Strategizing International Tax Best Practices – by Keith Brockman

Posts tagged ‘automatic exchange of information’

TAXE: Final report for Parliamentary actions

The EU Parliament’s resolutions were passed by a vote of 508 to 108, with 85 abstentions.  The proposals call for mandatory country-by-country (CbC) reporting, a common consolidated corporate tax base (CCCTB), defined tax terms and transparency / exchange of tax rulings.  A summary press release and the full report are provided for reference:

http://www.europarl.europa.eu/news/en/news-room/content/20151120IPR03607/html/Parliament-calls-for-corporate-tax-makeover

http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+TA+P8-TA-2015-0408+0+DOC+XML+V0//EN&language=EN

Key points:

  • Welcomes the EU Parent-Subsidiary Directive amendments, effective at year-end 2015, for a general anti-abuse rule and hybrid mismatches.
  • EU Commission has breached its obligations under Article 108 of the Lisbon Treaty by not launching state aid investigations previously.
  • EU Member States should respect the principle of profits taxation where they are generated.
  • Promote good practices on transfer pricing and the pricing of loans and finance fees in intra-group transactions.
  • Commission to further investigate restrictions of deductions for intercompany royalty payments (i.e. counter profit shifting).
  • All rulings that have an impact on other Member States to be presented in the CbC report, and shared with the Commission and tax administrations.  Rulings to be publicly disclosed in accordance with confidentiality requirements.
  • Mandatory CCCTB, with a deadline for the consolidation element and without any further impact assessments.
  • Develop measures to tackle cross-border VAT fraud.
  • Reform of the Code of Conduct on business taxation.
  • New State Aid guidelines by mid-2017.
  • EU to be a global leader in tax transparency.
  • More extensive CbC report, with intra-group transactions.
  • Accelerate European Tax Identification Number project.
  • Aggressive tax planning is incompatible with Corporate Social Responsibility (CSR).
  • Outgoing financial flows from EU are taxed at least once (i.e. withholding tax).
  • Transition period for developing countries to align with Global Standard on Automatic Information Exchange.

This report is compelling, far-reaching and a resource that will be used worldwide, as most non-EU countries will attempt to follow the ever-increasing EU intensity and propensity for changes in the international tax arena.  Thereby, it is a must read and a learning tool for non-tax executives in multinational organisations, as well as tax advisors, tax administrations and other interested parties.

Meeting of G5 Ministers: Tools to fight tax fraud & evasion

The Governments of France, Germany, Italy, Spain and the UK (G5) held a meeting on 28 April, 2014 to discuss progress on their mutual objectives to promote tax transparency and cooperation, fight tax fraud and evasion, counter harmful tax practices and respond to aggressive tax planning practices.  The following link provides detailed actions that were discussed:

http://www.minhap.gob.es/Documentacion/Publico/GabineteMinistro/Varios/Comunicado%20del%20G-5%20sobre%20reunión%20en%20Par%C3%ADs%2028%20abril%202014%20en%20inglés.pdf

Summary of discussions:

  • Agreement to sign the Automatic Exchange of Information (AEOI) agreements in alignment with the new, single, global OECD standard, joining 39 other jurisdictions that will effect exchange of information in 2017 with respect to 2015 data.
  • Reiteration of support to the OECD Base Erosion and Profit Shifting (BEPS) project.
  • Re: taxation of digital economies, the countries where companies conduct economic activities must be able to receive their “fair share” of tax.  To align this initiative, the G5 Ministers agreed on the interest of a flexible interpretation of the territoriality rules, including a Digital Tax Presence concept.
  • Transfer pricing rules must be adapted to ensure that profit and value creation are aligned, citing economic justification.
  • Tax avoidance re: hybrid mismatch arrangements should be addressed.
  • Country-by-Country (CbC) reporting is important, as it should provide all relevant tax administrations with the information necessary to complete a high level risk assessment.
  • OECD BEPS developments must be reflected at the EU level, encouraging review of the EU law and its impact on aggressive tax planning practices.

The conclusions set forth are significant for the following reasons:  Proposal by the G5, EU focused, collaborative discussions and agreement re: “fair share” of tax alignment, economic justification profit / value drivers, and a presumption that CbC reporting will provide information to complete a relevant risk assessment.

These initiatives should be monitored in alignment with the OECD BEPS proposals set forth for 2014 and 2015.

 

 

VAT: European Commission update

Tax Fraud: Commission looks at how VAT collection and administrative cooperation can be improved

Today (12 Feb.) the Commission adopted two reports which shed more light on problems linked to fighting Value Added Tax (VAT) fraud within the EU, and which identify possible remedies. The first report looks at VAT collection and control procedures across the Member States, within the context of EU own resources. It concludes that Member States need to modernise their VAT administrations in order to reduce the VAT Gap, which was around €193 billion in 2011. (see IP/13/844) Recommendations are addressed to individual Member States on where they could make improvements in their procedures.

The second report looks at how effectively administrative cooperation and other available tools are being used in order to combat VAT Fraud in the EU. It finds that more effort is needed to enhance cross border cooperation, and recommends solutions such as joint audits, administrative cooperation with third countries, more resources for enquiries and controls and automatic exchange of information amongst all Member States on VAT. Both reports are part of the broad Commission Action Plan to fight against tax fraud and evasion (see IP/12/1325), and can be found online on the European Commission’s Taxation and Customs Union website .

http://ec.europa.eu/taxation_customs/resources/documents/common/publications/com_reports/taxation/com(2014)71_en.pdf

http://ec.europa.eu/taxation_customs/resources/documents/common/publications/com_reports/taxation/com(2014)69_en.pdf

It is interesting to compare developments on topics such as joint audits, automatic exchange of information, and tax controls with that of the OECD and UN for corporate income tax.  The reports provide a valuable reference in regards to VAT developments in the EU, which are observed by non-EU countries for Best Practices.

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