IMF/OECD – UPDATE ON TAX CERTAINTY – IMF/OECD Report for the G20 Finance Ministers and Central Bank Governors. July 2018. 1. In response to the call from G20 Leaders, the OECD secretariat and IMF staff produced a comprehensive report on tax certainty (OECD/IMF Report on Tax Certainty, the “2017 Report”). This report identified the sources of uncertainty in tax matters and the various tools that taxpayers and governments could use to reduce it from the perspective of businesses and tax administrations in G20 and OECD countries. The G20 has asked for an update of the 2017 Report to be delivered in 2018. 2. The 2017 report highlighted that tax uncertainty creates a risk of discouraging investment. The OECD survey, for example, suggests that businesses find tax certainty in corporate tax and VAT important for investment and location decisions. The major drivers of tax uncertainty for businesses relate to uncertain tax administration practices, inconsistent approaches of different tax authorities in applying international tax standards, and issues associated with dispute resolution mechanisms. To enhance tax certainty, the report identifies a set of concrete and practical approaches and solutions. These include improving the clarity of legislation, increasing predictability and consistency of tax administration practices, effective dispute prevention, and robust dispute resolution mechanisms. While the 2017 report focused on tax certainty in G20 and OECD countries, it was recognized that it is important also for developing countries, even though the tools to enhance tax certainty in those countries would need to be assessed against their weaker enforcement and lower implementation capacities. 3. This update discusses what has happened since the 2017 report. It elaborates first on developments in OECD and G20 countries. Progress is reported on, for example, implementation of the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project and developments in dispute resolution, such as mutual agreement procedures (MAP) and arbitration. The update also reports on new initiatives, such as the OECD initiatives to mitigate uncertainty in tax treaties, the IMF initiative to address international taxation issues in its surveillance, developments in the treaty relief and compliance enhancement (TRACE) project, and the Forum on Tax Administration (FTA) initiative to improve risk assessment and audit processes. Finally, some initiatives are discussed that were not explicitly mentioned in the 2017 report, but which do matter for tax certainty, such as exchange of information, country-by-country reporting and OECD International VAT/GST Guidelines. 4. The importance of tax certainty for developing countries is reflected in some of the more granular data obtained from the OECD business survey of 2017. Moreover, a workshop in Tanzania in 2017 highlighted the importance of tax certainty for governments in developing countries. Several initiatives are discussed in this update that aim, among others, to enhance tax certainty in developing countries, such as toolkits by the Platform for Collaboration on Tax, Medium-Term Revenue Strategies, the wide array of IMF technical assistance in revenue mobilization (tax policy design, legal drafting, and tax administration), progress made with the tax administration diagnostic assessment tool (TADAT) and the joint OECD/UNDP program on Tax Inspectors Without Borders (TIWB).
OECD SECRETARY-GENERAL TAX REPORT TO G20 FINANCE MINISTERS AND CENTRAL BANK GOVERNORS. This report contains two parts. Part I is a report on the activities and achievements of the OECD’s tax agenda, and is made of two subparts: looking back at significant achievements and looking ahead at the further progress needed, in particular through the OECD/G20 Inclusive Framework on BEPS. Part II is a Progress Report to the G20 by the Global Forum on Transparency and Exchange of Information for Tax Purposes. JULY 2018. (…) Since 2008, the G20 has made the fight against international tax fraud and avoidance a priority. Thanks to the support of Leaders and Finance Ministers, major progress has been achieved, which has demonstrated that international cooperation, in a multilateral framework, can support and strengthen national sovereignty. Transparency has been improved and rules have been changed to realign the location of profits with the place where value is created. The time where multinational enterprises (MNEs) could use tax planning based on a lack of transparency, a lack of substance or the exploitation of cross-border loopholes is over.
