Index []...1 Taxsutra’s Special Coverage of IFA Copenhagen 2013 Index Sr No Particulars Page Nos 1...

1 Taxsutra’s Special Coverage of IFA Copenhagen 2013

Index

Sr No Particulars Page Nos

1 Daywise and session wise summary of proceedings at IFA Copenhagen Congress

2-20

2 BMR Take on IFA Copenhagen Congress

21-24

3 Special Interview on BEPS with OECD’s Mr. Pascal Saint-Amans

25-29

4 Interview with new IFA President Mr. Porus Kaka

30-31

5 Quotable quotes from Copenhagen Congress

32-33


Day 1 – August 25th 2013

As IFA President Manuel Tron delivered the inaugural

address on Sunday, Aug. 25th to kick off the

Copenhagen Congress, it truly was a spectacle to see

almost 2000 delegates from all across the globe

packing the Bella Center.

Mr. Tron kept his speech brief but made a few important

points about OECD's BEPS Action Plan and the role

that IFA should play in this regard. He advised that IFA

should carefully decide it's path vis-a-vis BEPS. He

alluded to the fact that structures of MNCs, which till a

few years ago, was considered acceptable, are now

termed 'abusive.' Mr. Tron opined that the coming days

would witness a complete makeover on the fronts of

international exchange of information, Transfer Pricing and double tax treaties.

With IFA celebrating 75 years of its existence, Mr. Tron traced the initial journey of IFA,

mentioning how 33 members from 10 odd European countries came together to form this

organization on Feb. 12, 1938. He expressed satisfaction that IFA today has 13,000

members from

over 100 branches

in 100+ countries.

He concluded his

talk with a mention

of his successor -

IFA President

elect Mr. Porus

Kaka, the first

Indian to occupy

this position. Mr.

Tron stated that the selection of Porus Kaka shows the true international character of IFA.

The opening ceremony also saw awards being given for tax research and the evening ended

with an enthralling performance by a band comprising of mostly school kids.


Day 2 – August 26th 2013

Day 2 at the Copenhagen Congress saw the beginning of four days of technical

deliberations, with a galaxy of speakers discussing topical issues like taxation of passive

income, cross border short term employment, cross border loss utilization and climate

change.

Plenary Session : Taxation of passive income for groups of companies

Chair - Barbara Angus (USA)

Panel Members - Ana Paula Dourado (Portugal) , Wilhelm Haarmann (Germany) ,

Kyung Geun Lee (Rep. of Korea) Brian Mustard (Canada) , Mike Williams (United

Kingdom)

Base Erosion and Profit Shifting

(BEPS) was one of the key points of

discussions during the first technical

session of the Copenhagen

Congress - “The taxation of passive

income for groups of companies”.

The Panel in light of BEPS

initiatives, not only discussed

aspects concerning Controlled

Financial Corporation (CFC) rules, but also those related to broader policy objectives around

taxation of passive income from Group companies. The Panel stated that CFC regulations

are a part of domestic law (and not treaty law) of the countries and hence, international

commonality could be a challenge as also the monitoring of the same under BEPS.

Discussing BEPS and CFC, the Panel felt that important stakeholders (in BEPS) may stay

out of the game. Home-country based MNCs versus foreign MNC is a significant constraint

in CFC policy, they opined.

The General reporters, Bertil Wiman and Mattias Dahlberg (Sweden), analysing 38 national

reports, mentioned that CFC is essentially an anti-deferral measure, arising out of “separate

entity approach”. Out of 38 reports analysed by them, 22 countries had CFC regulations. But

increasingly anti-avoidance is the focus in the CFC rules over Capital Import and Export

Neutrality (CIN and CEN). CFC rules were first introduced in 1962 by USA and it incidentally

was one of the topics of IFA Congress in 1964!

The Panel suggested that CFC can be utilised for protection of tax base not only of the

residence country, but also of other countries. However, effective “exchange of information”

on CFC was identified as one of the major challenges in enforcement. CFC law has been


accepted in international treaty law as also reflected in OECD’s 2010 Commentary (Article 7

- Para 14). The Panel also analysed two approaches in determining “passive income” (to

which CFC rules apply) namely - ‘Transactional approach’ and ‘Entity-based approach’.

While ‘Transactional approach’ targets specific income, it could result into computation

related issues. On the other hand, ‘Entity based’ approach is easier to apply. The Panel

further mentioned that targeting “mobile passive incomes” is one of the major policy

considerations in CFC regulations.

The Panel also discussed specific issues in CFC relating to financial services industry,

Intellectual Property (IP) and mining industries. In financial services industry, classification of

active versus passive income continues to be a major challenge. Discussing limitations in

passive income

classification of IP

related income in

Technology

industry, the

panelists discussed

that ‘marketing IP’

and ‘technology IP’

are treated in a

similar manner.

These gaps need to

be addressed.

Further, application

of CFC to IP also reflects dis-satisfaction with transfer pricing rules, felt the Panel.

The Panel analysed various important case laws relating to CFC regulations, such as,

Brazilian Court ruling in DAU wherein constitutional validity of CFC law in the context of tax

heaven was upheld.

The session also brought to the fore the fact that countries are increasingly adopting several

Specific Anti-Avoidance Rules (SAARs) to prevent tax deferral along with CFC, which leads

to certainty, but also creates more complexity in computations.

(Click here to view the presentations as available on IFA Congress Website)

http://www.ifacopenhagen2013.com/images/Subject_1_-Final.pdf


Session - “Cross-border loss utilization”

Chair - Jürgen Lüdicke (Germany)

Panel Members - Jürg Altorfer (Switzerland) Gauthier Blanluet (France) Daniela

Hohenwarter-Mayr (Austria) Koichi Inoue (Japan) Steve Suarez (Canada)

The Seminar “Cross-border loss utilization” did a critical review of tax systems and case laws

in respect of cross-border loss utilization. This topic’s relevance has increased due to current

economic climate. The issues relating to Cross-border loss utilization primarily arise due to

different taxation systems followed by different countries namely - Worldwide taxation (with

tax credits) and Territorial taxation system.

The Panel concurred that a “Simple Exemption method” creates

imbalance in utilisation of cross border losses, unless a specific

deduction is allowed in the home country for PE’s losses. The Panel

focussed on several EU specific issues on Cross-border loss utilization,

especially in light of ‘Freedom of Free Establishment’ available to an

enterprise under EU law. The panel touched upon several important

rulings on this issue such as Lidl Belgium case, Marks & Spencer’s case. As regards,

utilisation of transfer of losses from subsidiary company to parent company, the Panel

discussed a few planning techniques, which could work in some of the European

jurisdictions and in the Canadian context. The panelists noted that OECD’s recent report on

Aggressive Tax Planning has mentioned loss utilisation as an area of concern and the same

also finds a place in the BEPS Action Plan report.


