days, there is still good that comes out of being connected online, especially during a group move—or any move, for that matter.

I recently worked with a company in which two-thirds of the moves were abroad, to Singapore or Saudi Arabia. One of the challenges they were facing at the time was moving a small group—defined as 10 for this company—of data scientists from the southwestern U.S. to Singapore. The company could not get a collective move acceptance, and the move was not going to happen unless they all agreed.

During a consult one day, the company’s internal move coordinator recommended to one of the assignees to start a private Facebook group for colleagues who were already in the new location, who have done a similar assignment with the exact parameters, or who were also getting ready to make the move.

A couple of things to note: First, this was a very old company and was very much set in its ways—not progressive in the least. Second, up until this move the company had blocked all social media sites on campus during work hours. Trying to convince the powers that be to “unlock” access to social channels was daunting. Much to our surprise and delight, they quickly saw the projected value in leveraging a platform such as Facebook that would bring many returns all around.

Two of the assignees started the group, and within 24 hours it had 30 members. Perspectives from those who had experienced what this group was about were invaluable. Within 15 days, the entire group had accepted the transfer. They raved about how helpful it was to be able to ask real questions about day-to-day life in Singapore for Americans that the company really couldn’t answer. No matter how strong your cultural training is, one can never be completely prepared for such a change in culture, customs, and life. It was a great way for the group to feel connected and supported. Accompanying partners were also encouraged to begin their own group, and well, the rest is history. Morale for this move was at an all-time high—transferees and their families were actually excited about their new adventure!

The state of Delaware has newly interpreted its 2010 law imposing a tax on nonresident sellers of Delaware real property to mean that in order to be exempt as a “resident” an individual must have resided in Delaware on every day of the year of sale.  Consequently, only sales on December 31 of each year will qualify for the resident exemption, and employees who are relocated from Delaware and sell their home there may claim exemption from tax only if the capital gain is within the exemption amounts for the homesale capital gain exemption.

Although the Delaware statute refers to “withholding” of income tax on sales or exchanges of real estate by nonresident entities or individuals, it does not actually require any withholding, and neither the transferee of real estate nor any of the parties such as closing attorney, real estate agent, or title insurers are liable for any tax.  Rather, the statute requires every seller to file an estimated tax return and submit payment of any taxes estimated to be due, using the highest marginal rate.  Form 5403 is used for this purpose.  The Recorder of deeds is required to receive the estimated tax return, and the tax payment, before the Recorder records title to the property.  Consequently, no transfer of title may take place unless and until the seller complies with the law.

Form 5403 allows the seller to claim exemption from tax because the seller is a resident of Delaware.  It also allows for exemption if the gain is excluded from income.

The Delaware law, however, has a unique statutory definition of a resident individual.  A “nonresident individual” is defined as an individual who is not a resident individual of Delaware “for the individual’s entire tax year.”  The interpretation of this provision was initially unclear.  It might be interpreted to mean that all transferees moving out of Delaware and selling their homes would be treated as nonresidents, but Worldwide ERC® took the position it should be interpreted to mean only that a nonresident individual is one who was not a resident of Delaware at any time during the year, and until recently the state apparently accepted that interpretation.  

Although Worldwide ERC® continued to urge this interpretation to the State Division of Revenue, for 2019 the Division revised the Form 5403 and advised that the statute must be interpreted to require actual physical residence for the entire year.   Consequently, departing sellers are treated as nonresidents unless the departure occurred December 31, and to avoid tax, they will have to use Form 5403 to claim the capital gain home sale exclusion under section 121 of the Internal Revenue Code.  This is somewhat more restrictive than the rules in many of the states with similar laws, which require only that the home sold be the principal residence of the seller, or that make it explicit that the seller need be a resident only at the time of sale.

In Guidance Letter 03-08-05/92537, dated 19 January 2019, the Russian Ministry of Finance (MOF) specified that for a nonresident legal entity to claim eligibility for tax treaty benefits, it must provide to the payor of Russian income evidence that it is a nonresident and that it is the beneficial owner of the Russian income.

The entity must show, before the payment of the income, that it is a permanent resident of a country with which Russia has a currently effective tax treaty, and that it is the beneficial owner of the income.  The entity may use documents issued by the competent authority of a foreign country to establish nonresidency.  However, if the nonresident changes its residence after its former residence is confirmed, the Russian payor is still liable for withholding of tax due.

