Strategizing International Tax Best Practices – by Keith Brockman

Archive for the ‘OECD / UN’ Category

OECD G20 Report & Best Practice Analogies

OECD’s report to the G20 leaders in St. Petersburg, Russia is attached for reference, consisting of a Progress Report to the G20 in Part I, and details of the OECD Base Erosion and Profit Shifting (BEPS) Action Plan and offshore tax evasion efforts in Part II.  This posting will capture some highlights from the report, and pose analogies for Best Practices in alignment with the OECD’s initiatives.  The report may be accessed at:

Click to access SG-report-G20-Leaders-StPetersburg.pdf

The Introduction provides commentary on “legal tax avoidance,” renewed demands for greater transparency, calling for all taxpayers to pay their fair share, and completion of a global model for automatic exchange of information by 2014.

Initiatives of the Global Forum on Transparency and Exchange of Information (the Global Forum) have resulted in 119  jurisdictions committed to standards of transparency and exchange of information.  Best Practices includes communicating  results of the Global Forum to global and regional tax teams, and business leaders, to ensure that global consistency of information is being provided to tax authorities.  

The Global Forum promotes exchange of information via a monitoring and peer review process.  The process includes Phase 1 reviews, examining a jurisdiction’s legal framework for exchange of information, and Phase 2 reviews that examine information exchange in practice.  How well does the exchange of information process work for Multinational Enterprises (MNEs)?  Is this report, with a schedule of subsequent discussions on its impact, automatically sent to all tax team members, or is each individual personally responsible for accessing, reading and comprehending the report, including Phase 1 and Phase 2 reviews?

Peer reviews result in recommendations for improvement, with all jurisdictions required to provide follow-up reports describing actions taken. Re: global audits, are recommendations for improvement provided during, and after, the audit, with action steps documented?

The Global Forum has organized four training seminars in 2012, and five training seminars this year, in addition to implementation toolkits.  Appendix 4 of Part 1 provides a listing of members and observers, inherently resulting in potential impacts for these proposals beyond the OECD member countries.  How many training forums and business tools have been provided by MNEs in the last two years to review the ongoing trend of global tax proposals?

Part 2 lists the 15 activities of the BEPS Action Plan to be addressed by all relevant stakeholders.  For analogy, has the MNE also listed those same activities, addressing potential impacts, risk quantifications and expected actions for each of the proposals, including a relevant timeline and accountability?  Are all international tax team members and business leaders aware of the BEPS Action Plan?

Automatic exchange of information is becoming the norm, versus the exception, for tax authorities around the world.  How are tax changes, audit queries, changes in tax laws, etc., communicated within the MNE enterprise quickly and efficiently?  Is  a tax newsletter communicated to the global business, addressing areas of focus and learning?

Annex 2 of the Progress Report outlines a model of multilateral automatic exchange of information designed to implement a step change in transparency.    This section is useful in addressing future legislative changes, draft model competent authority agreements, legal / confidentiality concerns, and legal bases for the exchange of information.  MNEs should track public comments and future changes of OECD member countries and observers to address these initiatives.

The highlights of the OECD G20 Report, and suggested comments for Best Practices, are meant to promote creative thought and reflection to effectively plan for the rapid evolution of change in the international tax arena.

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OECD Multilateral Convention: Automatic information sharing among G20 countries

With China’s commitment on 27 August 2013, all G20 countries have signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (Convention), resulting in automatic exchange of information as the new global standard.

