Strategizing International Tax Best Practices – by Keith Brockman

Posts tagged ‘G8’

Strategizing APA’s in Turkey & OECD’s Tax Transparency Report

KPMG has published an informative and timely publication reviewing strategies for the use of unilateral, bilateral  and multilateral Advance Pricing Agreements (APA’s), with a detailed focus on recent APA developments in Turkey.  The KPMG publication cites the OECD’s June 2013 report “A Step Change in Tax Transparency” prepared for the G8 Summit.  The KPMG and OECD reports are referenced herein for review.

https://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/taxnewsflash/Documents/turkey-feb3-2014.pdf

http://www.oecd.org/ctp/exchange-of-tax-information/taxtransparency_G8report.pdf

The KPMG report is a valuable reference, providing strategic insight into using unilateral, bilateral and / or multilateral APA’s globally with a specific focus on Turkey.  The report includes chapters on Transfer Pricing in Turkey, Global APA Trend, Opportunities that APA Offers, When Should You Pursue an APA and the APA Process in Turkey.  The OECD report provides additional input on the exchange of information which is especially valuable against the backdrop of OECD’s recent request for guidance.

The transfer pricing landscape is changing, from a OECD perspective and also separate country initiatives that may, or may not, correlate with guidelines to be established this year and next by the OECD.  Accordingly, the use of APA’s should be reconsidered for developed and developing countries to achieve further certainty and avoidance of double taxation in these changing and challenging times.

Tax avoidance strategies: Int’l human rights law violations? – IBA report

The facilitation of tax avoidance strategies could constitute a violation of international human rights law, according to a new report by the International Bar Association.

http://www.ibanet.org/Article/Detail.aspx?ArticleUid=4A0CF930-A0D1-4784-8D09-F588DCDDFEA4

The International Bar Association’s Human Rights Institute (IBAHRI) Task Force on Illicit Financial Flows, Poverty and Human Rights was convened to reflect upon these pressing questions from the perspective of international human rights law and policy. This innovative report:
  • provides a detailed overview of tax abuses and secrecy jurisdictions
  • investigates the links between tax abuses, poverty and human rights
  • draws on case studies from Brazil, Jersey and the SADC region
  • evaluates responsibilities and remedies to counter tax abuses affecting human rights
  • delivers unique recommendations for states, business enterprises and the legal profession

For the purposes of this report, tax abuses include the tax practices that are contrary to the letter or spirit of domestic and international tax laws and policies. They include tax evasion, tax fraud and other illegal practices − including the tax losses resulting from other illicit financial flows such as bribery, corruption and money laundering. The term ‘tax abuse’ also includes tax practices that may be legal, strictly speaking, but are currently under scrutiny because they avoid a ‘fair share’ of the tax burden and have negative impacts on the tax revenues and economies of developing countries.

This report covers developments in international tax cooperation on issues such as automatic exchange of information, and base erosion and profit-shifting. It also assesses trends in international development policy which are increasingly focused on strengthening good tax governance in developing countries – thereby reducing dependency on foreign aid and improving development outcomes. It demonstrates the evolution of international human rights law and policy, whilst highlighting tax abuses as a pressing human rights concern.

The Task Force’s goals and objectives are:

1. To publish an innovative report containing findings and a set of recommendations on the interaction between illicit financial flows, poverty and human rights.

2. To widely disseminate the report with the view of pushing the issue of tax evasion and human rights onto global policy agendas, and sustaining discussion thereafter.

3. To incite multi-level policy changes in the area of tax evasion and economic, social and cultural rights adjudication to help end global poverty.

The report cites the following topics for relevance in its comprehensive discussion:

  • OECD BEPS Action Plan
  • OECD Anti-Bribery Convention
  • OECD “Tax Inspectors Without Borders” initiative (refer to 9 June posting)
  • G8 and G20 countries
  • US FATCA rules
  • US Dodd Frank legislation
  • UK House of Commons
  • UN Guiding Principles on Business and Human Rights
  • EU Accounting and Transparency Directives
  • Extractive Industries Transparency Initiative (EITI) (39 countries have signed up)

This report provides interesting insights into the complex relationship of international taxes and non-tax principles and objectives, for which all international tax executives should be aware.  Appendices of the report provide suggested recommendations for States, international business  and the legal profession to help combat today’s conflicts.

 

OECD: Tax Transparency report

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

Africa Progress Report 2013: Global Tax & Transparency initiatives

http://www.africaprogresspanel.org/en/publications/africa-progress-report-2013/apr-documents

The Press Release and Progress Report 2013 are not restricted to activities within Africa, as they advocate tax and transparency initiatives for the upcoming G8 Summit and the international community.  Japan, Russia, Switzerland, the UK and the US are individually identified in the report.

The Africa Progress Panel (APP) consists of ten distinguished individuals from the public and private sector who advocate for shared responsibility between African leaders and their international partners to promote equitable and sustainable development for Africa.  Mr. Kofi Annan chairs the APP. The Panel functions in a unique policy space with the ability to target decision-making audiences.

The press release sets the stage for the debate with the following statement: “International tax avoidance and evasion, corruption, and weak governance represent major challenges.  The report therefore welcomes the commitment from the current G8 presidency, the UK, and other governments to put tax and transparency at the heart of this year’s dialogue.  International business should follow best practices on transparency.”

Part III of the Report has sub-captions beginning on page 63 entitled: “Aggressive tax planning” drains the public purse, followed on the subsequent page with “When companies evade tax responsibilities.”  This section includes the following statements: “Tax avoidance has emerged as a global concern.  In Europe and North America, public anger has been directed towards highly visible multi-billion dollar firms that minimize their tax liabilities through sophisticated but aggressive tax planning.”

Part IV, “Fair taxation-an international challenge, ” provides the commentaries: “Many resource-rich countries in Africa are losing out as a result of “aggressive tax planning”-a euphemism in some cases for tax evasion.  Transfer pricing is another endemic concern.  Tax evasion is a global problem that requires multilateral solutions.  At the heart of the problem is the unwillingness of the OECD countries and wider international community to strengthen disclosure standards.  Japan, Russia, Switzerland, the UK and the US all operate regimes that allow for aggressive tax planning and limited regulatory oversight.  All tax jurisdictions should be required to declare the beneficial ownership structure of registered companies.  Governments in Africa could also look beyond the OECD dialogue.”

The sub-section entitled “Recommendations for Immediate Action” includes a message for transparency by extractive companies stating: “All countries should embrace the project-by-project disclosure standards embodied in the US Dodd-Frank Act and comparable EU legislation, applying them to all extractive industry companies listed on their stock exchanges.”

A message to the G8 community states: “The G8 should establish the architecture for a multilateral regime that tackles unethical tax avoidance and closes down tax evasion.  Companies registered in G8 countries should be required to publish a full list of their subsidiaries and information on global revenues, profits and taxes paid across different jurisdictions.  Tax authorities, including tax authorities in Africa, should exchange information more readily.”

The message to the international community states: “The G8 should adopt at its 2013 summit in the UK a framework that commits each country to full disclosure through a national public registry of the beneficial ownership of registered companies, with a commitment to create such registries before the 2014 G8 summit.”

This report demonstrates the tone for increased tax and transparency within Africa, and more importantly its message to the G8 and the international community.  Unfortunately, the terms aggressive tax planning, avoidance and evasion are used interchangeably in the Report which is intended to provide a strong message for tax and transparency changes but also provide complexity in seeking solutions.  This message is being seen more often in the news from around the world, and the transparency topic is one that should be discussed with senior management and the Board to ensure alignment going forward.

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