In order to establish that the recipient of Russian income is in fact the beneficial owner of that income, the recipient must provide documents confirming that it does not later transfer the income to third parties residing in countries that do not have an effective tax treaty with Russia, and that it actually engages in business activities in the country in which it is a resident.

Many countries have tax treaties with Russia, including the United States, under which income earned there is relieved of withholding for Russian taxes.  The new Guidance Letter is an important clarification of the conditions that must be shown to take advantage of that relief.

Worldwide ERC® members who receive payments from Russia but are not residents of that country must follow these new requirements to take advantage of tax treaty provisions eliminating or reducing Russian tax withholding on those payments.

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The IRS Whistleblower Office released its annual report on awards under the program, showing 217 awards in 2018 for a total exceeding $300 million.  The awards resulted from more than $1.4 billion in back taxes, penalties, and other proceeds of tax avoidance collected by the IRS due to information provided by private citizens.

Although the IRS whistleblower program has existed for many years, it was escalated dramatically in 2006 with enactment of a statute mandating awards of at least 15% but not more than 30% under certain conditions.  The IRS proceeded to establish an office dedicated to the program in 2007, which has grown as more citizens came forward with allegations of wrongdoing by others (frequently their employers).  

Awards have also been greatly expanded by the legislation in 2018 that made clear that the collected proceeds from which IRS must pay awards includes those from all programs the IRS is authorized to administer, enforce, or investigate, including criminal fines, civil forfeitures, and violations of reporting requirements.  Indeed, the new report says that almost $810 million of the additional collections from which awards were paid in 2018 came from that change in the law.

The IRS reports that whistleblower claims increased by 2.9% over 2017.  The $300 million of awards dwarfed the $34 million in 2017 and the $61 million in 2016.  During 2018 some 915 new claims were referred to IRS field offices for examination.  Sixty-five of the referred claims came from the IRS Large Business and International Division.  

Private tax practitioners were pleased with the progress shown, and the National Whistleblower Center welcomed the new report.

Worldwide ERC® members need to be aware of the risk posed by possible internal whistleblowers under this expanded and active program, which may cause considerable trouble even if allegations made are doubtful or untrue.  Possible targets of whistleblower claims could include tax protected relocation programs if not operated in accordance with IRS rules.

Why diverse and inclusive workplaces are important, and what global mobility professionals can do to help implement them

This article originally appeared in the February 2019 edition of Mobility magazine.

There’s no shortage of evidence to outline the many benefits of diverse and inclusive workforces and teams: Increased profitability, improved employee productivity and morale, and greater levels of innovation are just a few. Whether organizations are motivated by competitive advantage and boosts to their bottom lines, a sense of corporate social responsibility and justice, a desire for global growth – or some combination of all of those things –those fully and successfully embracing a D&I strategy are reaping the rewards.

At the Worldwide ERC® Global Workforce Symposium in Seattle late last year, Sunday Rubenstein, CRP, SGMS-T, associate director, visas and immigration, with EY; Elena Anderson–de Lay, GMS-T, co-founder and lead strategist with At Ease Solutions LLC; and Sylvia Ehrlich, SCRP, president of Intrepid Relocation, conducted a 30-minute “speed round” session to help global mobility professionals begin to explore some of the key D&I policy implementation benefits and challenges.

Start With Identifying What D&I Means

The first step, noted Rubenstein, is to define what diversity and inclusion really mean to a specific company, recognizing that:

Once organizations have defined what D&I initiatives look like for their own internal goals and cultures, the next step is to learn how to best leverage them. Ultimately, when those two things work harmoniously together, they become the foundation for a successful D&I strategy. Rubenstein cautioned, however, that developing the strategy is just the beginning of the process, and it’s something that will require continual monitoring, adjusting, and growth over time. The investment pays off, she added, with organizations seeing that once a strategy of inclusion has truly taken hold, “the more people feel they are being heard and the higher the trust levels rise in an organization, the more that translates into better business performance, team collaboration, and innovation.”

This article originally appeared in the February 2019 edition of Mobility magazine.

Handling changes with assignment intelligence

Compliance has become a big thing, whether we like it or not. Although the world appears to be getting smaller and more interconnected, relocations are becoming more and more difficult, with increased regulatory and compliance matters forming a significant part of the process. Countries band together, and “improvements” are made to cross-border regulations and passenger tracking, but the changes rarely better the working lives of global mobility professionals.