Tax authorities are cooperating multilaterally and automatically, as the Convention provides for spontaneous exchange of information, simultaneous tax examinations and tax assistance.  The accompanying press release, including a list of the 56 signatories, is available at:

http://www.oecd.org/tax/china-joins-international-efforts-to-end-tax-evasion.htm

What are the implications on Best Practices for these continuing developments?  Ideas for consideration include the following:

  • Providing taxpayer information to one authority should be viewed as being provided to many countries worldwide, thus maintaining consistency is essential.  A formal methodology will ensure Best Practices are being followed.
  • Tax assistance, simultaneous examinations and joint audits should be envisioned for reviewing the global Tax Risk Framework.
  • Best Practices for implementation of Mutual Agreement Procedure (MAP) are a topic of frequent discussion by tax authorities worldwide; thus Best Practices for Multinationals should also be focused on risk identification, measurement and application of MAP.
  • Related posts for reference:
  1. 23 July, OECD exchange of information: Multilateral Convention review
  2. 27 June, OECD FTA MAP forum to develop Best Practices
  3. 25 June, OECD report to the G20: Status, training, effectiveness
  4. 20 June, OECD Global Forum on Transparency and Exchange of Information: Activities
  5. 18 June, OECD: Tax Transparency report.
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PE Best Practices Risk Review: BEPS Action Plan, OECD & UN Model Conventions

A Permanent Establishment (PE) risk review is an integral component of a global Tax Risk Framework, increasing in importance with issuance of the OECD Base Erosion and Profit Shifting (BEPS) Action Plan.  The PE risk review should be monitored on a recurring basis against the backdrop of current and future developments.  The OECD and UN Model Conventions, with related Commentaries, provide insight into the development and current state of international PE guidelines.  The Conventions provide a useful framework to document specific PE criteria, and exceptions thereto, for risk analysis.

Action 6 (Prevent Treaty Abuse) of the BEPS Action Plan states that the definition of PE must be updated to prevent abuses.  Action 7 (Prevent the artificial avoidance of PE status) provides additional PE initiatives.  Actions 6 and 7 are designed to implemented by September 2014 and September 2015, respectively.  It will be paramount to note any changes in the “preparatory or auxiliary” exception.  A link to the BEPS Action Plan is hereby provided for reference:  http://www.oecd.org/ctp/BEPSActionPlan.pdf

Article 5 of the OECD Model Convention provides an outline for PE determination, including a “fixed place of business” standard, building site or installation project criteria, the “preparatory or auxiliary character” exception, dependent agent rules and further exceptions for activities of an independent agent and related entities.  The OECD Model Convention can be accessed at: http://www.oecd.org/tax/treaties/oecdmtcavailableproducts.htm

The OECD Commentaries are required reading to fully comprehend the history, and intended meaning, of Article 5.  Paragraph 2 of the Commentary provides an outline for determination of a “fixed place of business,” consisting of (i) the existence of a “place of business,” (ii) this place of business must be “fixed,” and (iii) the carrying on of the business through this fixed place of business.  Paragraph 24 of the Commentary states that , for application of the “fixed place of business” rule, “the decisive criterion is whether or not the activity of the fixed place of business in itself forms an essential and significant part of the activity of the enterprise as a whole.”  Paragraph 33 further provides that “the authority to conclude contracts must cover contracts relating to operations which constitute the business proper of the enterprise.”

The attached reference provides access to the UN Model Convention, Letter from India (13 Aug 2012), revised commentary on existing Article 5 and definition of PE for comprehensive understanding of the current PE Article.  The UN Model Convention contains an Introduction, Part One (including the Articles), and Part Two with Commentaries.  Paragraph 20 of the Commentaries states that the Commentaries on the Articles are regarded as part of the UN Model Convention, along with the Articles themselves.  Most importantly, Part Two cites differences of the UN and OECD Model Conventions, such as the UN inclusion of a services standard, exceeding 183 days in any 12-month period, that is not within the OECD guidelines.   http://www.un.org/esa/ffd/tax/unmodel.htm

Best Practice ideas for outlining PE risk include:

  • Documenting potential significant PE risks by legal entity, with specific reference to the PE attribute that attracts such risk, such as a fixed place of business or dependent agent.
  • Outlining availability of the preparatory or auxiliary character exception for potential risks.
  • Inclusion of objective and subjective evidence that provides defense for a potential PE determination, including wording from the applicable Convention and Commentaries.
  • Tools available to reduce double taxation upon determination of a PE, such as the Mutual Agreement Procedure (MAP).

