On October 19, 2017, Tax Executives Institute (TEI) filed a letter with the Platform for Collaboration on Tax, a joint initiative of the World Bank, OECD, International Monetary Fund, and United Nations, regarding the Platform’s draft toolkit on the taxation of offshore indirect transfers. TEI’s comments focused on the need for the Platform’s toolkit to educate and provide options to nations considering taxing offshore indirect transfers, rather than prescribing a preferred approach, among other things.
The Platform for Collaboration on Tax (the Platform), a joint initiative of the Organisation for Economic Co-Operation and Development, International Monetary Fund, United Nations, and World Bank, released a document entitled The Taxation of Offshore Indirect Transfers – A Toolkit (the Draft Toolkit or Toolkit) on 1 August 2017. The Draft Toolkit was designed to help developing countries address the complexities of taxing offshore indirect transfers of assets, which the Platform states is a practice by which some multinational corporations try to minimize their tax liability.
The toolkit and TEI’s submission paper are referenced herein for review
Highlights of TEI’s comments include the following points:
- There should be symmetry and neutrality as compared to direct asset transfers
- Status of toolkit is unclear, and is not a source of authoritative guidance
- The goal of the draft toolkit is unclear
- A capital gains tax can distort economic transactions
- Gains and losses should be the subject of the toolkit
- Most indirect transfers are made for economic, not tax, reasons
- The general treaty definition of immovable property seems to have been abandoned with no reason
The toolkit can be applauded for launching a multi-organizational approach with some good ideas, although such ideas should be further challenged and developed prior to an overall vision and detailed rules promulgated