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.


OECD – TAX DATABASE. UPDATE JUNE 2019. The average tax wedge for all four family types varied significantly between 2000 and 2018. Since 2000, all four family types experienced a continuous decrease in their tax wedge, reaching a temporary low during the financial crisis in 2009. In the three years following the crisis, the tax wedge rose again for all four family types. However, the tax wedge of all four family types is now lower than in 2000. The average tax wedge measures the effective tax rate on labour costs as the difference between the labour costs to the employer and the corresponding net take-home pay of the employee. It equals the sum of personal income tax, employee and employer social security contributions (SSCs) plus any payroll taxes, minus any cash benefits received by the employee, expressed as a percentage of labour costs (gross wages plus employer SSCs and payroll taxes). The tax wedge of the average worker is the highest throughout the observed period, now stabilising at 36%, which is close to but slightly below the level of 2000. A similar trend can be observed for the tax wedge of the two-earner married couple and the tax wedge of the one-earner married couple, which are now at 30.8% and 26.6% respectively. The average tax wedge of the single person with two children earning 67% of the average wage is the lowest of all four family types throughout the whole period. After experiencing a short increase between 2009 and 2013, it has now reached an all-time low of 16.0% of total labour costs.


OECD TRANSFER PRICING STANDARD AND BRAZILIAN APPROACH: THE WAY FORWARD. This one-day-long event will bring together senior officials from the Brazilian government, the OECD, representatives of MNEs operating in Brazil, and major trading and investment partners of Brazil. This event has been organised to highlight an important milestone reached in the joint transfer pricing project between OECD and Receita Federal do Brasil (RFB), which was supported by the United Kingdom Foreign and Commonwealth Office and focussed on analysing the existing Brazilian transfer pricing rules and comparing them to the international standard represented by the OECD Transfer Pricing Guidelines. The differences identified were then further assessed from the perspective of meeting the primary objectives of transfer pricing rules as well as from the perspective of other tax policy objectives. Based on the results of this assessment, the project also explored the possibilities for alignment to address the divergences identified. In the relevant sessions, the results of the project between OECD and RFB will be presented and discussed. The event will also provide the opportunity to discuss the possible options for alignment and it will conclude with a roundtable, which should allow for an exchange of views among the panellists. Thursday, 11 July 2019, Brasília, Brazil.


OECD SECRETARY-GENERAL TAX REPORT TO G20 LEADERS. Osaka, Japan June 2019. Since I last reported to you in December 2018, substantial progress took place on all the deliverables in the G20 International Taxation agenda; namely, tax transparency, Base Erosion and Profit Shifting (BEPS) implementation, addressing the tax challenges arising from the digitalisation of the economy, tax certainty and tax and development. Since its inception in 2008, the G20 has developed a very ambitious tax agenda to improve tax cooperation and transparency and ensure that companies pay their taxes where they carry on their activities. 10 years ago, bank secrecy and opaque structures were used and abused by too many taxpayers across the world to hide their assets and income from tax administrations. Thanks to the efforts of the G20, bank secrecy for tax purposes no longer exists and all financial centres are now engaged in the automatic exchange of financial information (through the OECD’s Common Reporting Standard – CRS). In 2008, only 40 exchange of information agreements between secretive jurisdictions and other countries had been put in place. Today, more than 4500 exchange of information agreements are in force with 90 jurisdictions implementing the CRS in 2018). As a result 47 million offshore accounts – with a total value of around 4.9 Trillion euros – have been exchanged for the first time. This level of transparency in tax matters is unprecedented and ensures that those assets will never escape detection. A small number of jurisdictions have yet to fulfil their commitments to exchange automatically by 2018 at the latest and they are urged to do so without further delay. Beyond these impressive numbers, our action has had a very concrete impact. First, you and other countries in the world have recovered taxes which had been defrauded for too long. For a few years now, I have reported to you the amounts collected from taxpayers coming forward and having disclosed formerly concealed assets and income through voluntary compliance mechanisms and other offshore investigations. The latest update brings the amount to over EUR 95 billion in additional revenue (tax, interest, penalties) from such initiatives, which is an addition EUR 2 billion since November 2018.


OECD – INTERNATIONAL EXCHANGE FRAMEWORK FOR MANDATORY DISCLOSURE RULES ON CRS AVOIDANCE ARRANGEMENTS AND OPAQUE OFFSHORE STRUCTURES. 1. Following the approval of the Model Mandatory Disclosure Rules (MDRs) by the OECD’s Committee on Fiscal Affairs and their release on 8 March 2018, Working Party No. 10 has developed the legal and technical information exchange infrastructure that is needed for the exchange of the information collected by tax administrations under the MDRs. 2. This note therefore sets out the international framework that would govern these exchanges, both from a legal and an operational perspective. 3. Part I of this note contains a draft multilateral Competent Authority Agreement for the exchange of MDR reports that has been modelled on the CRS MCAA. 4. In drafting the MCAA, an automatic exchange approach has been adopted, following the approach used for the CRS and CbC exchanges. This has been done in order to ensure that exchanges will be operationalised on the clear and unambiguous legal basis of Article 6 of the Convention and to provide clarity about the scope and periodicity of the exchanged information. The approach in the draft MCAA with respect to the information flows is that exchanges in principle are on a reciprocal basis between two jurisdictions that have implemented MDRs. This has the advantage that only jurisdictions that are familiar with the MDR and thus have a better understanding of the information will be receiving the information. It also provides an incentive for jurisdictions to adopt MDR to benefit from the automatic exchange network.