OECD – Exchange of Information on Request. HANDBOOK FOR PEER REVIEWS 2016-2020. The Global Forum on Transparency and Exchange of Information for Tax Purposes is the multilateral framework within which work in the area of tax transparency and exchange of information is carried out by over 130 jurisdictions which participate in the work of the Global Forum on an equal footing. The Global Forum is charged with in-depth monitoring and peer review of the implementation of the standards of transparency and exchange of information for tax purposes; being the standard of exchange of information on request (EOIR) and the standard of automatic exchange of information (AEOI). The EOIR standard is primarily reflected in the 2002 OECD Model Agreement on Exchange of Information on Tax Matters and its commentary, and in Article 26 of the OECD Model Tax Convention on Income and on Capital and its commentary, as updated in 2012. The Global has received a mandate from the G20 to monitor and review the implementation of the OECD Standard on AEOI and to assist developing countries in identifying their needs for technical assistance and capacity building in order to participate in and benefit from AEOI. All members of the Global Forum, as well as jurisdictions identified by the Global Forum as relevant to its work, are being reviewed under the EOIR standard. A first cycle of EOIR reviews took place from 2010 until 2016. The second round of EOIR reviews is scheduled from 2016 until 2020 against an enhanced EOIR standard, embedded in the 2016 EOIR Terms of Reference. The work on AEOI aims at establishment of the monitoring, support and review processes to best ensure the effective implementation of the AEOI standard for an AEOI review of jurisdictions starting from 2020. The ultimate goal of these reviews is to help jurisdictions to effectively implement the international standards of transparency and exchange of information for tax purposes. All review reports are published once adopted by the Global Forum and they thus represent agreed Global Forum reports. For more information on the work of the Global Forum on Transparency and Exchange of Information for Tax Purposes, and for copies of the published review reports, please refer to www.oecd.org/tax/transparency. About this handbook This handbook is intended to assist the assessment teams and the reviewed jurisdictions that are participating in the Global Forum on Transparency and Exchange of Information for Tax Purposes (the Global Forum) peer reviews and non-member reviews on EOIR under the second round of reviews (2016-20).
UNITED NATIONS HANDBOOK ON SELECTED ISSUES FOR TAXATION OF THE EXTRACTIVE INDUSTRIES BY DEVELOPING COUNTRIES
The purpose of this chapter is to give an overview of some of the taxation issues for extractive industries in developing countries and the interactions between them, options available, and the likely effect of choosing such options in particular circumstances. This is intended to assist policy makers and administrators in developing countries as well as to provide information to other stakeholders. Background contained in this chapter will provide a broader context for viewing the overall issue of natural resource development and the specific issues addressed in more detail in additional chapters. The work covered by this and each of the additional specific-issue chapters stems from a mandate given by the United Nations Tax Committee to the Subcommittee on Extractives Industries Taxation Issues for Developing Countries to consider, report on and propose guidance on extractive industries taxation issues for developing countries, focusing on the most pressing issues where guidance from the Committee may most usefully assist developing countries. The work will seek to provide policy and administrative guidance at a very practical level. This chapter is intended to broadly identify issues of taxation of the extractive industries; address several of the most significant ones in short form; help build awareness; and, ultimately, along with the additional specific-issue chapters, assist those faced with these issues to make policy and administrative decisions in relation to them.