Session - Climate change and international taxation

Chair - Jakob Bundgaard (Denmark) Panel Members - Claudine Devillet (Belgium), Michael Dirkis (Australia), Roberto Duque Estrada de Sousa (Brazil), John Gimigliano (USA), Anna Theeuwes (Netherlands)

The panel discussed the main policy consideration in Climate Change, which is to create a

carbon-price signal. The 2 key theoretical solutions currently are Cap & Trade ( Kyoto

http://www.ifacopenhagen2013.com/images/130825_SeminarC_20130826_IFACopenhagen_final.pdf


Protocol) norms and Carbon taxes. Session Chair Mr. Bundgaard mentioned that the Kyoto

Protocol is the first international agreement with binding reductions in greenhouse gases and

while the agreements

expired in 2013, most

countries had extended

them by a few years.

Mr. Estrada showed a

chart of distribution of

the 136 crore (1360

million) CERs issued

so far, which revealed

that 60% of total no. of

credits have been

issued by China, followed by India, Korea and Brazil. The panel discussed the lack of

regulations in countries like India and Brazil.

The Session Chair stated that there were significant uncertainties regarding tax treatment of

emission rights in different countries, giving rise to risks of both double taxation as well

as double non-taxation. One of the members of Panel cited a review of 200+ green taxes

prevalent across the world, which showed that 65% of them were incentive

based and only 35% levied penalties. The Panel also discussed the Green Tax

Index based on both quantitative as well as qualitative factors, which is topped

by USA, followed by Japan and UK.

The Panel touched upon the issue of characterization of emission allowance and the two

possible views with regards to the same - whether it is a financial asset or an intangible? 3

potential taxable moments are plausible, felt the Panel, namely: 1). Moment of Grant. 2).

Moment of Acquisition. 3). Moment of sale or use.

The Panel discussed a number of double tax treaty

issues as well as Articles in Model Treaty Convention

dealing with the same and mentioned that OECD is

slated to submit a draft in January 2014, the objective

being to ensure a consistent approach with respect to

tax treaty treatment of income from different

countries. One of the key issues that found

resonance was the differences among countries in

characterizing the income. The Panel also

deliberated on GST/VAT issues regarding carbon

credits.


http://www.ifacopenhagen2013.com/images/Seminar_A_Climate_change_main_screen_final.pdf


Session - Cross-border short-term employment Chair - Frederik Zimmer (Norway) Panel Members - Kasper Dziurdz (Austria), Martha Klasing (USA), Frank Pötgens (Netherlands)

The objective of the session was to discuss the concept of ‘employer’ under Art. 15 of Model

Convention and then focus on the permanent establishment rule in Art. 15.

Article 15 of the treaties (dealing with Dependent Personal Services) follows the coherence

principle. The country that gives the deduction of salary expense has a

right to tax salary income. The Panel discussed that the threshold of

183 days prevents excessive administrative burden. The term

'employer' has not been defined, and hence would take its meaning

from domestic law as per Article 3(2). The Panel discussed cases in

Netherlands and Germany ( pre 1992) that support ordinary meaning rather than domestic

law meaning. 2010 OECD Commentaries follows ‘economic employer’ concept for both

abusive as well as non abusive cases. Additionally objective criteria of integration and

control can be applied, stated the panelists.


http://www.ifacopenhagen2013.com/images/Seminar_B_slides_Master-4_24August_final.pdf


Day 3 - August 27th 2013

‘Automatic Exchange of information (AEOI) ' is the new international standard. That was the

key takeaway from Day 3 of IFA Congress at Copenhagen, which was graced by senior

officials at OECD. While AEOI comes along with perils of violation of privacy and secrecy of

what one may consider as private information, there is no escaping this new norm in the

current global scenario which is pushing towards transparency and disclosure. The other

topic discussed was transfer pricing related.

Session: Exchange of Information and cross-border co-operation between

tax authorities.

Chair - Ricardo Gómez-Barreda (Spain)

Panel Members - Monica Bhatia (OECD), Manal Corwin (USA), Bruno Gangemi (Italy), Natalia Quiñones Cruz(Colombia), Jennifer Roeleveld (South Africa).

Exchange of Information (EOI) has been an effective tool to combat tax evasion and will

level the playing field between taxpayers and tax authorities, on one hand and between

jurisdictions on the other by

removing information gaps,

felt the panelists. However,

they added that EOI

framework does suffer from

limitations in the form of

taxpayers’ protection of rights,

confidentiality of information

and increasing compliance

costs. The panel also saw new

forms of co-operation

emerging between various

countries to address the issue of effective EOI.

EOI was first introduced in France - Belgium treaty in 1843 and from 44 Tax Information

Exchange Agreements (TIEAs) in 2008, the tally has increased to over 800 TIEAs in 2013,

as a result of OECD and G20 countries' sustained efforts as also commitment shown by

political leaders.


Explaining the efforts made by OECD’s Global

Forum on Transparency and Exchange of

Information, its head of Secretariat - Monica Bhatia

explained that 119 member states have committed

themselves to the program. She also mentioned

that 98 Phase 1 reviews (involving examination of

legal framework) have been completed till date.

Absence of ownership related information was

observed as the top-most area of concern in Phase

1 reviews. Ms Bhatia also mentioned that 50 Phase

2 reports (involving examination of country practices) would be completed this year and

ratings would be announced in the Jakarta meeting, to be held in November 2013. Ms Bhatia

however added that the debate on ‘Foreseeable relevance’ between the countries (for

conventional EOI) and confidentiality (for automatic EOI) are some of the concerns on EOI’s

success and that OECD is striving to eliminate these differences.

The Panel discussed US legislation FATCA, which is considered as one of the major

alternate approaches to ushering in further

transparency. The Panel stated that UK, France,

Germany, Italy and Spain have agreed to work on

multilateral tax information exchange based on FATCA

Model Intergovernmental Agreement. The Panel also

briefly discussed “Rubik”, an alternative to automatic

EOI, adopted by Switzerland. ‘Rubik’ agreements have

been signed with Germany, Austria and the United

Kingdom.

From co-operation to enhanced co-ordination, seems to be the new mantra adopted by

some of the Revenue authorities, observed the Panel. The enhanced coordination measures

include Globalized audits (which include Joint Audits as well as Simultaneous audits). Joint

audits are already being conducted by USA - Australia, South African Revenue and UK

HMRC, Germany and Netherlands, shared one of the panelists. Greater co-operation is also

one of the underlying themes of BEPS Action Plan.

The Panel then discussed two sensitive issues -

viz ‘protection of Taxpayers’ rights’ and ‘Legal profession

privilege’. The Panel felt that indiscriminate automatic

exchange could violate individual’s right to privacy. But

otherwise, sharing of information without taxpayer’s notice

seems to be allowed under the domestic law of many


countries. Many countries allow legal professional privilege only to advocates and law firm

employees and as such other tax advisors may not be covered under the same, under EOI

regime, stated the panelists. The Panel also touched upon issues around the legality of use

of stolen information, passed on to tax authorities, based on some recent examples in

France and Germany.


