Strategizing International Tax Best Practices – by Keith Brockman

Posts tagged ‘Multilateral Convention on Mutual Administrative Assistance in Tax Matters’

Multilateral Convention: New countries

The Multilateral Convention on Mutual Administrative Assistance in Tax Matters, as amended by the 2010 protocol, is effective for the following countries:

  • March 1: Canada, New Zealand, Slovakia, South Africa
  • June 1: Croatia

The Convention provides for the mutual exchange of tax information with other tax administrations.

Best Practice ideas:

  1. Consistent coordination of responses to tax authorities by multinationals: As tax authorities share more information on a real-time basis, in accordance with the Multilateral Convention, global consistency is required for proper factual and risk determinations around the world.
  2. Regional and Headquarter tax office coordination to issues: Processes and methodologies should be in place to ensure consistency and internal governance.
  3. Tax (return) information reporting: More countries are adopting transfer pricing information reporting requirements, including transfer pricing methodology, and identification of relevant intercompany transactions in that country and/or other countries in accordance with their legislation.  A review of identifying current, and new information requirements should be established on a global master schedule ensuring internal coordination.
  4. Tax information questionnaires: A process should be established to identify questionnaires received with a global methodology for proper governance.

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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