OECD ECONOMIC POLICY PAPER N. 16 – THE ECONOMIC CONSEQUENCES OF BREXIT: A TAXING DECISION. The Economic Consequences of Brexit: A Taxing Decision Membership of the European Union has contributed to the economic prosperity of the United Kingdom. Uncertainty about the outcome of the referendum has already started to weaken growth in the United Kingdom. A UK exit (Brexit) would be a major negative shock to the UK economy, with economic fallout in the rest of the OECD, particularly other European countries. In some respects, Brexit would be akin to a tax on GDP, imposing a persistent and rising cost on the economy that would not be incurred if the UK remained in the EU. The shock would be transmitted through several channels that would change depending on the time horizon. In the near term, the UK economy would be hit by tighter financial conditions and weaker confidence and, after formal exit from the European Union, higher trade barriers and an early impact of restrictions on labour mobility. By 2020, GDP would be over 3% smaller than otherwise (with continued EU membership), equivalent to a cost per household of GBP 2200 (in today’s prices). In the longer term, structural impacts would take hold through the channels of capital, immigration and lower technical progress. In particular, labour productivity would be held back by a drop in foreign direct investment and a smaller pool of skills. The extent of foregone GDP would increase over time. By 2030, in a central scenario GDP would be over 5% lower than otherwise – with the cost of Brexit equivalent to GBP 3200 per household (in today’s prices). The effects would be larger in a more pessimistic scenario and remain negative even in the optimistic scenario. Brexit would also hold back GDP in other European economies, particularly in the near term resulting from heightened uncertainty would create about the future of Europe. In contrast, continued UK membership in the European Union and further reforms of the Single Market would enhance living standards on both sides of the Channel. April 2016.
OECD – ITALY’S TAX ADMINISTRATION. A Review of Institutional and Governance Aspects. 1. Italy is currently undertaking a series of critically important reforms to improve its long-term growth prospects. The current Government has set out its ambitious reform agenda across many policy areas including education, civil justice, public administration and taxation. Certain reforms have already been made, others are under way and more are in the pipeline. Expectations of effective and decisive government actions are high, in particular regarding the tax system. 2. In this context, and following a request of the Italian Minister of Economy and Finance Pier Carlo Padoan, the OECD Centre for Tax Policy and Administration has carried out a review of the organisational structure and institutional arrangements of Italy’s tax administration, with a focus on the Agenzia delle Entrate (the Revenue Agency) and the Agenzia delle Dogane e dei Monopoli (the Customs Agency). The review also highlights certain critical issues related to tax compliance and collection which emerged in the course of the work. 3. Several meetings were held with the Italian authorities, namely the Minister of Economy and Finance and the heads and senior managers of the Italian institutions involved in tax administration. Meetings were also held with labour unions, stakeholders and experts in tax matters, including small and medium sized enterprises (SMEs) and their consultants, to gather a broad range of views on Italy’s tax administration (see Annex A for the list of authorities, stakeholders and experts met). 4. A draft of this report was provided to the Italian authorities in January 2016 to check the factual descriptions’ accuracy and finalised shortly afterwards.
Ground-breaking multilateral BEPS convention signed at OECD will close loopholes in thousands of tax treaties worldwide
Ministers and high-level officials from 76 countries and jurisdictions have signed today or formally expressed their intention to sign an innovative multilateral convention that will swiftly implement a series of tax treaty measures to update the existing network of bilateral tax treaties and reduce opportunities for tax avoidance by multinational enterprises. The new convention will also strengthen provisions to resolve treaty disputes, including through mandatory binding arbitration, thereby reducing double taxation and increasing tax certainty.
The signing ceremony for the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS took place during the annual OECD Week, which brings together government officials and members of civil society from OECD and partner countries to debate the most pressing social and economic challenges confronting society. In addition to those signing today, a number of other jurisdictions are actively working towards signature of the convention and more are expected to follow by the end of 2017.
Improving the tax treaty dispute resolution process is a top priority of the BEPS Project. The Mutual Agreement Procedure (MAP) peer review and monitoring process under Action 14 of the BEPS Action Plan was launched in December 2016 with the peer reviews of the two first batches now well underway.
OECD – BEPS Action 6 on Preventing the Granting of Treaty Benefits in Inappropriate Circumstances PEER REVIEW DOCUMENTS
OECD – BEPS Action 6 on Preventing the Granting of Treaty Benefits in Inappropriate Circumstances PEER REVIEW DOCUMENTS. The Action Plan on Base Erosion and Profit Shifting (“BEPS Action Plan”) identified 15 actions to address BEPS in a comprehensive manner. In October 2015, the G20 Finance Ministers endorsed the BEPS Package, which includes the report on Action 6: Preventing the Granting of Treaty Benefits in Inappropriate Circumstances (“the Report on Action 6” or “the Report”, OECD (2015)). The minimum standard on treaty-shopping included in the Report on Action 6 is one of the four BEPS minimum standards. Each of the four BEPS minimum standards is subject to peer review in order to ensure timely and accurate implementation and thus safeguard the level playing field. All members of the Inclusive Framework on BEPS commit to implementing the Action 6 minimum standard and to participating in the peer review, on an equal footing. This note contains the key documents to be used for the peer review, which reflect the agreed approach: (1) the terms of reference and (2) the methodology for the conduct of peer reviews of the Action 6 minimum standard. The note additionally describes: the core output of the peer review and monitoring process, the process for the resolution of interpretation and application issues that might arise in the course of implementing the minimum standard on treaty-shopping; the process to be followed by jurisdictions that encounter difficulties in getting agreement from another jurisdiction member of the Inclusive Framework on BEPS in order to implement the Action 6 minimum standard; and the confidentiality of documents produced in the context of the review process. May 2017.