Session: Exchange of Information - (Practical aspects with regards to OECD

provisions and EU context)

Chair: Christian Comolet-Tirman (France)

Panel : Heinz Jirousek (Austria), Urs Kapalle (Switzerland), Fabrizia Lapecorella (Italy),

Michèle Perolat (EU).

Continuing the discussion on EOI,

specifically in European Union (EU)

context, the next Panel discussed the

nitty-gritty of the law and practical

aspects in relation to EOI. While most

bilateral tax treaties provide that

information requests must not be

refused solely for reasons of bank

secrecy, the panelists felt that a

balance must be maintained between transparency and confidentiality. They opined that as

per the prevalent double tax treaties position on administrative assistance, it is not

incumbent for a Country to provide information which contains business or trade secrets.

The panel suggested that in order to tackle tax fraud, information provided under EOI should

be 1) provided in a timely fashion. 2) Precise (i.e. Consistency between info provided by

Competent Authority and supporting documents available) and 3) Complete.

However the panelists cautioned that no action should be taken against financial

intermediaries (mainly Banks) that conduct proper due diligence and behave in a bonafide

manner while providing information. Good storing capabilities at tax administration end was

felt as one of the pre-requisites of an effective information exchange between Revenue

authorities.

http://www.ifacopenhagen2013.com/images/presentation_subject_2.pdf


The panel also explained the importance of 'precise' EOI without which it would be difficult to

obtain relevant info. The panelists discussed the difference between a 'fishing expedition'

and 'foreseeable relevance' of information though

they did admit that whether the information supplied

actually turns out to be relevant, is immaterial. They

did however add that the requesting country ought

to exhaust all sources of info available domestically.

The panel also discussed the Costs and

Administrative burden on financial intermediaries for

implementing and effecting the requests of tax

authorities. The panelists cited a European Banking

Association study which has calculated the cost of implementing American legislation

FATCA at $10 per bank account. Stating that Automatic Exchange of Information (AEOI)

was fast becoming the new international standard, the panel felt the goals of AEOI are:

a) Transparency

b) Control of tax returns (i.e. Cross checking info provided by tax payer with info received

from other jurisdictions)

C) Using such reported information automatically in tax assessments.

The panel concluded by requesting the authorities to keep in mind the constraints of financial

intermediaries, especially banks, since many of them need to process the information

requests from a single database.


http://www.ifacopenhagen2013.com/images/Seminar_D_-_Final_2013.pdf


Session: Profit methods and the arm's length principle

Chair - Isabel Verlinden (Belgium)

Panel Members - David Canale (USA), Gianni De Robertis (Italy), Marlies De Ruiter

(OECD) Wang Xiaoyue (PRC) , Masao Yoshimura (Japan)

The last Panel discussion of the day examined limitations of ‘arm’s length principle’ (ALP) in

transfer pricing, but which still remains a guiding principle. However, the Panel suggested

that special targeted measures, within or beyond ALP, also ought to be developed.

Ms Marlies De Ruiter from OECD extensively discussed OECD’s perspective on Transfer

Pricing , ALP and its limitations and Base Erosion & Profit Shifting (BEPS). Ms De Ruiter

stated that ALP which is based on third party behaviour, works well for most inter-company

transactions. However, the ALP approach has flaws especially the lack of comparables.

Recognition of “Group-ness” is also another flaw with ALP, stated the OECD representative.

She also elaborated on an approach that the transfer pricing analysis should result in profit

attribution in line with value creation. Explaining OECD’s draft on intangibles, Ms De

Ruiter added that some intangible related functions are particularly important and one would

generally expect these to be performed by the legal owner in arm’s length arrangements

between independent enterprises.

The Panel then discussed various aspects relating to “Most Appropriate Method” principle,

use of “Income method” especially for transfer pricing aspects on transfer of intangible

assets, and “Profit-Split” method. The panelists also shared country perspectives from USA,

China, Japan and some of European countries on these aspects.


http://www.ifacopenhagen2013.com/images/IFA_Seminar_E-_Slide_Deck_Final.pdf



It was a BEPS filled day at Copenhagen, with the panelists debating the 15 point OECD

Action Plan. OECD Director of Tax Policy - Pascal Saint-Amans, vigorously defending the

action plan, promised action within 2 years so that this contentious issue is off the agenda

for the foreseeable future. With IFA celebrating completion of 75 years, a special session

chaired by Prof. Michael Lang did some crystal ball gazing into how the tax system may look

after 25 years.

Session: Base Erosion and Profit Shifting

Chairman - Richard Vann (Australia)

Panel Members - William Morris (United Kingdom), Paul Oosterhuis (USA), Pascal

Saint-Amans (OECD), Mike Williams (United Kingdom)

The most awaited

session of the

Copenhagen Congress

started with the panel

tracing the origin of

BEPS to the global

financial crisis (2008-09)

and consequent belt

tightening by many

countries. The panelists

also felt that BEPS

stemmed from public

concerns vis-a-vis a

perceived unfair tax

system, political pressure as also domestic businesses having a sense of losing out to

MNCs.

The panel also dwelled on the unusual press interest in tax affairs of MNCs like Google,

Amazon, Starbucks etc, as also activism of NGOs like Christian Aid and Tax Justice

Network.

OECD Director of Tax Policy - Mr. Pascal Saint- Amans concurred and added that the

financial crisis was an opportunity for politicians to take a re-look at international tax rules,

which they hadn't done for decades. He also emphasized the top-down approach of BEPS

due to strong political backing from G-20 countries meant that the OECD had both a


deadline as well as mandate to find technical solutions to this burning issue. He however

warned that the concerns of G20 was primarily due to economic double non taxation and

that BEPS outcome should not lead to double taxation. The panel grouped the 15 point

BEPS Action Plan into 4 distinct areas: 1. Digital economy 2. Establishing international

coherence 3. Restoring international standards 4. Transparency and instruments

On digital economy taxation the panel suggested a level playing field between digital and

non-digital businesses in particular, a closer look at jurisdictions with low or no tax regime

that house legal ownership of IP and conclusion of sales contracts including revisiting

definitional aspects of

what constitutes

'preparatory & auxiliary'

activities.

As regards 'arbitrage', Mr.

