Topics in International Taxation: Partner country perspectives Prof. Jan J. P. de Goede ITC/ATI Tax and Development Conference, Berlin, 15 June 2017 IBFD Academic and International Tax Training - www.ibfd.org
Domestic Revenue Mobilization/ focus Broad topic; may include many different types of taxes. Choices seem to depend on tax, social and economic policy considerations, feasibility implementation International focus currently on corporate taxation of MNE s; coordinated measures to effectively avoid base erosion and profit shifting (BEPS; reports October 2015; role transparency via exchange of information to fight tax avoidance/evasion Experiences/ challenges in your countries? 2
Dilemmas taxation MNE s We are committed to creating the most competitive tax regime in the G20, and we are delivering on this ambition George Osborne, March 2013 We're not accusing you of being illegal, we're accusing you of being immoral Margaret Hodge, November 2012 Tax competition / Tax cooperation/ budgetary needs/ public moral outrage; predominant approach in your countries? 3
BEPS; kind of issues relevant for you? Coherence, Substance, Transparency Coherence Hybrid Mismatch Arrangements (2) Interest Deductions (4) CFC Rules (3) Harmful Tax Practices (5) Substance Preventing Tax Treaty Abuse (6) Avoidance of PE Status (7) TP Aspects of Intangibles (8) TP/Risk and Capital (9) TP/High Risk Transactions (10) Transparency Methodologies and Data Analysis (11) Disclosure Rules (12) TP Documentation (13) Dispute Resolution (14) Digital Economy (1) Multilateral Instrument (15) Minimum standards, re-inforced standards, best practises 4
Ultimate Residence Country (High Tax) Practical illustrations. Similar problems BEPS in a nutshell experienced in your countries?? HQ Parent Co Ineffective/No CFC Rules Maximise Deductions Minimise Assets/Risks Low Tax e Country High Tax e Country Maximise Assets/Risk s Market or Productio n Country (High Tax) 21/06/2017 e Co 2 Avoid Taxable Presence or Minimise Assets/Risks Local Activit y e Co 1 Hybrid Mismatch Preferential Regime Maximise Deductions Low or no Withholding tax 5
Expected BEPS impact in a on BEPS 6 Ultimate Residence Country (High Tax) Low Tax e Country Action 8-10 Maximise Assets/Risks Market or Productio n Country (High Tax) 21/06/2017 e Co 2 Avoid Taxable Presence Action or 7 Minimise Assets/Risks Action 8-10 Parent Co Local Activit y Ineffective/No CFC Action 3 Rules Maximise Deductions Minimise Assets/Risks e Co 1 Low or no Withholding tax Action 4 Action 8-10 Action 6 High Tax e Country Hybrid Mismatch Action 2 Preferential Regime Maximise Action 5 Deductions Action 4 Address techniques used to Align Address Common Nexus substance Limit treaty approach interest abuse with value through uses to avoid Include the income PE status, creating e.g. by creation a expenditure introduce minimum deductibility: through standards coordination revised/new Common replacing BEPS concerns on R&D a distributor in on with the as a a guidance treaty approach tools. Proxy shopping for Combination for applying on Activity net (i.e. interest LOB the of commissionnaire definition of CFC arrangement; income, IP ALP: and/or primary deductions delineation PPT) limited of actual to a by artificially regimes. and defensive other antiabuse e.g. income fragmenting transaction, percentage clauses risk allocation, from digital Compulsory rules. business Ordering activities (between spontaneous rule to take that 10%- intangibles including sales HTVI, advantage avoids exchange 30%) of double of EBITDA of exceptions information taxation plus that CCA, commodity transactions were optional while initially preventing group adopted wide to prevent ratio and services on rulings double the taxation non-taxation of mere preparatory or auxiliary activities; and/or by splitting-up construction Action 13 contracts
BEPS Inclusive Framework Inclusive Framework. BEPS Associate (minimum standards / fee), peer review minimum standards, pending further work, creating/ providing toolkits developing countries, support in capacity building via: Platform for collaboration on Tax: OECD, World Bank, IMF,UN; support for developing countries in BEPS implementation, standard setting, capacity building, technical assistance Is this considered to be of interest to you? Do you see pros and cons in participation? If so, which ones? p.s. Minimum standards: Action 5 harmful tax practises incl. exchange tax rulings, Action 6 treaty shopping, Action 13 exchange of Country by Country reporting and Action 14 improving dispute resolution, besides CRS financial account data (Forum Transparency and EOI) 7
Action 15 Multilateral Instrument The Multilateral Convention to implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting in existing treaties; 96 countries negotiated, and 68 countries signed (and 8 signed the intention to sign) the Convention on 7 June 2017. New opportunity to sign next year Several Choices: reservations on articles, exclusion of treaties, participants Inclusive Framework must meet BEPS minimum standards. Certain provisions apply only in bilateral opt in situations. Choices depends on tax treaty policy signatories Considered relevant by you? If yes, manageable? 8
9 Some relevant questions What are your main challenges regarding domestic revenue mobilization, against the background of international developments like BEPS/CRS? Do you see these as purely national or regional issues? What is the importance of receiving and providing information, EOI (rulings, CbC reports, financial account data), to fight tax avoidance and evasion for you? Do you face problems of priority setting with respect to these issues, more specifically:
Some relevant questions (continued) Which BEPS/CRS/Other measures are most important for you from a perspective of domestic revenue mobilization? Which measures are in your view the easiest and which ones the hardest to realize? Can you share successful experiences? Which needs for technical support do you have regarding info/ training on BEPS/ MLI/CRS, or other issues, in view of your priority setting? 10
What conclusions can we draw from your input? j.degoede@ibfd.org 11