OECD (2017) – FIGHTING TAX CRIME: THE TEN GLOBAL PRINCIPLES. This is the first comprehensive guide to fighting tax crimes. It sets out ten global principles, covering the legal, strategic, administrative and operational aspects of addressing tax crimes. The guide has been prepared by the OECD Task Force on Tax Crimes and Other Crimes (TFTC). It draws on the experience of the members of the TFTC as well as additional survey data provided by 31 jurisdictions: Australia, Austria, Brazil, Canada, Czech Republic, Denmark, El Salvador, Finland, France, Georgia, Germany, Greece, Iceland, Indonesia, Italy, Japan, Lithuania, Luxembourg, Malaysia, the Netherlands, New Zealand, Norway, Singapore, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Switzerland, the United Kingdom and the United States. The guide shows that the fight against tax crime is being actively pursued by governments around the world. Jurisdictions have comprehensive laws that criminalise tax offences, and the ability to apply strong penalties, including lengthy prison sentences, substantial fines, asset forfeiture and a range of alternative sanctions. Jurisdictions generally have a wide range of investigative and enforcement powers as well as access to relevant data and intelligence. Suspects’ rights are nearly universally understood in the same way and enshrined in law. Increasingly, jurisdictions are taking a strategic approach to addressing tax offences, which includes targeting key risks and leveraging the tools for co-operation with other law enforcement agencies, both domestically and internationally. At the same time, tax crime investigations increasingly need to be undertaken with greater efficiency and fewer resources. However, data shows that the investment is worthwhile, with some jurisdictions being able to calculate the return on investment from the criminal tax investigation teams and reporting recovery of funds well in excess of the expenditure, ranging from 150% to 1500% return on investment. The role played by criminal tax investigators thus contributes significantly to jurisdiction’s overall tax compliance efforts. The implementation of the 10 global principles around the world is critical in addressing the tax gap and supporting domestic resource mobilisation. Recommendations: This guide recommends that jurisdictions benchmark themselves against each of the ten global principles. This includes identifying areas where changes in law or operational aspects are needed, such as increasing the type of investigative or enforcement powers, expanding access to other government-held data, devising or updating the strategy for addressing tax offences, and taking greater efforts to measure the impact of the work they do. In particular, developing jurisdictions are encouraged to use the guide as a diagnostic tool to identify principles which may not yet be in place. Jurisdictions which have made commitments to capacity building for developing jurisdictions in tax matters (such as the Addis Tax Initiative or the G7 Bari Declaration) are recommended to consider how they can work with developing jurisdictions to enhance tax crime investigation based on this guide, including through providing support for the OECD International Academy for Tax Crime Investigation and other regional initiatives. The TFTC will continue its work in facilitating international co-operation on fighting tax crime, particularly on issues where multilateral action is required to address common challenges. This could also include collaborating to create an agreed strategy for addressing tax crimes that have cross-border elements. Such a strategy could include identifying the risks of such tax crimes, defining the additional data and other mechanisms that are needed to more effectively combat such tax crimes and working towards ensuring that data and mechanisms are available and efficient in practice.
OECD – BEPS ACTIONS 8 – 10. Financial transactions. 3 July- 7 September 2018: Under the mandate of the Report on Actions 8-10 of the BEPS Action Plan (“Aligning Transfer Pricing Outcomes with Value Creation”), Working Party No. 6 (“WP6”) has produced a non-consensus discussion draft on financial transactions. The first part of the discussion draft provides guidance on the application of the principles contained in Section D.1 of Chapter I of the Transfer Pricing Guidelines to financial transactions. In particular, Section B.1 of the discussion draft elaborates on how the accurate delineation analysis under Chapter I applies to the capital structure of an MNE within an MNE group. The discussion draft clarifies that the guidance included in this section does not prevent countries from implementing approaches to address capital structure and interest deductibility under their domestic legislation. Section B.2 outlines the economically relevant characteristics that inform the analysis of the terms and conditions of financial transactions. The second part of the discussion draft, contained in sections C, D and E, addresses specific issues related to the pricing of financial transactions such as treasury function, intra-group loans, cash pooling, hedging, guarantees and captive insurance. The discussion draft also includes a number of questions to commentators on which inputs from stakeholders will be particularly relevant to WP6 to further its work and prepare another discussion draft after considering the input received. Interested parties are invited to send their comments on this discussion draft, and to respond to the specific questions included in the boxes, by 7 September 2018 by email to TransferPricing@oecd.org in Word format (in order to facilitate their distribution to government officials). Comments in excess of ten pages should attach an executive summary limited to two pages. Comments should be addressed to the Tax Treaties, Transfer Pricing and Financial Transactions Division, OECD/CTPA. Please note that all comments received on this discussion draft will be made publicly available. Comments submitted in the name of a collective “grouping” or “coalition”, or by any person submitting comments on behalf of another person or group of persons, should identify all enterprises or individuals who are members of that collective group, or the person(s) on whose behalf the commentator(s) are acting. The proposals included in this discussion draft do not, at this stage, represent the consensus views of the CFA or its subsidiary bodies but are intended to provide stakeholders with substantive proposals for analysis and comment. Introduction. 1. The purpose of the following sections is to provide guidance for determining whether the conditions of certain financial transactions between associated enterprises are consistent with the arm’s length principle. 2. Section B describes the application of the principles of Section D.1 of Chapter I to financial transactions. Section C provides guidance on determining the arm’s length conditions for treasury activities, including intra-group loans, cash pooling and hedging. Section D examines financial guarantees, and section E outlines the analysis of captive insurance companies.