Amans stated that there

was a need to close down

the same but said in the

same breath that there

was no need to start from

scratch in light of Hybrid Mismatch Report already being there. He mentioned two possible

instruments to counter arbitrage - domestic legislation and tax treaty. The panel identified

CFC policy as one of the most challenging areas for OECD, especially with regards to

designing a level playing field between home grown MNCs and foreign MNCs. One of the

panelists wondered if it made sense for residence countries to adopt CFC when the

beneficiaries are likely to be source countries. The same panelists also added that USA

would like alignment of CFC regimes, failing which many US based MNCs may consider

having their parent companies outside USA.As regards one of the major concern area of

double non-taxation, the panel discussed the possibility of a guiding 'GAAR principle' being

incorporated as a Model article instead of being a part of the OECD commentary, as it

currently is. On the issue of PE, one of the panelists warned that if the PE threshold is

changed significantly it would affect 3000 tax treaties. Another panelist representing an MNC

giant cautioned that PE is an issue that particularly worries businesses, especially the

possibility of a permanent establishment "popping out" everywhere, which he said, affects

investment decisions. He urged the OECD to be sensitive and develop 'brightline rules.' Mr.

Amans clarified that the consensus (of G20) is to tackle double non-taxation and not go

beyond that. On another hotly debated BEPS action point of transfer pricing, one of the

panelists made a strong plea for formulas to keep the 'arms length standard' afloat. He

opined that transfer pricing was collapsing under it's own weight with too much information


being provided to tax authorities and felt that there was an urgent need to simplify transfer

pricing rules and documentation. The panel discussed the issue of 'transparency' and the

industry representative on the panel admitted that businesses need to restore public trust in

tax system and explain to them " why they do, what they do. " Mr. Amans stated that there

had been of late so much departure from the transparency

benchmark that it had to be restored though he hastened to add

that OECD understood the necessity to protect rights of

taxpayers. The panel concluded with a discussion on the

feasibility of a multilateral instrument to implement the BEPS

Action Plan. The panelists also opined that considering the tight

OECD deadlines on BEPS, the private sector must be closely involved and help the OECD

better understand business models. Mr. Amans, in his closing remarks, acknowledged the

challenges of co-ordinating with different governments, NGOs and businesses but defended

the deadline by asking a rhetorical question as to who would have thought that 40 countries

would agree on a 15 point action plan in just one year? Finishing on a humorous note, he

promised the delegates that OECD would achieve something within 2 years so that this

issue is taken off the IFA Congress agenda for next 30 years.


Session: Jubilee Seminar 75th Anniversary of IFA - “What will the tax system look like

in 25 years?"

Chair - Michael Lang (Austria)

Panel Members - Wei Cui (PRC), Keith Engel (South Africa), Liselott Kana (Chile), Rick

Krever (Australia), Scott Wilkie (Canada).

http://www.ifacopenhagen2013.com/images/Seminar_F_v2.pdf


The Jubilee Seminar on the occasion of “75th Anniversary” of IFA tried to do crystal ball

gazing on the future of global taxation system. The panel dealt with issues relating to tax

mix, uniformity in VAT systems and rates, relevance of ALP concept, new types of taxes and

role of Revenue officials and tax professionals. The panelists shared perspective on each of

these aspects, across different regions in the world.

On Tax Mix, the panel discussed economic, political and demographic aspects that impact

tax levy. Almost all panelists opined that direct taxes is an important component and that the

tax mix is unlikely to shift towards indirect taxes or consumption

based taxes. As regards developing economies, the panel felt that

there is always a tension between attracting foreign direct

investment (FDI) versus protecting the tax base.

Uniform Single VAT rate was the next topic of discussion. Mukesh

Butani (BMR), in his brief comment, stated that such a move is unlikely to happen in the next

25 years. Mr Butani argued that States would like to have some degree of financial control

and independence on the levy of taxes. One of the panel members explained that especially

in China and India, a uniform VAT will have several structural challenges. In the African

context, the panel member explained that many African nations (other than South Africa) are

still establishing VAT systems. The audience poll on this issue showed that almost 90%

members felt that the VAT systems around the world will remain as diverse as they are now

and are unlikely to be uniform.

The 2000 odd delegates however were equally divided on whether the arms’ length principle

(ALP) will remain the same after 25 years. Most panelists felt that OECD’s ALP principle is

currently being supported by countries. In the European context, one of the panelists

mentioned that different interpretations of ALP in domestic law exist within EU. In developing

countries, the panel stated that application of ‘ALP principles’ puts an additional burden on

the administrators.

Various members of the panel stated that new type of taxes, especially around environment

and financial transactions are being considered by countries. However, a significant new

form of taxes are unlikely to be introduced, felt the panel. China could consider introduction

of new natural resources taxes, stated one of the panel members. As regards Europe,

Prof. Michael Lang explained that the controversial Financial Transaction Tax and

the Common Consolidated Corporate Tax Base (CCCTB) are some of the new measures.

On the future role of tax advisors, the panel felt that a significant specialisation in taxation

would arise, given the complexity in tax laws. They also talked about the current trend

wherein many law firms are giving up traditional tax management functions and are mainly


focussing on tax litigation. The Panel also concurred that a greater co-ordination between

tax administrations and taxpayers will be required over coming years, in view of the growing

complexities and limited resources.


http://www.ifacopenhagen2013.com/images/PPT-draft_version_20130825NL_G.pdf



The Copenhagen Congress concluded with former Director of tax policy at OECD - Jeffrey

Owens suggesting that the OECD/UN develop a common GAAR framework in order to bring

uniformity in GAAR legislations. There was also a discussion on latest developments in the

Indian tax world with TP Ostwal providing the country's perspective.

Session: Recent developments in International Taxation

Chair - Philip Baker

Panel Members - Ana Claudia, Akie Utumi, Jeffrey Owens, T.P. Ostwal, Tomas Balco

Special Witness - Andrew Dawson, Jacques Sasseville, Liselott Kana, Porus Kaka,

Robert Danon

The last day of IFA Copenhagen Congress began with an overview of several important

updates relating to international taxation. Some of the major issues discussed by the panel

included General Anti-Avoidance Rules (GAAR) , update on United Nations Committee’s

work , Indirect transfers , update on India-Mauritius treaty, OECD’s work (other than BEPS)

on Permanent Establishment (PE) etc.

Jeffrey Owens (Former Director of Tax Policy, OECD) stated that a number of countries are

adopting GAAR. He called for setting up of a framework on GAAR either by OECD or UN,

which the

countries could

adopt, so as to

bring uniformity

in GAAR

legislations. Mr

Owens

discussed the

changing

structure of tax

administration

internationally,

especially the

use of risk based approach adopted in tax administration and international co-operation. He

also mentioned that “reputation risk” is one of the key considerations in tax related decision

making considered by corporates and is being effectively used by tax administrations as

well. Mr Owens also raised issues on the interests of ‘Less Developed Countries’ (LDC). He

raised a


question as to the availability of any international forum wherein their voices will be heard

and opined that forums like OECD/UN will not be suitable for LDCs.