OECD/Platform for collaboration on tax – PCT Progress Report 2018 – 2019

OECD/Platform for collaboration on tax – PCT Progress Report 2018 – 2019. The adoption of the Sustainable Development Goals (SDGs) and the Addis Ababa Action Agenda in 2015 has prompted multilateral organizations to expand their work on domestic revenue mobilization (DRM) in countries, particularly developing countries, 1 including through rapidly growing portfolios of tax-related activities. In this context, the Platform for Collaboration on Tax (PCT) was established in 2016 to bring together the experiences and expertise of the four largest multilateral organizations active in tax matters (International Monetary Fund [IMF], Organization for Economic Co-operation and Development [OECD], United Nations [UN], and World Bank Group [WBG]) to enhance cooperation on domestic revenue issues. Over the last three years, the Platform has helped exploit complementarities and synergies among its Partners in their work on tax, while fully respecting the governance mandates and policy positions of each organization. This report provides an update of the work of the PCT during 2018-19. The PCT previously reported on its progress in 2017.2 Going forward, the PCT plans to provide updates on an annual basis to its governing bodies and interested stakeholders.3 Section II of this report provides an update of the PCT work plan. In February 2018, the PCT held its first global conference on taxation and the SDGs. In their closing statement, Partners committed to 14 actions for enhancing coordination, cooperation and collaboration in their work on tax in support of the SDGs (Box 1). To meet the commitments set out in the 14 Action Items, the PCT has begun with the implementation of a comprehensive work plan. The work plan consists of three main work streams: (1) coordination of DRM capacity development activities; (2) analytical activities; and (3) outreach activities. Then, Section III of the report discusses the early experience with Medium-Term Revenue Strategies (MTRS) and draws preliminary lessons. A brief overview of DRM-related activities of PCT Partners is provided in Section IV. As support for capacity development is scaled up, efficiency and effectiveness only gain more importance. Risks of redundancy, as well as support that outpaces countries’ absorption capacity, need to be managed. By collaborating, synergies in support for capacity development can be exploited and comparative advantages leveraged. Partners have identified complementarities in their mandates, tools and ways of working, which are presented in the Note on Complementarities between the Platform Partners, included as Annex 1. Next steps for strengthening collaboration between Partners are included in Section V of this progress report.


OECD – SIGNATORIES AND PARTIES TO THE MULTILATERAL CONVENTION TO IMPLEMENT TAX TREATY RELATED MEASURES TO PREVENT BASE EROSION AND PROFIT SHIFTING. Status as of 18 June 2019. This document contains a list of signatories and parties to the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting. Under the provisions of the Convention, each jurisdiction is required to provide a list of reservations and notifications (the “MLI Position”) at the time of signature. The MLI Positions provided for each jurisdiction upon the deposit of the instrument of ratification, acceptance or approval and/or signature are available via the links below.


OECD – MULTILATERAL CONVENTION TO IMPLEMENT TAX TREATY RELATED MEASURES TO PREVENT BASE EROSION AND PROFIT SHIFTING. The Parties to this Convention, Recognising that governments lose substantial corporate tax revenue because of aggressive international tax planning that has the effect of artificially shifting profits to locations where they are subject to non-taxation or reduced taxation; Mindful that base erosion and profit shifting (hereinafter referred to as “BEPS”) is a pressing issue not only for industrialised countries but also for emerging economies and developing countries; Recognising the importance of ensuring that profits are taxed where substantive economic activities generating the profits are carried out and where value is created; Welcoming the package of measures developed under the OECD/G20 BEPS project (hereinafter referred to as the “OECD/G20 BEPS package”); Noting that the OECD/G20 BEPS package included tax treaty-related measures to address certain hybrid mismatch arrangements, prevent treaty abuse, address artificial avoidance of permanent establishment status, and improve dispute resolution; Conscious of the need to ensure swift, co-ordinated and consistent implementation of the treatyrelated BEPS measures in a multilateral context; Noting the need to ensure that existing agreements for the avoidance of double taxation on income are interpreted to eliminate double taxation with respect to the taxes covered by those agreements without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance (including through treaty-shopping arrangements aimed at obtaining reliefs provided in those agreements for the indirect benefit of residents of third jurisdictions); Recognising the need for an effective mechanism to implement agreed changes in a synchronised and efficient manner across the network of existing agreements for the avoidance of double taxation on income without the need to bilaterally renegotiate each such agreement; Have agreed as follows: (…)