The above Best Practices should be combined with Best Practice ideas in former posts:

  • 14 April PE Risks: Best Practices for Awareness & Planning
  • 14 July: PwC PE survey: Trends & Challenges

PE determination is increasing in importance in today’s changing tax world, thus a detailed risk matrix is essential to determine current potential risk areas, as well as provide valuable information to assess proposed changes by the OECD and/or UN.

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OECD / UN, PE, Tax Risk Management, Transfer Pricing

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U.N. Committee of Experts on International Cooperation in Tax Matters: update

http://www.un.org/esa/ffd/tax/

The U.N. Committee of Experts on International Cooperation in Tax Matters (U.N. Committee ) is responsible for drafting the U.N. model tax treaty and the Practical Manual on Transfer Pricing for Developing Countries.  The U.N. Committee’s work on international tax and transfer pricing developments should be watched closely by the international tax community.  Additionally, developments on important topics should be compared with that of the OECD, including its Revised Draft on Transfer Pricing Aspects of Intangibles (03 August post), White Paper on Transfer Pricing Documentation (31 July post) and the Base Erosion and Profit Shifting Action Plan (19 July post).

The attached link provides reference to its provisional agenda for the 21-25 October 2013 session, the appointment of 25 members to the U.N. Committee for a 4-year term expiring on 30 June 3017 and the U.N. Model Double Taxation Convention.

The 9th session of the U.N. Committee will address U.N. Model Tax Convention issues, including the following:

  • Article 4 (Resident): Application of treaty rules to hybrid entities
  • Article 5 (PE), including international VAT cases
  • Article 7 (Business Profits): Force of attraction principles
  • Article 9 (Associated Enterprises): Commentary update
  • Article 26 (Exchange of information)
  • Other topics, including provision on taxation of fees for technical services, issues for the next update of The Practical Transfer Pricing Manual for Developing Countries, and The Manual for Negotiation of Bilateral Tax Treaties between Developed and Developing Countries.

The 25 members were appointed by U.N. Secretary-General Ban Ki-moon and will act in their personal capacity.  A detailed biography of each member is included in the press release; a listing of their name and current position is provided herein for quick reference.

  1. Mr. Khalid Abdulrahman Almuftah, Deputy Director, Revenues and Tax Dept., Ministry of Economy and Finance, Qatar
  2. Mr. Mohammed Amine Baina, Chief, Division for International Cooperation, Dept. of Taxation, Ministry of Economy and Finance, Morocco
  3. Ms. Bernadette May Evelyn Butler, Legal Adviser, Ministry of Finance, Bahamas
  4. Mr. Andrew Dawson, Head, Tax Treaty Team, HMRC, UK
  5. Mr. El Hadj Ibrahima Diop, Director of Legislation and Litigation Studies, Ministry of Economy and Finance, Senegal
  6. Mr. Johan Cornelius de la Rey, Legal Officer, Legal and Policy Division, South African Revenue Service (SARS)
  7. Ms. Noor Azian Abdul Hamid, Director, Multinational Tax Dept., Inland Revenue Board (IRBM), Malaysia
  8. Ms. Liselott Kana, Head, Dept. of International Taxation, Internal Revenue Service, Chile
  9. Mr. Toshiyuki Kemmochi, Director, Mutual Agreement Procedures, National Tax Agency, Japan
  10. Mr. Cezary Krysiak, Director, Tax Policy Dept., Ministry of Finance, Poland
  11. Mr. Armando Lara Yaffar, Director General, Int’l Affairs, Dept. of Revenue, Ministry of Finance and Public Credit, Mexico
  12. Mr. Wolfgang Karl Albert Lasars, Director, International Tax Section, Federal Ministry of Finance, Germany
  13. Mr. Tizhong Liao, Deputy Director General of Tax Treaty, Dept. of International Taxation, State Administration of Taxation, China
  14. Mr. Henry John Louie, Deputy to the Int’l Tax Counsel (Treaty Affairs), U.S. Dept. of the Treasury
  15. Mr. Enrico Martino, Head, International Relations, Dept. of Finance, Ministry of the Economy and Finance, Italy
  16. Mr. Eric Nii Yarboi Mensah, Chief Tax Treaty Negotiator, Ghana Double Tax Treaty Convention Team
  17. Mr. Ignatius Kawaza Mvula, Assistant Director, Zambia Revenue Authority
  18. Ms. Carmel Peters, Policy Manager, Inland Revenue, New Zealand
  19. Mr. Jorge Antonio Deher Rachid, Tax and Customs, Embassy of Brazil, Washington, D.C.
  20. Mr. Satit Rungkasiri, Director General, Revenue Dept., Ministry of Finance, Thailand
  21. Ms. Pragya S. Saksena, Joint Secretary, Tax Policy and Legislation, Central Board of Direct Taxes (CBDT), Dept. of Revenue, Ministry of Finance, India
  22. Mr. Christoph Schelling, Head, Division for International Tax Affairs, State Secretariat for Int’l Financial Matters, Swiss Federal Dept. of Finance
  23. Mr. Stig B. Sollund, Director General and Head of Tax Law Dept., Ministry of Finance, Norway
  24. Ms. Ingela Willfors, Director, Int’l Tax Dept., Ministry of Finance, Sweden
  25. Mr. Ulvi Yusifov, Head, Int’l Treaties Division, Int’l Relations Dept., Ministry of Taxes, Azerbaijan

