THE UN TRANSFER PRICING WORK

Transcription

1 THE UN TRANSFER PRICING WORK Michael Lennard Brussels, 24 February 2011 Chief, International Tax Cooperation Section Financing for Development Office, United Nations

2 The Usual Disclaimer These notes and the presentation reflect views personal to the presenter and should not necessarily be taken as the views of the United Nations or the UN Tax Committee, except as specifically noted. 2

3 The UN Tax Committee Under the head of Financing for Development in UN framework. Secretariat therefore is in UN Department of Economic and Social Affairs (DESA) Financing for Development Office. Supports the 25 person UN Tax Committee. 3

4 Why Financing for Development? 2002 Monterrey Consensus on Financing for Development: Follow-up in Doha Declaration end of Main Ideas: Up to countries to determine how to develop (sovereignty); But other countries must support this. 4

5 Monterrey Consensus Relevant aspects of Financing for Development 1. Domestic resource mobilisation (important tax role in development schools, hospitals, roads etc it isn t only about avoiding double taxation, even though that s s important see 2.) 2. Foreign direct investment (importance of investment to development, so not anti - business) 3. International trade 4. Official development assistance 5. External debt 6. Systemic issues ( voice and participation of developing countries an important tax focus) 5

6 Current Membership ( )# 2013)# D ing country experts (15) D ped country experts (10) Morocco Egypt South Africa Nigeria Ghana Senegal China Malaysia Republic of Korea* India Pakistan Barbados Chile* Mexico* Brazil Belgium* Italy* Spain* Germany* Norway* Switzerland* United States* New Zealand* Japan* Bulgaria * Denotes OECD Member # NB All Members act in their personal capacities, not as country y representatives 6

7 Work of the Committee Annual Session (5 days a year maximum) 7th session: October 2011 (Geneva). Subcommittees (Work ongoing). 7

8 Work of the Committee 2009 Annual Session Committee responds to perceived lack of sufficient clear and relevant guidance for developing countries on the policy and administrative aspects of applying transfer pricing analyses to some of the transactions of multinationals. 8

9 Subcommittee on Transfer Pricing Mandate: Practical Issues develop a practical manual on transfer pricing, based on the following principles: a)that it reflects the operation of Article 9 of the United Nations Model Tax Convention, and the Arm s s Length Principle embodied in it, and is consistent with relevant Commentaries of the U.N. Model [these recommend following the OECD Guidelines]. b)that it reflects the realities for developing countries, at their relevant stages of capacity development. c)that special attention should be paid to the experience of other developing countries [i.e. South-South]. South]. d)that it draws upon the work being done in other fora. d) 9

10 The Road Ahead? Present a complete draft manual for adoption to the 2012 [was 2011] Tax Committee annual session. Likely to be a roll-out out of Chapters as they are completed. Will be integrated into renewed UN (and hopefully other) capacity building efforts in the tax area. 10

11 The Road Ahead? Meeting hosted by Indian Government in February 2011 to consider new drafts (a record 17 participants, with good developing country participation [participation is not UN-funded]). Next meeting hosted by Japan (September 2011) after redrafts and drafts of new chapters. First drafts to be finalised at October 2011 session of the Tax Committee. 11

12 Areas of focus: The Road Ahead? What sort of approach might be appropriate for a DC at its particular stage of development, and in line with its priorities; e.g. at what point is a specific TP regime unnecessary/ advisable/ necessary? TP should be understood as a journey how should it be planned a staged approach? initial focus areas? Integration with other aspects,, e.g. general investment promotion policy, dispute resolution policy, risk assessment and audit capabilities and priorities. 12

13 Areas of focus: The Road Ahead? Can arm s s length pricing (ALP) approach be addressed in a way that better works for DCs (especially by allowing focus of limited resources on areas of greatest concern at a point in time, and by reducing levels of data seeking and crunching required for each individual case) and still be ALP? Can we learn from e.g. Brazilian fixed margins, use of safe harbours and even the formulary apportionment debate,, to make ALP more workable for both governments and taxpayers, yet still be identifiably an ALP approach? How do we fairly deal with the imprecision of ALP? 13

14 Areas of focus: The Road Ahead? Language and readability (seeking funds for an editor). Improving/ adding examples and inputs from developing countries and testing to see if it meets the needs. 14

15 Areas of focus: The Road Ahead? Small focus group meeting in June 2011 to further engage developing country government experts plus address wider issues for permanent missions to the UN including NGO and business perspectives. Working with the Friedrich Ebert Stiftung on this a first epitomises wide interest in TP and capital flight issues more generally. 15

16 The Road Ahead? Areas of focus: Integrate into capacity building efforts of ourselves and others: High level inter-regional regional adviser on tax cooperation expected to be advertised soon, after about 10 years without one! A lot of interest in placing persons from developed and developing countries into the UN Secretariat to work on transfer pricing issues. 16

17 The Road Ahead? Areas of focus: Hopefully greater collaborative work,, including but not limited to: the G-20 G context, OECD, WB, IMF, regional and broader associations of tax administrations, UNDP, UN regional commissions, individual countries. 17

18 Some Common Questions How does this relate to OECD work is it just duplicating or is it creating a separate set of guidelines?? [A: it is neither] Is it business friendly or unfriendly? [A: it is good for good business, bad for avoiders/ evaders] Why is the UN work supporting ALP rather than formulary apportionment? [A: it is the immediate practical focus of DCs looking to TP issues at present] What else can be done practically to deal with data, knowledge, skills gaps.. [A: creative, needs-responsive thinking and action needed] 18

19 Final Reflections Important work, but not for every country don t t let us forget LDC s s immediate needs! Must be seen as a genuine effort to meet needs and priorities of specific developing countries, not pushing products. Who bears the costs of complexity at present, and who should in future? How do we ensure DCs have a seat at the table in setting norms of international transfer pricing not just receiving and implementing them. Website: 19