OECD – MONEY LAUNDERING AND TERRORIST FINANCING AWARENESS HANDBOOK FOR TAX EXAMINERS AND TAX AUDITORS.  The purpose of the Money Laundering and Terrorist Financing Awareness Handbook for Tax Examiners and Tax Auditors is to raise the awareness level of tax examiners and tax auditors regarding money laundering and terrorist financing. As such, the primary audience for this Handbook are tax examiners and tax auditors who may come across indicators of unusual or suspicious transactions or activities in the normal course of tax reviews or audits and report to an appropriate authority. While this Handbook is not intended to detail criminal investigation methods, it does describe the nature and context of money laundering and terrorist financing activities, so that tax examiners and tax auditors, and by extension tax administrations, are able to better understand how their contributions can assist in the fight against serious crimes. This Handbook is an update of OECD’s 2009 Money Laundering Awareness Handbook for Tax Examiners and Tax Auditors. This update enhances the 2009 publication with additional chapters such as “Indicators on Charities and Foreign Legal Entities” and “Indicators on Cryptocurrencies” relating to money laundering. In a separate chapter, the increasing threat of terrorism is addressed by including indicators of terrorist financing. While the aim of this Handbook is to raise the awareness of the tax examiners and tax auditors about the possible implications of transactions or activities related to money laundering and terrorist financing, this Handbook is not meant to replace domestic policies or procedures. Tax examiners and tax auditors will need to carry out their duties in accordance with the policies and procedures in force in their country. Financial crimes, including tax crimes, money laundering, and terrorist financing, undermine jurisdictions’ political and economic interests and pose a serious threat to national security. Law enforcement authorities working to combat these crimes operate in an environment with limited resources, and advances in technology mean that criminals are using ever more sophisticated methods to avoid detection. Combatting these crimes therefore necessitates a “whole of government approach” where different financial crime authorities can pool their knowledge and skills to collectively prevent, detect, and enforce these crimes. By their very nature, tax crimes are closely linked to other financial crimes and it is well recognised that tax authorities have a central role to play in identifying and reporting money laundering and terrorist financing. While the benefits of reporting and information sharing between tax authorities and anti-money laundering authorities are well recognised, both developed and developing jurisdictions alike face ongoing challenges when it comes to applying this cross-government co-operation in practice. The OECD originally developed this Handbook in 2009 as a practical tool to enhance cooperation between tax authorities and anti-money laundering authorities. This revised Handbook updates the 2009 version with respect to money laundering indicators, and includes, for the first time, material to raise the awareness of tax examiners, auditors, and investigators of issues concerning terrorism financing. There are substantial gains to be made by developing strong legal, institutional, operational, and cultural frameworks for tax authorities to report and share information with authorities responsible for combatting money laundering and terrorist financing. Efforts to frustrate these criminal activities start with a firm commitment from political leaders but ultimately end with government officials implementing these policies on the ground. Authorities around the globe are encouraged to make use of this Handbook and adapt it to their jurisdiction’s particular circumstances, taking into account the varying roles that tax administrations have in terms of reporting unusual or suspicious transactions, receiving suspicious transaction reports, and investigating money laundering and terrorist financing offences. Doing so can strengthen the ability of tax examiners and auditors to identify and report money laundering and terrorist financing, thus enhancing the whole-of-government efforts to detect, deter and prevent these illegal and destructive activities.


OECD Taxation Working Papers N. 38 – CORPORATE EFFECTIVE TAX RATES: MODEL DESCRIPTION AND RESULTS FROM 36 OECD AND NON-OECD COUNTRIES. This paper presents the new OECD model for the calculation of forward-looking effective tax rates and provides first empirical results based on an OECD survey, conducted in 2016, collecting comparable crosscountry information on corporate tax provisions from 36 OECD and Selected Partner Economies. The empirical results discussed in this paper highlight that an accurate assessment of investment incentives across countries needs to build on a consistent methodological framework capable of covering not only corporate statutory tax rates but also many different rules that affect the tax base such as fiscal depreciation and other deductions or allowances. The OECD corporate effective tax rate model described in this paper provides such a framework; it builds on the theoretical model developed by Devereux and Griffith (1999, 2003) and currently covers 10 asset categories and 36 different corporate tax systems. Empirical results are based on two different macroeconomic scenarios, showing that effective average and marginal tax rates vary widely across asset categories, countries and sources of finance. In addition to the cross-country comparative analysis presented below, the OECD model also enables researchers to conduct further cross-country and within-country analyses of the incentive effects of corporate and personal income taxation. The appendix describes in detail how the OECD model can be used for policy analysis. It includes several examples and illustrates how country-specific policy evaluations can be conducted. (Tibor Hanappi).