Technology offers critical solutions to prevent, identify and tackle tax evasion and tax fraud, says OECD
Technological solutions offer a clear path for dramatically reducing tax evasion and tax fraud, which cost governments billions in lost revenue annually, according to a new OECD report.
Technology Tools to Tackle Tax Evasion and Tax Fraud demonstrates how technology is currently being used by tax administrations in countries worldwide to prevent, identify and tackle tax evasion and tax fraud. These solutions can offer a win-win: better detection of crime, higher revenue recovery, and synergies that can make tax compliance easier for business and tax administrations.
Public comments are invited on a discussion draft which provides guidance on the implementation of the approach to pricing transfers of hard-to-value intangibles described in Chapter VI of the Transfer Pricing Guidelines.
The Final Report on Actions 8-10 of the BEPS Action Plan (“Aligning Transfer Pricing Outcomes with Value Creation”) mandated the development of guidance on the implementation of the approach to pricing hard-to-value intangibles (“HTVI”) contained in Section D.4 of Chapter VI of the Transfer Pricing Guidelines.
OECD Taxation Working Papers No. 28: DISTINGUISHING BETWEEN “NORMAL” AND “EXCESS” RETURNS FOR TAX POLICY. This paper explores the practical challenges tax policy analysts face when trying to apply differential taxation to “normal” and “excess” returns. The distinction between these two elements is being increasingly used in tax policy. The problem is that there is no clear definition for a “normal” return. While it is often equated to a risk-free return, or the return available on a ten-year government bond, many commentators agree that it should incorporate a risk element. The typical rationale for applying differential taxation stems from the desire to achieve neutral taxation, i.e. minimise the real economic responses of taxpayers due to the wedge taxation imposes between before-tax and after-tax returns. A set of important questions are raised for tax policy analysts to consider. Two crucial factors that make the distinction challenging are heterogeneity and uncertainty. Given the potential for unintended consequences, this is an important issue that warrants more discussion and thought. Reynolds, H. and T. Neubig (2016), “Distinguishing between “normal” and “excess” returns for tax policy”, OECD Taxation Working Papers, No. 28, OECD Publishing, Paris.
OECD Taxation Working Papers N. 30: THE IMPACT OF ENERGY TAXES ON THE AFFORDABILITY OF DOMESTIC ENERGY. Energy affordability can be defined as a household’s ability to pay for necessary levels of energy use within normal spending patterns. This paper uses three indicators to measure energy affordability risk in 20 OECD countries at current taxes on electricity, natural gas and heating oil. Energy affordability risk differs widely between countries. The countries with the highest GDP per capita tend to have the lowest levels of energy affordability risk. The paper then analyses how indicators of energy affordability change in response to a hypothetical tax reform that introduces uniform taxes on natural gas, heating oil and electricity in all countries analysed, mostly increasing tax rates on these fuels. Results show that, if combined with an income-tested cash transfer using one third of the change in revenue resulting from the tax reform, the reform generally improves energy affordability. If combined with a lump-sum transfer instead, results show that energy affordability increases only according to the most selective of the three indicators. Flues, F. and K. van Dender (2017), “The impact of energy taxes on the affordability of domestic energy”, OECD Taxation Working Papers, No. 30, OECD Publishing, Paris.
Canada Revenue Agency – S3-F8-C2, Tax Incentives for Clean Energy Equipment. The Income Tax Act and Income Tax Regulations include the following measures to encourage Canadian taxpayers to make investments in qualifying clean energy generation and energy conservation projects: an accelerated capital cost allowance (CCA) for investments in clean energy generation and energy conservation equipment; Canadian renewable and conservation expense (CRCE), which is a category of expenditures relating to the development of eligible clean energy generation and energy conservation projects that may be deducted in full in the year incurred, carried forward indefinitely for use in future tax years or renounced under a flow-through share agreement; and Atlantic investment tax credit of 10% of the cost of prescribed energy generation and conservation properties. The purpose of this Chapter is to describe these incentives and the criteria necessary to benefit from them. Responsibility for administering the tax incentives is shared between the CRA and Natural Resources Canada (NRCan). According to subsection 13(18.1), the Technical Guide to Class 43.1 and 43.2, which is published by NRCan, applies conclusively with respect to engineering and scientific matters that arise when determining whether a property qualifies for accelerated CCA. The guide provides technical information on eligible properties that meet the requirements of the particular paragraph or subparagraph of Class 43.1, ineligible properties that are specifically excluded from Class 43.1, tables of typical capital costs for the different technologies and the relevant forms necessary to obtain a technical opinion from NRCan on the scientific and engineering requirements. This guide can be found on the NRCan webpage entitled Tax Savings for Industry. For the purposes of the definition of CRCE in subsection 66.1(6), the Technical Guide to Canadian Renewable and Conservation Expenses (CRCE) published by NRCan applies conclusively with respect to engineering and scientific matters. This guide can also be found on the NRCan webpage entitled Tax Savings for Industry. The Canada Revenue Agency (CRA) issues income tax folios to provide technical interpretations and positions regarding certain provisions contained in income tax law. Due to their technical nature, folios are used primarily by tax specialists and other individuals who have an interest in tax matters. While the comments in a particular paragraph in a folio may relate to provisions of the law in force at the time they were made, such comments are not a substitute for the law. The reader should, therefore, consider such comments in light of the relevant provisions of the law in force for the particular tax year being considered.