Instinctively, one might expect countries with more developed processes and systems to be easier to work with. But we have all encountered the real truth: More development means more regulation or better enforcement of pre-existing laws. A nation that is open for worldwide business must protect itself, and it generally does that in the form of more nuanced laws and statutes. Unfortunately, two of the areas that are of primary concern to relocations—immigration and taxation—are profoundly affected.

These often stricter rules aim to better regulate and control countries’ economic structures, but they inevitably cause issues for relocation professionals, no matter where within the industry they find themselves.

Putting yourself into a position where you can efficiently handle these changes with assignment intelligence (a holistic and data-centric approach to relocations) is not a simple process when your activities regularly involve more than a small handful of countries.

In an addition to its “Frequently Asked Questions” about moving expenses on 7 February, 2019, the IRS said that excludable 2018 payments for 2017 civilian moving expenses should not be reported in Box 12P of the 2018 W-2 form.  That space should only be used to report military moving expenses, which remain excludable for 2018 moves.  For the FAQ, go to https://www.irs.gov/newsroom/frequently-asked-questions-for-moving-expenses.  

Confusion arose after IRS in Notice 2018-75 announced that payments or reimbursements in 2018 for 2017 moving expenses remained excludable on 2018 returns despite the suspension of the exclusion by the 2017 Tax Cuts and Jobs Act (TCJA).  For the Notice, go to https://www.irs.gov/pub/irs-drop/n-18-75.pdf.  

In prior years, when some moving expenses were deductible under section 217 and excludable under section 132, the deductible/excludable portion of such expenses was included in Box 12P on the Form W-2, except for expenses of moving household goods that were paid directly to moving companies, which were not reported at all.  

However, the TCJA suspended the deduction/exclusion for all taxpayers except active duty military for 2018 through 2025.  Notice 2018-75 created an exception for expenses incurred in 2018 for moves in 2017.  As companies began to prepare Forms W-2, questions arose as to whether such expenses should be accounted for by continuing to include them in the Box 12P.

Although the IRS has now answered that question, the answer comes too late to avoid some problems.  It has been reported that some tax filing services or tax software packages have rejected Forms W-2 with an entry in Box 12P for a civilian employee.  Most tax advisors had assumed prior to the new FAQ that the Box 12P should still be used for expenses excluded under Notice 2018-75, and it is likely that companies with expenses that fell into this category did so.  It may now be necessary for those companies to issue Forms W-2c for those employees.  

This article originally appeared in the December 2018 edition of Mobility magazine.

E-closings align transferee convenience with mobility objectives

The mobility industry has benefited from remarkable innovation in recent years, increasing efficiency and improving the transferee experience. Two primary examples include transferee portals with application programming interface integrations for service partners and video surveys for household goods shipments. Similar advances have transformed the process of purchasing real estate, with electronic signature (“e-signature”) technology becoming the norm and online platforms allowing transferees to find the best rates and providers to maximize their benefit spend.

Yet when we get to the real estate closing, there’s little to distinguish the experience in 2018 from 1998 or, in some ways, 1978. Some of the formalities have changed, but the process itself can feel antiquated. The time required for closing can be unpredictable as we wait on last-minute concessions, outstanding documents, and approvals. Communication often overlaps and can appear confused and contradictory as we work to meet the requirements of the parties, lender, and settlement agent. There is still a stack of paperwork to be signed at the closing table, and all too often, some documents are seen for the first time when the purchaser is handed a pen.

Related: Blockchain and Real Estate Conveyancing

Electronic closings (“e-closings”) will modernize the settlement process to meet the expectations of an increasingly digital real estate ecosystem. The movement to e-closings in mobility programs promises to increase transparency and service while freeing transferees and their families to focus on the most valuable uses of their time. There are many hurdles to overcome before e-closings are available and implemented nationwide. There are policy considerations because, at least initially, the benefit is available only in certain locations and from certain providers.

This article originally appeared in the December 2018 edition of Mobility magazine.

With Recent Innovations Come New Responsibilities

As every industry struggles to keep up with rapidly evolving technological advancements, they’re also struggling with a barrage of data security concerns that come with them. The world of mobility is no exception. On one hand, recent innovations are making program management easier for mobility managers, providing relocating employees with quicker answers via automated solutions, and putting mountains of real-time data into the hands of relocation management companies and clients alike. On the other hand, the stakeholders involved with these processes find themselves wondering just how we make sure all of that data stays protected.