Jacques Sasseville (OECD), discussed the recent UK Supreme Court decision in “Ben

Nevis”. The ruling laid down important principles on “treaty under-ride” and retrospective

applicability of treaty protocol in collection of

taxes. Ms Liselott Kana, (Member of

the UN Committee of Experts on

International Cooperation in Tax Matters)

briefly discussed updates in UN’s work on

taxation related matters. She mentioned

that the October 2013 meeting of UN

Committee will be discussing several

aspects relating to updating of the UN

Model. She specifically mentioned that a

more extensive work on taxation of services will also be carried by UN, subject to availability

of resources. On the issue of reservations expressed by some members of the UN

Committee on reliance of OECD’s Transfer Pricing guidelines, she stated that “perhaps the

principles are correct, but as a group it a bit strange to refer to another organisation’s work

without any format possibility to set the rules in that other organisation”.

The session also saw discussions on current trends in taxation of offshore indirect transfers.

Mr Porus Kaka (IFA President) discussed the recent Indian High Court ruling in Sanofi –

Merieux dealing with this aspect. Mr T.P. Ostwal discussed

updates from India relating to GAAR, draft safe harbour rules and

India-Mauritius tax treaty. He mentioned that inclusion of GAAR in

the treaty itself and ‘Tax Examinations Abroad’ and ‘Assistance in

Collection of Tax’ are some of the major requests from the Indian

side. Whereas, retaining capital gains exemption and Limitation of

Benefits (LOB) based on Singapore DTAA viz. expenditure test

have been requested from the Mauritian side.

One of the Panel members explained that Mongolia recently terminated its tax treaties with

Netherlands, Luxemburg, Kuwait and UAE , mainly due to concerns on possible nil taxation

of income from interest, dividend and capital gains.


http://www.ifacopenhagen2013.com/images/Seminar_H_-_Draft_slides_-_without_surprises_-_final.pdf


Other Sessions:

Overhead and VAT deductibility (re PE)

Chair - Dennis Ramsdahl Jensen (Denmark)

Panel Members - Alex Córdova Arce (Peru), Rita De La Feria (United Kingdom),

Joachim Englisch (Germany), Pierre-Marie Glauser (Switzerland), Rohan Shah (India)


and

Subnational taxes and international taxation

Chair - Elizabeth Johnson (Canada)

Panel Members - Leah Durner (USA), Santiago Montezanti (Argentina), Arne Schnitger

(Germany), Madeleine Simonek (Switzerland)


The other two panel discussions during the day were on the topics of subnational taxes and

overhead & VAT deductibility with a particular focus on business structures involving PE.

The panel on subnational taxes dealt with practices in countries like Argentina, Canada,

Germany, Switzerland, and the United States.

http://www.ifacopenhagen2013.com/images/Seminar_J_final_v2.pdf

http://www.ifacopenhagen2013.com/images/Seminar_I_slides_.pdf


Knowledge Partner -

BMR Take

The 2013 IFA Congress which took place at Copenhagen last week discussed two scientific

subjects which are very relevant in today’s context. The first scientific subject discussed was

taxation of passive income for groups of companies. Base erosion and profit shifting

(‘BEPS’) is receiving utmost attention in all countries including India and there is an

international appeal to the countries to collaborate in combat against base erosion and tax

abuse. Controlled Foreign Corporation (‘CFC’) rules are being used by countries as a tool to

protect and in some cases enhance tax base. CFC provisions were first introduced in the

United States as anti-deferral measure. Since then, several countries have introduced CFC

provisions either on a stand-alone basis or along with General or Specific anti avoidance

rules. The discussion at IFA covered several aspects including policy objectives with respect

to taxation of foreign passive income, different approaches to taxing foreign passive income,

other approaches such as switch over provisions to check deferral etc. It is expected that

CFC rules will cause a 'positive spillover effect' as eventually, it will discourage the

companies from pursuing aggressive tax planning through use of low tax jurisdictions.

One of the landmark cases decided by the European Court of Justice on the constitutionality

of CFC rules is the Cadbury Schwepps case (2006) wherein it was held that the CFC rules

restrict freedom of establishment because they discriminate against domestic controlled

companies. While the BEPS action plan has recommended that the countries should adopt

and strengthen CFC rules and agree to a common design by 2015, it is doubtful if there is as

much scope for concerted action. It is apprehended that CFC rules affect free movement of

capital and are not entirely transparent as they are implemented

domestically. With CFC rules in place, offshore structures may still be

set up if these help from a foreign exchange control perspective, or for

more efficient utilisation of funds generated abroad. In the Indian

context, CFC provisions have been proposed in the draft Direct Taxes

Code Bill, 2010. However, these proposed rules may need to be

reviewed to provide clarity on availability of foreign tax credits, and also to provide clear

definitions to lay down a robust but fair system of taxation .

The second scientific topic - Exchange of information and cross border cooperation between

tax authorities is extremely relevant in today’s tax environment. In 2009 the G20 had

declared that the era of banking secrecy was over. This was referred to as the Big Bang.

Cases in Liechtenstein and the UBS case in the USA were the main triggering events giving


rise to the necessity for tax information exchange. In their recent 2013 meeting, the G8

leaders have committed to establish automatic exchange of information between tax

authorities. However, this will need to be balanced out with taxpayer rights and data privacy.

The peer reviews done by the Global Forum show that it is difficult to get data due to various

reasons including that many countries do not maintain ownership details. Many countries

are new to this process and as they get

more accustomed to the exchange of

information process, the timeliness and

effectiveness is expected to improve. New

forms of co-operation such as joint audits,

simultaneous audits, bilateral advance

pricing agreements, technical working groups, cross border tax training, FATCA, etc. are

also being contemplated in the international context. However, any implementation of

exchange of information programs with need to match different confidentiality standards and

record keeping requirements in different countries, and difficulty in tax collection in various

jurisdictions may be required to be overcome. The OECD BEPS Action Plan requires

compulsory spontaneous exchange of information in certain circumstances. However, further

work may be required to be done especially with respect to protection of taxpayer rights,

development of international standards and unifying exchange of information procedures

and protocols. The work would also need to cover issues regarding using stolen data

especially in light of the Swiss Falciani and the Italian Vaduz cases.

Exchange of information is necessary on the one hand to combat tax evasion but at the

same time fundamental rights of taxpayers must be protected. Automatic exchange of

information is expected to be the norm for the future, and would also provide a level playing

field between the tax authorities and tax payers. Effective exchange of information would

however also depend on the level of transparency. Further work may need to be done to

address concerns regarding use of information for non tax purposes and protect taxpayer

confidentiality.

India has also realised the importance of effective and timely

exchange of information, and in this context, joined these global

efforts by taking a number of steps. These steps include re-

negotiating existing double taxation avoidance treaties to

incorporate new exchange of information articles, entering into Tax

Information Exchange Agreements (TIEAs) with 10 countries which

have nil or low taxes, joining the Multilateral Convention on Mutual

Administrative Assistance in Tax Matters for non-OECD Countries, making necessary

changes in the Indian domestic tax law and establishing a dedicated Exchange of


Information cell in the Foreign Tax and Tax Research Division. Further, earlier this year, the

Central Board of Direct Taxes released a draft manual on exchange of information to provide

guidelines on requesting for and sharing of information with treaty partners.