It will be interesting to observe the interaction of new U.N. Committee members, and most importantly the initiatives addressed against the backdrop of the OECD’s recent developments.

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OECD (Revised) Draft: Transfer Pricing Aspects of Intangibles

http://www.oecd.org/ctp/transfer-pricing/intangibles-discussion-draft.htm

Working Party No. 6 of the Organization for Economic Cooperation and Development (“OECD”) has prepared a Revised Discussion Draft on Intangibles, following an earlier Discussion Draft in June 2012.  This revised Draft includes changes based upon comments received, including a public consultation, in 2012.

This Draft addresses, directly and indirectly, actions contained in the OECD Action Plan on Base Erosion and Profit Shifting (“BEPS Action Plan”).  Refer to my 19 July 2013 post for information on the OECD BEPS Action Plan.

The changes in the Draft  include a new section addressing local market features, location savings, assembled workforce and group synergies, in addition to explanatory changes to the definition of intangibles.  As stated in the Revised Discussion Draft, a transfer pricing intangible is not solely determined by its general tax or accounting characterization.  The intangible definition is also mutually exclusive from the definition of royalties for purposes of Article 12 of the OECD Model Tax Convention.  Additionally, functions, assets and risks related to intangibles are determined via the functional analysis, and are not presumed to be held by the legal owner of the intangible.

The Draft includes an interesting discussion of the use of projected growth rates and discount rates, including examples in the Annex to illustrate the guidance on special considerations for intangibles.

Written comments may be submitted to the OECD on or before 1 October 2013.  A public consultation will also be held on 12-13 November 2013 in Paris, France, selecting speakers from those providing written comments.

Analogous to my 31 July 2013 post for the OECD White Paper on Transfer Pricing Documentation, this Revised Discussion Draft should be reviewed and compared with the current methodology for intangibles, noting significant variations for internal analysis.  Intangibles are a significant component of transfer pricing, thus this Draft should be seriously considered by all multinationals.

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OECD / UN, Tax Risk Management, Transfer Pricing

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OECD: White Paper on Transfer Pricing Documentation

http://www.oecd.org/tax/transfer-pricing-documentation.htm

The Organization for Economic Cooperation and Development (“OECD”) is quickly following up Step 13 in its Action Plan on Base Erosion and Profit Shifting (“BEPS Action Plan”) for enhanced transparency, information on global income allocation, economic activity and taxes paid among countries, according to a common template.  Refer to my 19 July 2013 post for information on the OECD BEPS and Action Plan.

