OECD – Substantial Activities in No or Only Nominal Tax Jurisdictions: Guidance for the Spontaneous Exchange of Information

Substantial Activities in No or Only  Nominal Tax Jurisdictions: Additional Guidance for the Spontaneous Exchange of Information and Opt-in Notification Template. The Forum on Harmful Tax Practices (FHTP) agreed at its meeting on 15 – 19 October 2018 on the resumption of the application of the substantial activity factor to no or only nominal tax jurisdictions (hereafter the “Standard”, approved by the Inclusive Framework in November 2018). The Standard requires no or only nominal tax jurisdictions to exchange information in specified situations. The Standard already includes details as to the circumstances giving rise to exchange, the data points included in the exchange, and the jurisdictions to be exchanged with, summarised in Annex A. Building on that work, this document adresses the practical modalities regarding the exchange of information requirements of the Standard. Part 1 contains guidance on the timelines, the international legal framework and clarifications on the key definitions: a. Applicable timelines: The applicable timeline for conducting the exchanges varies depending on whether the information is Exchanged as a result of non-compliance with the substantial activity requirements or in other situations. b. Legal mechanism to operationalise the exchange process: The exchanges occur as spontaneous exchange of information (SEOI) under the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (the Convention), or where bilateral tax agreements are used, under applicable Tax Information Exchange Agreements or bilateral tax treaties that permit SEOI. In order to operationalise the exchanges, a standardised opt-in template has been developed, by which potential recipient jurisdictions notify their interest in receiving the respective information and that the information is foreseeably relevant for the administration of the recipient jurisdiction’s taxes (see Annex F).c.Key definitions: Relevan t definitions for the exchange framework have been developed. Part 2 contains the format for the exchanges. The Standard foresees that a stand ardised template and XML schema will govern the spontaneous exchanges pursuant to the Standard. The document also includes in Annex A an extract of the Standard relevant to the issues addressed, in Annexes B – E templates for the exchanges which are the basis for the XML Schema and in Annex F the opt-in notification template for the exchanges under the Standard.


OECD – COMBATTING TAX CRIMES MORE EFFECTIVELY IN APEC ECONOMIES. Tax crimes, corruption, terrorist financing, money laundering, and other financial crimes threaten the strategic, political, and e conomic interests of all countries. The sums lost to illicit financial flows (IFFs), including those that derive from these crimes are vast. For example, a 2011 UNODC report estimates that from 2000 to 2009, total proceeds from transnational organised crime was the equivalent of 1.5% of global GDP, or USD 870bn in 2009. 1 These illegal activities and ensuing lost revenues complicate efforts to reach the Sustainable Development Goals (SDGs) and meet the objectives of the 2015 Cebu Action Plan 2 such as good governance, sound fiscal policies, and infrastructure financing. These crimes are all closely related and thrive in a climate of secrecy, inadequate legal frameworks, lax regulation, poor enforcement, and weak inter-agency co-operation. By exploiting these weaknesses and advances in technology, criminals can covertly move substantial sums between multiple jurisdictions with relative ease and great speed. Consequently, criminal activity and the illicit financial flows that follow are becoming ever more sophisticated. Meanwhile, law enforcement structures have, in many cases, not evolved at the same speed and the international community has struggled to keep up with this threat. In recognition of the importance of this topic, APEC Finance Ministers included in their Cebu Action Plan a roadmap for a more sustainable financial future for the Asia-Pacific region. Specifically, Action item 2.E calls on APEC Economies to: “build capacity to address financial crimes, which threatens everyone’s economic and social well-being. Illicit financial activities such as tax evasion, corruption, terrorist financing, computer fraud, money laundering and other financial crimes are a global problem requiring coordinated responses within governments and between APEC Economies.” The Cebu Action Plan also called for the OECD to prepare, within two to four years, “a report exploring ways to strengthen capacity in tackling tax crimes and other related crimes in APEC Economies.” This report responds to that mandate by bringing together the legal instruments, policy tools, and capacity building initiatives available to enhance the fight against tax crimes, drawing on examples and successful practices in APEC Economies.