Big Data and Relocation Technology
‍Technology is evolving at an exponential rate, providing us with capabilities and insights we had never imagined in the past. For example, companies are now able to send targeted emails to prequalified customers in specific areas; segment their customer populations, making them easier to understand; and easily assess big data at a moment’s notice. This is all thanks to the technology we can put into place to collect that data. When data is collected and stored properly, technology enables relocation management companies and their clients to retrieve key information in real time, and then to analyze data in sets—often called big data—to make better business decisions based on the patterns and associations it reveals.

Specific to mobility, we’re seeing RMCs invest in three primary areas of technology in an effort to improve efficiency, productivity, and awareness.

Artificial Intelligence (AI)
‍Because of the global nature of RMCs, virtual assistants and chatbots are becoming a growing area of interest. They provide the ability to automate processes, saving a tremendous amount of time and resources; they provide website visitors with immediate answers in any global time zone; they allow the host company to gather information about the visit; and they can spot trends in inquiries and responses, providing RMCs with valuable information on what visitors are looking for or need. While they’re not replacements for customer service representatives or a human touch, they can be a helpful enhancement and a guaranteed immediate contact during a visitor’s initial website visit, even after hours, when a live employee isn’t available. Best of all, AI isn’t static; it learns and adapts as data is processed over time.

This article originally appeared in the January 2019 edition of Mobility magazine.

Companies are seeing a rapid increase in permanent transfers

It’s no secret that companies have been increasingly using alternatives to long-term assignments to manage their mobility programs in recent years. While many companies still expect their numbers of long-term assignees to increase, successive surveys by ECA International have found that the rate of increase is slowing each year. In contrast, the use of short-term assignments, commuter assignments, and permanent transfers is on the rise.

ECA’s January 2018 “Permanent Transfers Survey” found that nearly 40 percent of international transfers lasting more than one year are made on a permanent basis, where there is no expectation or commitment for the employee to return to the home country. Four years earlier this figure was only 22 percent. Nearly two-thirds of companies have seen the proportion of permanent transfers increase in the last three years, and a similar number forecast further increases in the next three.

Given this rate of increase, will traditional long-term assignments soon become a thing of the past?

Why Permanent Transfers Are On the Rise
‍As more employees want and expect to be internationally mobile to satisfy their own professional and personal ambitions, 38 percent of companies reported that they will increasingly use permanent transfers to meet employee demands. However, the results indicate, overall, that the rise is being driven primarily by the needs of businesses rather than employees.

‍This article originally appeared in the January 2019 edition of Mobility magazine.

The what, why, and how

As global mobility professionals, we often wonder what the best global mobility model is for our company. Should I outsource global mobility? Should I handle some functions in-house? What does the best global mobility model look like?

However, there is no single best global mobility model. For some companies, outsourcing the whole global mobility function is best; for others, doing everything in-house is most effective; and for yet a third group, a combination of in-house and outsourced services works best.

So if there is no one single best global mobility model, you may wonder, “How do I determine the best model for my company?”

The Benchmark
‍First, let’s get a better understanding of what kind of global mobility models companies have nowadays. According to a recent Orion Mobility survey, 52 percent of surveyed companies identified their relocation programs as hybrid models, 33 percent are fully outsourced, and 15 percent are fully in-house.

On January 1, 2019, Jair Bolsonaro was sworn in as the new President of Brazil. On October 28, 2018, Bolsonaro defeated Fernando Haddad of the Worker’s Party 55.1% - 44.9% in a run-off.

Bolsonaro’s election comes amid a tumultuous time in Brazil. Government corruption is a major problem with President, Dilma Rousseff getting impeached in 2016 and former president Luiz Inácio Lula da Silva in prison for corruption. Da Silva was the front runner in this year’s election before being sent to jail. Brazil is also facing a slumping economy and rising crime rates, which all likely had an impact on the election results as voters pushed back against the “establishment.”

Many are comparing Bolsonaro’s rise to that of President Donald Trump’s, as both were able to position themselves as strong outsiders rallying against the media and establishment politics. Bolsonaro has been quite vocal about how he plans to govern differently. Among his initiatives, Bolsonaro wants to reduce the size of the government, increase productivity, and reduce regulations.

Bolsonaro comes into power with some lofty policy goals he hopes to achieve. Three of the main goals for the new administration are pension reform, privatization, and tax reform. Pension reform is a touchy subject in Brazil as currently, many people retire in their 50s and receive generous benefits from the government. As Brazil’s next legislative session is about to get underway, politicians are already discussing proposals to tackle pension reform. While it is still to early to tell, it is likely that the government will try to raise the retirement age by at least a few years, which would save the government money.