The White Paper takes a “big picture” approach, with interested parties invited to comment by 01 October 2013.  An insightful summary outlines significant differences in transfer pricing documentation requirements from country to country, concluding with a recommended two-tiered approach (“Coordinated Documentation Approach”) consisting of a Masterfile and a Local file.

The recommended Masterfile is broad in scope, requesting global legal ownership/structure, geographical location of principal operating entities, in addition to management structure and geographical location of key management personnel.  Major business lines would be described in extensive detail, as well as intangible strategies, intercompany financing activities, listing of APAs, MAP procedures and the consolidating income statement.

The Local File describes local management structure and geographical location of senior executives, recent business restructurings including transfers of intangibles, controlled transactions and financial information.

Annex 1 and 2 provide multi-country surveys on transfer pricing documentation and tax return disclosure requirements, with related sources of information for reference.

The OECD believes the Coordinated Documentation Approach offers a balanced trade-off between greater transparency and streamlined transfer pricing documentation requirements.

All international tax executives should follow public comments that are posted by  OECD for this new Coordinated Documentation approach, discuss advantages and disadvantages with their peers, in addition to determining if they will provide comments directly.  The current methodology of preparing transfer pricing documentation reports should be compared to this suggested approach to initiate insightful planning and efficiencies that will form Best Practices for future years.

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OECD / UN, Tax Risk Management, Transfer Pricing

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OECD Country MAP Profiles & Statistics – Valuable tools

http://www.oecd.org/ctp/dispute/countrymapprofiles.htm

http://www.oecd.org/ctp/dispute/mapstatistics20062011.htm

The links provide reference to the OECD Country MAP Profiles and MAP Statistics 2006-2011.  The OECD MAP content provides valuable information that should be included as an integral component of audit risk strategies.

The Country MAP Profiles provide the following content for OECD member countries, in addition to Argentina, People’s Republic of China, Russia, and South Africa:

  • Competent Authority contact information
  • Organisation of the Competent Authority
  • Scope of MAP & MAP Advance Pricing Arrangements (APAs)
  • References to domestic guidelines and administrative arrangements
  • MAP request content, timelines, fees and documentation requirements
  • Provisions on tax collection, penalties and interest pending outcome of the MAP process
  • Other dispute resolution mechanisms, and
  • Links to websites for the relevant jurisdiction.

The MAP Statistics include information on MAP inventories, cases initiated, completed, withdrawn, and average cycle time.  These statistics are provided for the OECD member countries and some non-OECD economies.  This information is very helpful in reviewing the trend of MAP filings in relevant jurisdictions.  There were 3,838 open MAP cases by OECD member countries at the end of 2011, with an average completion time of 25 months.

The OECD Forum on Tax Administration (FTA) convenes later this year to discuss Best Practices for improving MAP: refer to prior post 27 June 2013.

With the increase of transfer pricing controversies that are inherently complex and subjective in nature, MAP is a tool that is being used more frequently worldwide.  Examples of Best Practices to strategize MAP are provided for insight:

  • Document domestic and bilateral/multilateral avenues of appeal upon commencement of an audit to facilitate advance planning.
  • Review Double Tax Treaties for relevant Arbitration provisions that are providing an impetus for some jurisdictions to finalize negotiations.
  • Determine the interplay of domestic appeals (informal settlement, formal Appeals, Court filings, etc.) with MAP early in the audit process.
  • Outline deadlines for domestic appeals, MAP and other bilateral/multilateral tools (i.e. EU Arbitration Convention)
  • Develop a pro-forma multilateral calculation to strategize solutions minimizing double taxation.
  • Ensure MAP and other appeal strategies are integrated in the Tax Risk Framework.

    OECD Map with accession (green) and discussion...

    OECD Map with accession (green) and discussion (pink) countries added (Photo credit: Wikipedia the relevant jurisdictions)

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OECD exchange of information: Multilateral Convention review

http://www.oecd.org/ctp/exchange-of-tax-information/conventiononmutualadministrativeassistanceintaxmatters.htm

This link provides access to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters prescribing procedures for the exchange of information between tax authorities, in addition to press releases and related documents.