OECD – Model Mandatory Disclosure Rules for CRS Avoidance Arrangements and Opaque Offshore Structures.

The purpose of these model mandatory disclosure rules is to provide tax administrations with in formation on CRS Avoidance Arrangements and Opaque Offshore Structures, including the users of those Arrangements and Structures and those involved with their supply. Information disclosed pursuant to the application of these model rules can be used both for compliance purposes and to inform future tax policy design. These rules should also have a deterrent effect against the design, marketing and use of arrangements covered by the rules. 2. The model rules require an Intermediary or user of a CRS Avoidance Arrangement or Opaque Offshore Structure to disclose certain information to its tax administration. Where such information relates to users that are resident in another jurisdiction it would be exchanged with the tax administration(s) of that Jurisdiction in accordance with the terms of the applicable international legal instrument. 3. The mandatory disclosure rules do not affect the substantive provisions of a jurisdiction’s CRS Legislation or impact on any reporting outcomes under the CRS. Rather these rules are information gathering tools that seek to bolster the integrity of the CRS by deterring advisors and other intermediaries from promoting certain schemes. The rules seek to accomplish this by providing tax administrations and policy makers with information on schemes, their users and suppliers, for use in compliance activities, exchange with treaty partners and tax policy design. 4. Consistent with the concepts on mandatory disclosure articulated in the BEPS Action 12 Report the model rules are not limited to situations of non-compliance with the tax law (including the rules on CRS reporting). Thus, a disclosure under the rules does not necessarily imply a violation of any tax rule and will not always result in the tax administration taking compliance actio n in respect of a disclosed Arrangement. Equally, the fact that a tax administration does not respond to a disclosure does not imply any acceptance of the validity or tax treatment of the Arrangement by the tax administration. Jurisdictions implementing the se model rules would need to take into account domestic specificities in their own CRS Legislation and the interaction of these model rules with existing anti-avoidance rule.

OECD – PCT Progress Report 2018-2019

OECD – 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, 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 act ive 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.


This report contains two parts. Part I reports on the activities and achievements in the OECD’s international tax agenda. Part II reports on the activities and achievements of the Global Forum on Transparency and Exchange of Information for Tax Purposes. 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. The constant efforts of the G20 over the past 10 years have dramatically changed the environment, improving the efficiency and fairness of international tax. The results of these efforts are now showing and they are big. 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.


OECD Taxation Working Papers N. 44 – TAXING VEHICLES, FUELS, AND ROAD USE: OPPORTUNITIES FOR IMPROVING TRANSPORT TAX PRACTICE. This paper discusses the main external costs related to road transport and the design of taxes to manage them. It provides an overview of evolving tax practice in the European Union and the United States and identifies opportunities for better alignment of transport taxes with external costs. There is considerable scope for improving transport tax practice, notably by increasing the use of taxes based on road use. Distance charges offer great promise in delivering more efficient road transport. In heavily congested areas, targeted charges are a cost-effective way of reducing congestion. Fiscal objectives provide an impetus for change as improving vehicle fuel efficiency and fleet penetration of alternative fuel vehicles erode traditional tax bases, particularly those relating to fossil fuel use. A gradual shift from an energy-based approach towards distance-based transport taxes has the potential to establish a stable tax base in the road transport sector in the long run. By Kurt van Dender.


OECD Taxation Working Papers N. 45 – THE POTENTIAL OF TAX MICRODATA FOR TAX POLICY. This paper explores one distinctive form of the ‘big data’ of economics – individual tax record microdata – and its potential for tax policy analysis. The paper draws on OECD collaborations with Slovenia and Ireland in 2018 where tax microdata was used. Most empirical economics is based on survey data. However, the current trend of low and falling response rates has placed a question mark over the future value of survey practice generally. By contrast, this paper discusses the increasing use of tax microdata in economic research and the new types of policy analysis made possible by it. In the future, best-practice tax policy analysis is likely to combine tax microdata with survey and national account data. The advantages of these combined data will be important for policymakers to understand and address future policy challenges including protecting tax revenues in an era of population ageing and supporting fairness given the changing nature of economic mobility.  By Seán Kennedy.