Apart from a discussion on the two scientific topics, the 2013 IFA Copenhagen Congress

also had elaborate discussions on BEPS. BEPS has received a lot of attention in the past

few months from governments of various countries. While different countries have different

tax cases which have made governments turn their heads and relook at the source country

rights of taxation, the global consensus seems to be to arrive at a common approach to

tackle the BEPS issue. In the UK, the media has given a lot of attention to BEPS given

the Google, Starbucks and Amazon tax controversies. In the US the focus seems to be on

outbound investments which give rise to "nowhere" or "stateless" income.

The OECD rolled out its 15 point action plan in July

this year, which has also been endorsed by the G20.

The OECD Action Plan has laid out different

deadlines falling in 2014 and 2015 which all the

member countries have committed to.

There is a recommendation that OECD should suggest model language to stop treaty abuse.

The OECD BEPS mandate also discusses changing the model with respect to PE abuse

specifically in light of three issues - commissionaire arrangements, specific activity

exclusions such as for preparatory and auxiliary activities and allocation of profits to agency

PEs. These changes are being discussed in the light of the famous French Dell and

Norwegian Zimmer cases which examined the issue of establishment of an Agency PE given

the complexities arising due to applicability of civil law.

Transfer pricing is another significant area which merits

discussion. The contemporary issues surrounding transfer

pricing include identifying and finding solutions where

arm's length pricing does not work. The possible outputs

would include refinement of the arm's length principle and

limits on the application of the principle. There is a need

for broader international agreement with respect to the

arm’s length principle approach. Some formulae may be necessary and even helpful but

may not provide a complete solution. There is also a need to simplify rules and

documentation.

On an overall basis, as a tool to aid in facilitating concerted action, OECD has also put forth

an idea of a multi lateral instrument which seems revolutionary and would be a significant

step forward. Its success would however depend on whether or not all countries agree to


adopt it. While there are tight deadlines for the BEPS action plan, full participation of all

parties is imperative for its success. Business input would be critical and private sector will

need to be closely involved particularly since business practices have changed dramatically.

OCED’s Business and Industry Advisory Committee would seek to play a coordinating role in

this context.


Special Interview on BEPS with OECD’s Mr. Pascal Saint-Amans

Mr. Pascal Saint-Amans (Director of the Centre for Tax Policy

and Administration, OECD ) in an exclusive interview with Mr.

Arun Giri ( Editor, taxsutra.com ) and Mr. Mukesh Butani (

Managing Partner, BMR Legal & Permanent Scientific Member,

IFA) at Copenhagen on Aug 29, 2013.

Transcipt:

Arun Giri: BEPS is all over the Finance world, tax world and the

IFA Copenhagen Congress. Our first question to you, Mr Amans is that you have a mandate

this time and its a political mandate to get technical solutions to complex international tax

issues.

Pascal Saint-Amans: Absolutely. It is clear that Base Erosion and Profit Shifting (BEPS )

has become a political issue and we have a political mandate from the G20, Finance

Ministers, they met in July in Moscow, they told us you need to implement this action plan

you need to deliver in the next 18 months to 2 years, and next week there will be a summit in

St. Petersburg and its likely that the leaders of G20 will re-enforce that mandate, asking the

OECD which is working with G20 non-OECD countries, to implement the action plan.

Mukesh Butani: Pascal, you made an important statement yesterday that the concern of 8

non-OECD countries (who were in the G20 BEPS initiative) is also arising from economic

double non-taxation. But you also said that you would avoid economic double taxation. Many

multi-nationals find themselves under aggressive audits, virtually subjecting them to

economic double taxation due to efficacy of the Mutual Agreement Procedure (MAP) for

resolving disputes. You see BEPS now casting an additional obligation on multi-nationals or

are you still going to pursue with the agenda for avoiding economic double non-taxation by

strengthening the MAP process?

Pascal Saint-Amans: Absolutely, What is clear is that our mandate is, at the OECD, and

broadly in this context, is about eliminating double taxation. So what we start with is we

make sure that cross-border investments do not pay taxes in two places. They should pay

taxes only in one place. If they pay in two places, their country of residence should credit the

taxes levied at source. So that’s the first principle. But, given that, we have developed

instruments which now result in double non-taxation. Mea ning that you can shift the profits

in jurisdictions where it’s not taxed and you strip the profit out of the source country and you

don’t pay anything at the residence country. A country like India, obviously, is very much

willing to put an end to double non-taxation because it’s the source country and you need

the income for the development of the country. It is true that India is often perceived as being

aggressive and as resulting in double taxation. However, and that’s the work we will be

doing, we need to find a balance putting an end to sources of double non-taxation to be


better able to have consensus on the rules, the principles, which will ensure the elimination

of double taxation. So we cannot afford having double non-taxation. Otherwise you’ll have

countries walking away. You have India saying that these principles are not good because I

(India ) cannot collect anything and nobody taxes it.

Mukesh Butani: India’s concern on double non-taxation really arises from specified treaties.

The larger concern of multi-nationals (in India) is timely resolution of disputes. Secondly, due

to tax activism that we are recently seeing select countries, tax administrators have the

tendency to paint everyone with the same brush and everyone is considered as indulging in

double non-taxation. Tax rates in India are comparable (with tax rates of treaty partners) so

there is little incentive for anyone to shift profits or make use of any tax arbitrage. How do

you think India will benefit from BEPS participation?

Pascal Saint-Amans: And on that front, we are fully aware of some of the problems that the

businesses in many countries (face), not just in India, but also in OECD countries. And that’s

why one of the actions is about mutual agreement procedure. How can we improve mutual

agreement procedure? If we come to the point where we eliminate double taxation, we

ensure that there is no double non-taxation.. then we need to have a good efficient

mechanism to solve disputes when they occur, and arbitration might be a solution for that,

and then the governments will feel more confident that the profit doesn’t shift. India should

feel so as well and maybe they will be more confident and therefore, more able to implement

more efficiently the mutual agreement procedures. So that’s what we are doing with all

OECD countries, with all non-OECD G20 countries. We have India, China, Argentina, Brazil,

South Africa, Saudi Arabia has joined, Russia is joining, and we are waiting for Indonesia to

join.

Mukesh Butani: You are making an interesting point on arbitration. I don’t know many non-

OECD countries who are in the G20 combination who they have mandatory arbitration in

their tax treaties. But India does not. India’s treaty policy is clear. India does not want to

embrace mandatory arbitration because it feels it will otherwise be abdicating its judicial

authority to an arbitrator. What’s your view on that?

Pascal Saint-Amans: Well that’s, not specific to India, many countries are like that. In

Europe you have a convention on arbitration which is poorly implemented. The US has

started with Canada, and i think, now its into force. But you can see that all countries,

because they are sovereigns from a tax perspective, are more than reluctant to get engaged

in mandatory arbitration. That’s why, if we want them to get there, and I think that is the right

direction, we need to give them comfort that the current system is not a one way street

where businesses enjoy double non-taxation and that’s it. So if we restore the balance, may

be the points of view of different countries will change.

