Strategizing International Tax Best Practices – by Keith Brockman

Posts tagged ‘tax transparency’

OECD Guidelines for MNE’s: A valuable tool in the Tax Risk Framework

The OECD published the OECD Guidelines for Multinational Enterprises (Guidelines) in 2011, this being the latest version of the Guidelines.

A unique feature of the Guidelines is the implementation of National Contact Points (NCPs), agencies established by adhering governments to promote and implement the Guidelines.  They also provide a mediation and conciliation platform for resolving practical issues that may arise. Chapter XI of the Guidelines, Taxation, that begins on page 60 outlines important concepts including timely tax compliance, cooperation with tax authorities, compliance with the letter and spirit of the tax laws and regulations of the relevant countries, and conforming transfer pricing principles to the arm’s length principle.

These principles should form an important foundation for a company’s Tax Policy and/or Tax Risk Framework, providing transparent objectives in the global tax risk profile.  The link to the Guidelines are provided for reference.

There is also a link to  the Annual Report on the OECD Guidelines for Multinational Enterprises 2013, which describes the activities undertaken to promote the observance of the Guidelines during the period June 2012 – June 2013.  The Annual Report outlines the role of the NCPs, and content of proposed violations (inclusive of Taxation), that have been submitted for review.  All OECD countries, and 11 non-OECD countries (Argentina, Brazil, Columbia, Costa Rica, Egypt, Latvia, Lithuania, Morocco, Peru, Romania and Tunisia) adhere to the Guidelines.

Click to access 48004323.pdf

http://www.keepeek.com/Digital-Asset-Management/oecd/governance/annual-report-on-the-oecd-guidelines-for-multinational-enterprises-2013_mne-2013-en#page175

The Guidelines should be a valuable Best Practice tool in a Tax Risk Framework, as well as the total risk framework of a multinational enterprise.

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OECD / UN

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OECD Task Force on Tax & Development: Meeting update

The OECD Task Force’s role is to advise the OECD Committees in delivering a Tax and Development Programme focused on developing countries.  Co-chaired by South Africa and the Netherlands, its members include OECD and developing countries, business, and regional/international organisations.

http://www.oecd.org/tax/tax-global/taxanddevelopment.htm

Click to access taskforce-tax-development-korea-outcome-statement.pdf

The annual meeting was held 30-31 October in Seoul, Korea, with the following points of emphasis.

  • State building, accountability and effective capacity development, including governance of tax incentives and a feasibility study on Tax Inspectors Without Borders initiative (9 June post)
  • More effective transfer pricing regimes in developing countries, with country initiatives in Columbia, Ghana, Honduras, Kenya, Rwanda, Tanzania and Vietnam developed in partnership with the EU and World Bank.
  • Increased transparency in the reporting of financial data by MNEs, identifying Best Practices while monitoring developments of the Dodd-Frank Act and proposals for revising the EU Transparency Directive.
  • Countering international tax evasion/avoidance and improving transparency and exchange of information, preparing countries for peer reviews by the Global Forum on Transparency and Exchange of Information and developing exchange of information projects in Kenya and Ghana.

The report provides added value with numerous links to referenced initiatives (i.e., Tax Inspectors Without Borders, EU Transparency Directive) for a comprehensive understanding of the multiple initiatives being developed.

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OECD / UN

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Tax transparency; Seizing the initiative

Click to access EY_Tax_Transparency.pdf

I highly recommend reviewing this comprehensive publication by Ernst & Young, focusing on strategies and questions Boards should ask to prepare for tax transparency reporting.  One insightful section describes key stakeholders for tax transparency reporting, including consumers, NGOs, Parliamentarians, OECD, and the media.

The publication encompasses the following concepts:

  • Current context for transparency
  • Current tax transparency reporting requirements
  • What others are reporting
  • Information that could be disclosed
  • Challenges to be faced
  • Deriving value from tax transparency
  • Next steps

There is an excellent summary, at the end of the publication, depicting a structured approach for managing your tax profile, outlining ideas leading to a Best Practices strategy.

A Best Practices initiative for tax transparency reporting should be initiated, forming a framework to address challenges and identify opportunities.

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Tax Risk Management

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Australia: Tax return disclosures enacted into law

http://www.comlaw.gov.au/Details/C2013A00124

Australia has enacted tax return disclosures into law via amendments referenced in Schedule 5, Tax secrecy and transparency.  The Commissioner must, as soon as practicable after the end of the income year, make publicly available the following information for corporate tax entities with reported total income of $100 million or more, according to information reported in the entity’s tax return:

  • ABN
  • Total income for the income year
  • Taxable income or net income (if any) for the income year
  • Income tax payable (if any)

All multinationals should develop an action plan, if not already in place, outlining the method by which tax return disclosures are to be reported in Australia and other countries around the world.  The methodology should be aligned with the CFO, Board of Directors and senior leaders of the business.

The tax return information chosen for disclosure will not provide reasons why there may be significant differences between total income, taxable income and the resulting income tax payable (if any), and will likely provide a forum for public scrutiny and questions surrounding noted variances.

Accordingly, critical decisions re: additional voluntary disclosures, responses to questions generated by the disclosures, and other relevant factors should be considered within the context of the global Tax Risk Framework.  Valuable information can be obtained from tax disclosures of the extractive industries, including the impact of indirect taxes and non-tax contributions.

Tax transparency is a rapidly growing trend for which global strategies and Best Practices should be adopted to timely address current and future developments.

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Tax Risk Management

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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 / UN, Tax Risk Management

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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 / UN

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