The Convention, and its provisions, are becoming more important with increased tax transparency and sharing of Best Practices among tax jurisdictions.  The Multilateral Convention, as well as factors leading to its current and future importance provide valuable context in understanding the current state of affairs, and intentions to increase the exchange of information worldwide.

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OECD Base Erosion and Profit Shifting (BEPS) report & Action Plan

http://www.oecd.org/tax/beps.htm

Click to access OECD.pdf

The BEPS report, previously released, and the new Action Plan are available for public review, with many commentators already providing insight on the Action Plan.

The 24 month Action Plan is comprehensive and aggressive, with tax transparency and disclosure rules likely to be implemented early in that timeline.  The report also discusses an improvement of global rules in developing countries, further referenced by work of the Tax Inspectors without Borders study, as discussed in my 9 June 2013 post.

One very interesting proposal in the report is the development of a multilateral convention to address BEPS issues.  This will allow countries to rapidly implement some actions without formally renegotiating bilateral treaties.  Additionally, Appendix C provides examples of tax planning structures by multinational organizations.

The OECD BEPS report and Action Plan will provide additional momentum and debate for the proposed actions, for which multinationals should prepare an internal action plan to address such initiatives.

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OECD / UN, Tax Risk Management, Transfer Pricing

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Global Perspective & Challenges: VAT / GST/ Indirect taxes

http://www.pwc.com/gx/en/tax/indirect-taxes/shifting-balance.jhtml

PwC has recently published this report highlighting new challenges and forward looking insights for indirect taxes.  Detailed country summaries are presented for Brazil, Canada, China, China, Germany, India, Russia, Singapore, South Africa, United Kingdom, and the United States.  The article referenced at the end of the post highlights India’s intentions to introduce a GST.

VAT systems are present in more than 150 countries, with VAT receipts representing approx. 20% of total tax revenue in the OECD countries.  As VAT rates are increasing, tax bases are broadening, and EU joint audits with VAT are commencing, indirect taxes are requiring added focus for effective tax risk management.

The OECD’s Global Forum on VAT held its first meeting in November 2012, striving to increase collaboration and establish Best Practices in VAT administration and compliance.  The OECD International VAT/GST Guidelines will be finalized by year-end 2013, studying VAT neutrality, the destination principle for supply of services and intangibles, anti-abuse provisions, as well as enhancing mutual cooperation and dispute resolution mechanisms.

The report highlights Best Practice ideas, including the following:

  • Identifying responsibility and awareness for indirect taxes, including environmental taxes
  • Drafting contracts with provisions for new VAT/GST consequences in different jurisdictions
  • Import and export risks and opportunities for logistic planning
  • Risk awareness for indirect tax consequences
  • Reviewing refund opportunities based on case law precedents
  • Developing a methodology for reviewing and testing VAT characterizations and rate changes
  • Inclusion of indirect taxes as an integral component of the global tax strategy and Tax Risk Framework

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OECD FTA MAP forum to develop Best Practices

A new forum, open to all members of the Forum on Tax Administration (FTA), will convene later this year to discuss Best Practices for improving MAP.  Topics that may be discussed include:

  • Development of a strategic plan
  • Resource limitations
  • Relationship building
  • Identifying trends in disputes
  • Increasing APA’s and accelerated CA procedures
  • Roll-over adjustments
  • Multilateral case procedures
  • Taxpayer’s involvement in MAP resolution
  • Achieving certainty sooner for a win-win result

This new forum will be an interesting development for all.

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OECD report to the G20: Status, training, effectiveness

http://www.oecd.org/tax/2013-OECD-SG-Report-to-G20-Heads-of-Government.pdf

The OECD report provides relevant information worthy of review, including the following items:

  • 119 member jurisdictions have committed to the Transparency & Exchange of Information initiative (except for Lebanon),
  • Status of ongoing technical assistance and training objectives,
  • Competent Authority database is in place, containing information for over 70 jurisdictions,
  • Measurement techniques to determine effectiveness, and
  • Appendices listing various factors in providing exchange of information, including confidentiality provisions, rights and safeguards.