Technical paper, 28 June 2018. The Global Revenue Statistics Database covers the countries and data from four Revenue Statistics publications, which are each published on an annual basis. These publications are produced to focus on domestic resource mobilisation in each of the four groups of countries. Box 1 provides further information about the individual publications and the regional partners involved in each. The four publications use the same classification system and methodology, as set out in the OECD Interpretative Guide (OECD, 2016). This technical paper provides a brief overview of the methodology used in the underlying regional and OECD databases to produce the four annual publications and the Global Revenue Statistics Database. Data collection, classification and sources The new Global Revenue Statistics Database covers 80 countries from around the world from 1990 to 2015. It draws on the four annual Revenue Statistics publications and includes 16 African countries, seven Asian countries, 25 countries from Latin America and the Caribbean (LAC) and 35 OECD countries plus one non-OECD EU member (Lithuania) . Additionally, three unweighted country group averages are provided: the Africa (16) average, the LAC average and the OECD average. The OECD Interpretative Guide: definitions & tax classification All data in the Global Revenue Statistics Database are classified using the OECD classification of taxes set out in the Interpretative Guide. This ensures consistency across the countries included in the publication and provides a high granularity of tax revenue categories. The classification of tax revenues set out in the OECD Interpretative Guide has been in use since the 1970s and is an international reference for policy makers, academics and researchers.
Revised Guidance on the Application of the Transactional Profit Split Method. INCLUSIVE FRAMEWORK ON BEPS: ACTIONS 10. The guidance set out in this report responds to the mandate under Action 10 of the BEPS Action Plan, which required the development of: “… rules to prevent BEPS by engaging in transactions which would not, or would only very rarely, occur between third parties. This will involve adopting transfer pricing rules or special measures to: … (ii) clarify the application of transfer pricing methods, in particular profit splits, in the context of global value chains;…” The OECD Transfer Pricing Guidelines have included guidance on the transactional profit split method since their first iteration in 1995. Since the revision to the Guidelines in 2010, the transactional profit split method has been applicable where it is found to be the most appropriate method to the case at hand. This basic premise is unchanged. However, this revised guidance, while not being prescriptive, clarifies and significantly expands the guidance on when a profit split method may be the most appropriate method. It describes presence of one or more of the following indicators as being relevant: Each party makes unique and valuable contributions; The business operations are highly integrated such that the contributions of the parties cannot be reliably evaluated in isolation from each other; The parties share the assumption of economically significant risks, or separately assume closely related risks. The guidance makes clear that while a lack of comparables is, by itself, insufficient to warrant the use of the profit split method, if, conversely, reliable comparables are available it is unlikely that the method will be the most appropriate. The revised text also expands the guidance on how the profit split method should be applied, including determining the relevant profits to be split, and appropriate profit splitting factors. Sixteen examples are included in the revised guidance to illustrate the principles discussed in the text, and demonstrate how the method might be applied in practice. These will be included in Annex II to Chapter II of the Guidelines. June 2018.