Arun Giri: On some specific issues, like permanent establishment, digital economy, some

panelists felt that the OECD should probably take the path of examining whether tweaking


the existing rules are enough instead of coming out with wholesale new instruments.

Whereas, you are taking a radical approach. So would you agree to tweaking some of the

rules relating to PE or digital economy.

Pascal Saint-Amans: In the BEPS action plan, we have an action on digital economy to

understand what’s at stake, how it works, and what are the new issues which will be

challenges for tax administrations and tax payers for next 20 years. So we’ll be working on

that. We also know that we have a number of deficiencies on transfer pricing, on Permanent

establishment, and also new areas where we need to bridge the gaps between tax

sovereignties – interest deductibility, CFC legislations and arbitrage that needs to be

addressed. So all this is the framework of the action plan and within the action plan we will

be dealing with the elimination of double non-taxation, when deficiencies result in taxation

nowhere. In addition to that, at some point, there will be another debate..I am not sure that

there will be any kind of consensus, which is the balance between the source and residence

on the permanent establishment, on transfer pricing and other provisions in tax treaties. I

think OECD will be the place where the debate will take place because that’s now the place

which tends to be global, that’s what we want to do, because we need to have all the

countries’ views reflected in the discussion and i am very much pushing for that, as you

know, we have created the Global Transparency Forum and Exchange of Information to

have 120 countries on an equal footing. Now with the BEPS project we have 40 countries on

an equal footing. So we’ll have that debate. But, there are two debates. One is - double non-

taxation is not acceptable by anyone and we need to solve it and we’ll do that in the next two

years. And then you have another question which is - what’s the balance between source

and residence, which ultimately is to be solved bilaterally by the countries. But, we can,

clearly help this debate, frame this debate and see where the world is moving in the next

years.

Arun Giri: On transfer pricing, you heard industry seeking simpler rules. How are you going

to make How are you planning to make TP documentation rules simpler? One of your

ambitious action plan is to have a common TP documentation across jurisdictions.

Pascal Saint-Amans: The answer is simple - Country by Country reporting. This is what this

is about. Give the broad picture instead of tons of documents which are costly for both the

business and the governments and not that helpful. Where is your profit? Where is your tax?

And then the tax administrators will be able to do the risk assessment. So, this is what we

will be doing. There’s an action on that.

Mukesh Butani: I have a questions on borderless digital transactions’ taxability. We heard

the US views on source and residence. India wants to follow strict source based taxation. My

fear is that, this fight between residence and source based taxation which will again

resurface in the BEPS discussion and could result in economic double taxation


Pascal Saint-Amans: The answer is yes, you have risks when countries are on the table to

come to terms. And that’s why we are here to say why they are not able to come to terms.

And some countries, the source countries, who are currently saying that the rules don’t work,

so we walk away from the rules. That’s why we are doing the BEPS project so that they don’t

walk away from the consensus. So that they agree that there are common principles that you

need to respect. If a country doesn’t respect the common principles, it does harm to itself in

mid or long term. And this is in all countries, including in India. If you don’t behave according

to the rules which are commonly agreed then you face the risk that the investors will walk

away in spite of all the interest of being in the growing economy when growth is there.

Getting the consensus is difficult, because the interests are not aligned but that’s the hard

job that we are trying to do.

Mukesh Butani: 15 action points on BEPS agenda. Many people feel that you are trying to

bite more than you can chew. Is there an element of prioritization as to what you’ll be

focusing on? Or do you think, in a defined time frame, you’ll be able to come out with clarity

on all 15 items?

Pascal Saint-Amans: We have 15 actions, which are all priorities. It’s not a random list. It’s

a consistent action plan. Its a comprehensive action plan. We need to achieve them all..

otherwise we have not addressed the problem. And I insist on this comprehensiveness of

the action plan. Now, we have different deadlines, one year, 18 months, 2 years. So, these

are the priorities if you want. But, actually its not really based on priority but on our ability to

deliver. We have a political mandate, now it’s time to implement. The technicians know

where they must be. So, they shouldn’t be stopped by technical hurdles. And we’ll do it.

Mukesh Butani: I mean lot of burden on your shoulders, wish you luck and are able to

achieve all action points and no one walks away from the negotiation table.

Arun Giri: Multilateral instrument, Philip Baker (renowned tax expert & Queen’s Counsel),

expressed skepticism.. How are you going to implement BEPS action plan if we have to

amend 3000 treaties ? Is multilateral agreement between all countries possible?

Pascal Saint-Amans: It’s one of the actions. It’s not the only answer. The very fact that we

have this report, that we have a sense of direction, I think is having an impact on businesses

and also on governments. Making some more comfortable on the sense of direction, making

some others aware that they need to change. So we already have an impact. And the

multilateral convention, will definitely, or should definitely, be an instrument to have a fast

implementation of the instruments that we’ll come up with… Changes in the model

convention, changes in the commentary. It’s awfully difficult, but if you don’t try, you’ll never

get it.

Arun Giri: Is the United States on board? There are press reports that US is not happy with

some action points.


Pascal Saint-Amans: That’s just wrong. All the actions, I mean this action plan is

consensus document. Meaning that all the countries, including the G20 non-OECD

countries, have agreed to it. So, they agree in what is in the action plan. So don’t listen to

people who just don’t understand what consensus means. Nobody has objected this. It’s

agreed by everybody. Would it be easy to move there? No. Are there technical questions?

Yes. Are there possible differences? Yes. But again, the sense of direction is agreed. And

next week it will be agreed by the presidents and Prime ministers of all these 40 plus

countries. So everybody agrees on that and there is a mandate.

Arun Giri: When do we see you in India?

Pascal Saint-Amans: I’m coming in October.


Interview with new IFA President Porus Kaka

Taxsutra: OECD has released its 15 point BEPS Action Plan.

Your thoughts on the same?

Porus Kaka: For the world I think the BEPS project is taking

significant attention of the Tax community. It has set ambitious action

plans and also timelines. International Tax is at the forefront of the

G20 and G7. With the world’s most powerful leaders giving attention

to this area it is a matter that all persons in this area will have to

consider carefully.

There are several areas of BEPS such as the Digital economy, transfer pricing and value

creation that our Revenue Officials have been raising in several fora, so this I’m sure this

is a project that India will look at carefully. I do hope that the Business Community is also

involved in this project. When one is intending to re-write rules of taxing business one

should look at Business Models first otherwise it will create enormous problems at the

implementation stage. Right now this project is driven by political and financial

considerations and will require great cohesion between countries. The objectives are

ambitious and one would have to await the Action plans steps to comment on their

ultimate result.

