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.
2014 Update to the OECD Model Tax Convention
The 2014 Update, as adopted by the OECD Council on 15 July 2014, includes changes that were previously released for comments, including the meaning of “beneficial owner.” Numerous additions and deletions to Commentaries on various Articles, including positions of non-member countries, are also included. A link to the Update is provided for reference:
The Update requires a comprehensive review to determine potential implications, including beneficial ownership restrictions and ways of working by competent authorities. Such review should distinguish changes to the Articles versus additions or deletions to the Commentary interpreting such Articles. Note that the OECD BEPS changes will be an addition to this Update.
OECD / UN