OECD – Guidance for Tax Administrations on the Application of the Approach to Hard-to-Value Intangibles INCLUSIVE FRAMEWORK ON BEPS: ACTION 8
Guidance for Tax Administrations on the Application of the Approach to Hard-to-Value Intangibles INCLUSIVE FRAMEWORK ON BEPS: ACTION 8. Action 8 of the Action Plan on Base Erosion and Profit Shifting mandated the development of transfer pricing rules or special measures for transfers of hard-to-value intangibles (HTVI) aimed at preventing base erosion and profit shifting by moving intangibles among group members. The outcome of that work is the approach to hard-to-value intangibles, which is found in the 2015 Final Report for Actions 8-10, “Aligning Transfer Pricing Outcomes with Value Creation” (BEPS TP Report) and it was formally incorporated into the Transfer Pricing Guidelines, as Section D.4 of Chapter VI. The HTVI approach protects tax administrations from the negative effects of information asymmetry by ensuring that tax administrations can consider ex post outcomes as presumptive evidence about the appropriateness of the ex-ante pricing arrangements. At the same time, the taxpayer has the possibility to rebut such presumptive evidence by demonstrating the reliability of the information supporting the pricing methodology adopted at the time the controlled transaction took place. The BEPS TP Report also mandated the development of guidance for tax administrations on the application of the HTVI approach. Under this mandate, the Committee on Fiscal Affairs issued a public discussion draft in May 2017, inviting interested parties to submit comments on the proposed guidance for tax administration on the application of the HTVI approach. The guidance contained in this report aims at reaching a common understanding and practice among tax administrations on how to apply adjustments resulting from the application of the HTVI approach. This guidance should improve consistency and reduce the risk of economic double taxation. In particular, the new guidance: · Presents the principles that should underlie the application of the HTVI approach by tax administrations; · Provides a number of examples clarifying the application of the HTVI approach in different scenarios; and · Addresses the interaction between the HTVI approach and the access to the mutual agreement procedure under the applicable tax treaty. The guidance for tax administration on the application of the HTVI approach contained in this document has been incorporated into the Transfer Pricing Guidelines as an annex to Chapter VI. June 2018.
TAX ADMINISTRATION IN OECD AND SELECTED NON-OECD COUNTRIES: Comparative Information Series (2010). This series describes key features of the systems in place for administering national taxes in OECD and selected non-OECD countries. Its starting point is the premise that revenue bodies can be better informed and work more effectively together given a broad understanding of the administrative context in which each operates. The series identifies fundamental elements of modern tax administration systems and uses data, analysis and country examples to highlight key trends, recent innovations, and examples of good practice and performance measures/ indicators. Armed with such knowledge, revenue bodies should be better equipped to undertake their own comparative analyses and benchmarking studies, particularly for performance-related aspects and for assessing comparative efficiency. The series is structured as follows: · Chapter one describes the institutional arrangements put in place by Governments to conduct national revenue administration operations. · Chapter two outlines the organisational set-ups adopted by revenue bodies and identifies important reforms recently implemented, in course of adoption, or planned. · Chapter three provides brief information on revenue body practices for specific aspects of strategic management. · Chapter four provides an overview of human resource management aspects. · Chapter five provides summary data and analyses (covering multi-years) of the resources allocated to revenue bodies to administer national tax laws. · Chapter six sets out summary operational performance data (covering multiyears) for key areas of administration (e.g. service, verification and debt collection). · Chapter seven identifies developments with the provision of modern electronic services to assist taxpayers meet their obligations. · Chapter eight provides an overview of the legal/administrative frameworks employed for tax collection including: taxpayers‘ rights; provision of rulings; return filing, tax payment and assessment (major taxes); and enforced debt. A number of the more important observations and trends observed are set out hereunder.