OECD Taxation Working Papers N. 39 – SIMPLIFIED REGISTRATION AND COLLECTION MECHANISMS FOR TAXPAYERS THAT ARE NOT LOCATED IN THE JURISDICTION OF TAXATION: A REVIEW AND ASSESSMENT. This paper reviews and evaluates the efficacy of simplified tax registration and collection mechanisms for securing compliance of taxpayers over which the jurisdiction with taxing rights has limited or no authority to effectively enforce a tax collection or other compliance obligation. Although the experience of jurisdictions in addressing this problem has involved primarily consumption taxes, that experience, and the lessons that can be learned from it, are applicable as well to other tax regimes that confront the same problem. Many jurisdictions have implemented (and are in the process of implementing) simplified registration and collection regimes in the business-to-consumer (B2C) context for taxpayers that are not located in the jurisdiction of taxation. Although the evidence regarding the performance of the simplified regimes adopted by jurisdictions is still quite limited, the best available evidence at present (in the European Union) indicates that simplified regimes can work well in practice and a high level of compliance can be achieved since there is a concentration of the overwhelming proportion of the revenues at stake in a relatively small proportion of large businesses and since the compliance burden has been reduced as far as possible. It also indicates that the adoption of thresholds may be na appropriate solution to avoid imposing a disproportionate administrative burden with respect to the collection of tax from small and micro-businesses in light of the relatively modest amount of revenues at stake and that a good communications strategy is essential to the success of a simplified regime (including appropriate lead time for implementation). In sum, simplified registration and collection regimes represent an effective approach to securing tax compliance when the jurisdiction has limited or no authority effectively to enforce a tax collection or other compliance obligation upon a taxpayer. Hellerstein, W., S. Buydens and D. Koulouri (2018).


OECD – COMPILATION OF COMMENTS. PUBLIC COMMENTS ON THE DISCUSSION DRAFT ON WHAT IS DRIVING TAX MORALE? These comments have been prepared by the BEPS Monitoring Group (BMG). The BMG is a network of experts on various aspects of international tax, set up by a number of civil society organizations which research and campaign for tax justice including the Global Alliance for Tax Justice, Red de Justicia Fiscal de America Latina y el Caribe, Tax Justice Network, Christian Aid, Action Aid, Oxfam, and Tax Research UK. These comments have not been approved in advance by these organizations, which do not necessarily accept every detail or specific point made here, but they support the work of the BMG and endorse its general perspectives. They have been drafted by Sol Picciotto, with contributions from Jeffery Kadet, Tovony Randriamanalina and Attiya Waris. We appreciate the opportunity to provide these comments and are happy for them to be published. Introduction. This discussion draft (the DD) updates previous OECD research of 2013 on tax morale in individuals and, additionally presents a new business section, using data from a survey of multinational enterprises (MNEs) conducted in 2016 to discuss business tax morale in developing countries. Our concern is international corporate taxation especially in relation to developing countries. In our view, the inclusion of the data from the 2016 survey of business into the work on tax morale of individuals is unhelpful and makes the draft report incoherent. In addition, there are surprising omissions from the report, particularly the lack of any discussion of the attitudes to tax of key groups such as wealthy people and tax advisers. Our comments will focus mainly on the second chapter on business, and especially its policy recommendations. More generally, however, it is of key importance in our view to understand that the motivation to pay tax is not ‘intrinsic’, at least in the sense of some kind of innate motivation of individuals. Tax is at the heart of the social contract or solidarity of citizens of a state, and there is plenty of evidence that its legitimacy, and hence the willingness of citizens to pay it, rests on notions of tax fairness. We are surprised that these issues are largely ignored in this DD, and will comment further on them below. 15 MAY 2019.