These notable efforts are ongoing, providing timely and informative information that should be shared.

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OECD Global Forum on Transparency and Exchange of Information: Activities

http://www.oecd.org/tax/transparency

The Global Forum has 120 members and is the premier international body re: implementation of internationally agreed transparency standards and exchange of information.  This Forum is very active in today’s tax environment, as demonstrated by its recent activities including:

  • 2nd meeting of the Competent Authorities on 30-31 May 2013, attended by 174 delegates from 77 jurisdictions.  Delegates shared procedures for Exchange of Information networks to tackle tax evasion, tools to enhance effective communication between Competent Authorities, as well as providing opportunities to  share experiences and practices.
  • Regional Training Seminar in Brazil 7-10 May 2013, attended by 70 tax administrators from Argentina, Brazil, Columbia, Costa Rica, Dominican Republic, El Salvador, Paraguay and Uruguay.  Panama and the United Kingdom provided expert trainers, focusing on an OECD overview of Exchange of Information, the 2012 update to Article 26 of the OECD Model Tax Convention and its Commentary, and the Multilateral Convention on Mutual Administrative Assistance.
  •   Regional Training Seminar in Dakar, Senegal 24-26 April 2013, attended by 20 tax authorities in 8 francophone African countries (Burkina Faso, Cameroon, Democratic Republic of Congo, Gabon, Morocco, Niger, Senegal and Tunisia).  The African countries are recent members of the Global Forum and will have Phase 1 peer reviews in 2014.  Belgium and Qatar provided expert trainers, focusing on the peer review process and preparation for evaluation of legal and regulatory frameworks for the exchange of information.

The activities of this Forum are visibly expanding transparency initiatives and the exchange of information around the world.  The recent G8 conference encouraged all countries to join in order to share mutual benefits.

Regional and global tax teams should review internal processes to ensure global consistency and adherence with internal governance protocols.  Additionally, a dialogue should be established between tax and the business leaders to heighten global awareness and ensure strategic alignment.

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OECD: Tax Transparency report

Click to access taxtransparency_G8report.pdf

This OECD report entitled “A Step Change in Tax Transparency” was prepared for the G8 meeting and summarizes recent developments, action plans for global automatic exchange of information and a feasibility assessment.

In today’s tax environment the exchange of tax information is quickly evolving and gaining momentum.  This report provides valuable context for discussion.

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OECD: A Framework for Co-operative Compliance

http://www.oecd.org/tax/administration/co-operative-compliance.htm

This insightful report focuses on practical experiences of 24 countries, with a chart summarizing each country’s status for this initiative.  Additional features are identified leading to successful “co-operative compliance” strategies.

A framework is developed, based on a business case approach, for revenue authorities to measure results, and success.  The report adopts a systematic approach to tax risk and discusses the five pillars established in 2008 based on understandings for:

  • Commercial awareness
  • Impartiality
  • Proportionality
  • Openness through disclosure and transparency
  • Responsiveness

Evolving concepts include:

  • Future direction of initiatives
  • Multilateral co-operative compliance
  • Approaches by tax authorities to measure results and success.

The report provides useful links in Appendix A for country specific information and is an excellent reference to develop further understanding into this rapidly growing initiative, while providing a foundation for Best Practices including:

  1. Documentation of the current enhanced relationship / co-operative compliance methods in use.
  2. Reviewing available co-operative compliance programs for the 24 countries in the report.
  3. Developing a process determining if, when and how the voluntary programs are to be adopted.
  4. Developing a measurement for success based on current initiatives, as well as benchmarking results and experiences with your peers.
  5. Reviewing this evolving initiative annually.
  6. Developing Memorandum of Understanding learnings, as programs are both formal and informal in approach.
  7. Advising regional teams of country developments for continual awareness and future opportunities.
  8. Comparing resource limitations with potential benefits for future co-operative compliance initiatives.

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Audits, OECD / UN, Tax Risk Management

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