Bolsonaro also campaigned on the promise of pushing for privatization. Currently, Brazil has 418 state-owned enterprises (SOEs) - more than any country in the Americas - though some are no longer in use. Additional privatization would open Brazil up to increased foreign investment, especially from China, which has been investing heavily in Brazil over the past few years. Bolsonaro hopes that moves to privatize can help improve the country’s infrastructure. Privatization is a controversial topic in Brazil, so it remains to be seen just how much progress Bolsonaro can make on this goal.

Tax reform is the third main priority proposed by President Bolsonaro. Brazil is known for having a complex and burdensome tax system, so a main priority would be simplifying the process. A few different proposals are being considered and it is unclear at this point which one will be the most politically popular or achievable.

On January 29, the United Kingdom (UK) House of Commons voted in favor of UK Prime Minister Theresa May renegotiating with European Union (EU) officials the “backstop” provision of the Brexit agreement.  The “backstop” provision would require the UK to remain in the EU customs union and single market until the issue of how to address the border between the Republic of Ireland and Northern Ireland is resolved.  Since the vote, an EU spokesperson has reiterated the position of the EU that the current proposed agreement is non-negotiable.

A majority of members of the Conservative party were joined by their coalition partners with the Democratic Unionist Party of Northern Ireland, as well as a few Labour party members, to pass the amendment by a vote of 317 to 301.  Specifically, the amendment seeks for the backstop provision to be renegotiated and replaced with “alternative arrangements to avoid a hard border.” May has until February 13 to return to Parliament with a renegotiated deal.

Interestingly, a majority of Parliament also voted in support of an amendment stating the UK would not leave the EU without an agreement in place. In the vote of 318 to 310, almost all Labour party members were joined by 17 conservatives and members of third parties in passing the amendment. All other amendments including one that would have delayed Brexit were defeated.

The clock continues to click as the Brexit date of March 29 approaches.  It is yet to be seen if the EU will make any concessions on the current agreement, as the other 27-member states have been uniform in taking a strong position with the UK.  We have seen recently a number of member state legislatures pass measures that direct their respective governments to develop plans for a no-deal Brexit possibility. However, there is still a strong desire within the EU and UK governments to reach a deal.

As new Brexit events emerge, we will keep you apprised.  While there remains uncertainty revolving around Brexit regarding the impact on workforce mobility, we do know that much will remain the same in the short-term for UK citizens who work and reside in the EU, and vice versa.

On Friday, January 25, 2019, President Trump and Congressional leaders reached a deal to end the partial government shutdown. At 35 days, the partial government shutdown is now the longest in U.S. history. The deal signed by President Trump would reopen the government for three weeks until February 15, 2019. This temporary deal does not include any new money for a border wall and is meant to give Congressional leaders more time to negotiate a long-term solution.

While federal workers are back to work this week, the threat of another possible shutdown looms. On January 16, 2019, President Trump passed legislation that calls for furloughed workers to recieve back pay once the government reopens. Still, it is likely to take up to a week for furloughed workers to receive back pay (and maybe longer, depending on the agency).

Despite the shutdown’s end, the economic impact will likely be felt for months to come. The non-partisan Congressional Budget Office (CBO) released a report on January 28, 2019, entitled “The Effects of the Partial Shutdown Ending in January 2019” which outlines the expected economic impact of the shutdown. CBO estimates that the five-week shutdown has cost the U.S. economy $3 billion that it will never recover. The CBO has also lowered its projection for Q1 2019 GDP growth by 0.02%.

After the government reopened, both Democrats and Republicans have expressed optimism about reaching a funding deal before the February 15th deadline. If Congressional leaders cannot reach a deal, it is possible that President Trump will try to take executive action to secure funding for a border wall. Any such action would undoubtedly lead to multiple lawsuits from Democrats challenging the President’s authority to redirect funding to build a wall. If a deal is not reached by February 15, 2019, the U.S. government will once again experience a partial shutdown. Worldwide ERC® will be sure to keep you up to date as negotiations progress.  

As the shutdown dragged on, the operations of important federal agencies such as the IRS, Department of Housing and Urban Development (HUD) and the Environmental Protection Agency (EPA) ground to a halt. The shutdown created chaos last week at major American airports as hundreds of air traffic controllers missed work. Government shutdowns are costly and impede business. We have yet to measure the full effect of this shutdown’s impact, but in short, having the full U.S. government open again is good news for the mobility industry.

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