Taxsutra: The BEPS Action plan comes down heavily on " double non-taxation" and

favourable tax treaties like India-Mauritius one, but the Indian Supreme Court in Azadi

Bachao Andolan observed that "treaty shopping" is a "necessary evil" in an developing

economy. Where would you draw the line between these 2 extremes? Is there a middle

path?

Porus Kaka: Though double non-taxation you are correct is a part of BEPS, I’m not sure

if it is specifically targeting the Indo-Mauritius treaty. What is “necessary” for India is really

a political and economic question and the Govt has to make this choice. Personally I

believe that investors especially FII’s cannot afford to have litigation on the matter and

wait for years while their investors are no longer available to decide on what the final tax

liability will be in India. I’m not sure if we give them a clear cut rate which is fair and

ensure no possibility of litigation on who will be the entity taxed or the manner of Taxation

etc. whether they would be still reluctant to invest. Today no FII can afford the time or

delay to get matters settled.


Taxsutra: A few months you had advocated the concept of "moral tax", wherein you

advised corporations to avoid aggressive tax planning and suggested that they should be

'reasonable' and 'careful' while devising tax planning schemes. Should one then draw an

indirect inference that the Westminster doctrine (that tax planning within 4 corners of law

is permissible ) is on ventilator and we are essentially now living in an era of " Substance

over Form."

Porus Kaka: What I meant is that today whether you call it “moral” or “fair” rate there is a

pressure that Corporates will have to recognize while planning and in this I had cautioned

that planning cannot be very aggressive. You must remember that when you have an

aggressive strategy today you will have pressure and be judged by not only the Courts

but also by the Political Class and also the NGO’s and Public. Though I believe the

Judgement on tax matters should ultimately remain within the Court domain today’s reality

is otherwise. On the Westminster doctrine I don’t agree that it is on any ventilator and

even today “artificial” devices” will fail the Courts test. However it will however now be

judged also in the light of Statutory provisions like GAAR.

Taxsutra: The Indian economy is going through a tough phase, with foreign investment

drying up. One of the reasons cited by global investors is the uncertainty created by big

ticket tax litigations. What do you think should the Indian government (i.e. Finance

Ministry) do on the tax front to restore confidence among foreign investors?

Porus Kaka: I’m not an economist but I’m sure that there are several reasons for

Investors not investing or withdrawing from India currently but you are right that the

headlines on Tax disputes are not helpful. If you are mentioning that FDI is drying up then

I do believe that our hasty “retrospective” provisions in the 2012 Budget greatly damaged

our reputation as a place with an Independent Judiciary where Courts would ultimately

decide tax disputes. One cannot blame an investor for being cautious as this is a risk they

would not be willing to accept.

I also believe that the present Finance Minister has taken a lot of steps to restore

confidence and I’m sure he has a difficult task to get over the “retrospective” problem as it

has already passed parliament led by his own Govt. However what he can do he has

been slowly implementing including circulars on Transfer Pricing, setting up Committees

to interact with Business and a Tax Administration Reforms Commission, etc.


Quotable Quotes from Copenhagen Congress:

Philip Baker (Queen’s Counsel, UK)

“Exchange of Information can cause a great deal of damage ( to protection of taxpayer rights

)...its not going to leave the table and Courts will certainly step in because if information is

exchanged from Country A to Country B and the information leaks out there will be action

(legal) against the Revenue authorities.”

Monica Bhatia (Head – Secretariat, OECD Global Forum on Transparency & Exchange

of Information)

“With information exchange, structures which are hiding activities will be exposed. OECD is

going to take the issue of secrecy in relation to information exchange very seriously. Many

countries have removed and are removing those domestic laws which might hamper

exchange of information.... A lot of tax havens are joining FATCA and G8 initiative, and in

future they will have to take a call whether to join other countries or get left behind.”

Porus Kaka (President, IFA)

“The big ticket headlines on the disputes don’t help..The greatest damage that was done

was not to preserve independence of our judiciary (India) in 2012, with the retrospective

(amendments).... I think we can have an alternative system and strengthen APA, DRP

(Dispute Resolution Panel) and Advance Ruling so that it is quick and final. “

Jeffrey Owens (Former Director, Centre for Tax Policy & Administration, OECD)

“ It would be helpful for G20 to endorse broad principles of GAAR or atleast some equivalent

and provide guidance on what is good GAAR and what is bad GAAR.... the UK GAAR is

quite acceptable, the original proposals (GAAR) in India were quite aggressive. “

William Morris (Senior International Tax Counsel & Director – Global Tax Policy –

General Electric)

“Transfer Pricing is one of the key parts of the BEPS project.. i do believe that the arms

length standard continues to be important but obviously there may be modifications which

need to be made to it. In case of developing country like India where Revenue Authorities

have taken considerable interest in transfer pricing, the possibility of broad arranging deal

which satisfies all countries and which perhaps shifts some emphasis from residence

countries to source countries is going to be very important.”

Prof. Michael Lang (Head – Institute for Austrian & International tax Law, WU)


“One of the speakers made a very good statement that maybe the term (arms length) will

survive but not the principle... In the future there may not be so much difference between

dealing at Arm’s Length and formula systems because formulas creep into the arms length

principle over time. “

Mike Williams (Director of Business & International tax, HMRC)

“Let us assume we come to a solution on BEPS, we cant then tell people to wait 30 or 40

years to implement that solution while we update thousands of bilateral treaties. So the

multilateral convention is an idea we need to look at very urgently”.

Prof. Kees Van Raad (Professor of International tax Law, University of Leiden)

“ The whole notion of PE, which is a tricky notion is historically based on the state of the

economy as it was over 100 years.. which has completely changed now and we still use that

concept (PE).. i think BEPS is calling for a more fundamental re-assessment of the basic

premises.. i would say 5 years from now the way residence countries and source countries

operate will be fundamentally different from what we see now. ”

Mukesh Butani (Partner, BMR Legal & Permanent Scientific Member, IFA)

Not surprising, the Copenhagen Congress was dominated by BEPS debate. Whereas

Countries will work to secure their revenue base, BEPS should call for greater cooperation

between governments and businesses to achieve a balanced and effective tax system and

cooperative compliance. An approach to match tax legislation and fair tax administration

should be the goal. A lot can be achieved on tax neutrality if tax litigation is pursued

selectively, rather than as a Revenue generating exercise. Concerted action on BEPS front

to strengthen dispute resolution under treaties including mandatory arbitration combined with

countries adhering to rule of law will lend certainty to tax payers .

Rajesh Ramloll (President, IFA Mauritius)

“All small jurisdictions will have to face a challenge in trying to implement the changes (in

implementing Exchange of Information ). Issue regarding implementation is to have a proper

I.T. Solution and that is going to be a cost issue. Everything is going to be model on EU

savings directive which the EU will apply among their own countries but that is going to

become the standard, and how small jurisdictions like Mauritius will comply to that is an

issue of capacity building.”


See you soon...

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