Tax Certainty - EBF – European Banking Federation Certainty EBF TAX CONFERENCE 2017 Brussels, 22...
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Tax Certainty EBF TAX CONFERENCE 2017 Brussels, 22 November 2017 Giorgia Maffini OECD’s Centre for Tax Policy and Administration
Transcript of Tax Certainty - EBF – European Banking Federation Certainty EBF TAX CONFERENCE 2017 Brussels, 22...
Tax CertaintyEBF TAX CONFERENCE 2017
Brussels, 22 November 2017
Giorgia Maffini
OECD’s Centre for Tax Policy and Administration
Tax certainty
• “We welcome the … work on tax certainty conducted by the OECD andthe IMF. We acknowledge the report on Tax Certainty submitted to usand encourage jurisdictions to consider voluntarily the practical toolsfor enhanced tax certainty as proposed in that report, including withrespect to dispute prevention and dispute resolution to beimplemented within domestic legal frameworks and international taxtreaties.”
• “We ask the OECD and the IMF to assess progress in enhancing taxcertainty in 2018”
1. www.oecd.org/tax/g20-report-on-tax-certainty.htm
Tax certainty report 1 delivered to G20 Finance Ministers with IMF, March 2017
Chair of the Inclusive Framework has written to all subsidiary bodies
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The business survey
The OECD Business Tax Certainty Survey
• Between 18 October and 16 December 2016
• 724 completed responses
• From firms with global HQ in 62 different jurisdictions
• And regional HQs in 105 different jurisdictions
Wide consultation
• Survey was developed on basis of Tax Survey developed by OUCBT and ETPF
• Consultation with business, governments/tax administrations, civil society, academia
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Global Headquarters
Business survey – global HQs
4
Top 20 countries,by HQ of respondents MNEs only
0
10
20
30
40
50
60
70
80
5
Business survey - regional HQs
Regional Headquarters
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Turnover (in USD)(1)
FT Global 500
(2)
Survey (Overall)
No. of
firms% No. of firms %
Over USD 25 b 181 36.2% 61 8.4%
Between USD 10b and USD 25b 126 25.2% 37 5.1%
Between USD 500m and USD 10b 55 11% 123 17%
Between USD 50m and USD 500m 0 0 123 17%
Less than USD 50m 0 0 262 36.2%
NR/No answer 138 27.6% 118 16.3%
Total 500 100% 724 100%
Turnover (in USD) FT Global 500 Survey (Overall)
in USD million in USD million
Mean 47,510 28,295
Median 25,229 99.7
Standard Deviation 62,069 443,044
Total 17,198,580 17,146,558
% Vs. FT Global 500 100% 99.7%7
Current position/responsibilities No. of firms Percentage
Director (or equivalent) of the tax department 332 46%
Senior manager (or equivalent) of
international tax issues115 16%
Senior manager (or equivalent) of specific tax
issues 31 4%
Government relations 24 3%
Others 167 23%
Missing 55 7.6%
Total number of respondents 724 100%
Respondents by position
8
9
Respondents by sector
32%
13%
12%
8%
7%
28%
C MANUFACTURING
K FINANCIAL AND INSURANCEACTIVITIES
G WHOLESALE AND RETAIL TRADE;REPAIR OF MOTOR VEHICLES ANDMOTORCYCLES
M PROFESSIONAL, SCIENTIFIC ANDTECHNICAL ACTIVITIES
Missing
Other
Top 5 business factors,by importance for investment
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
Corruption PoliticalCertainty
The overall taxenvironment
Current andexpected
macroeconomicconditions in the
country
Labour costs
Mea
n
10
11
Top 5 business factors by importance for investment (financial sector only)
3.5
3.6
3.7
3.8
3.9
4.0
4.1
Corruption Political Certainty Efficient financial markets Availability and quality ofdigital infrastructure
Cost of complying withregulations
Top 5 tax factors,by importance for investment
3.3
3.4
3.5
3.6
3.7
3.8
3.9
Uncertainty about theeffective tax rate on profit
The anticipated effective taxrate on profit
Uncertainty about input taxcredits, refunds, place of
supply issues for VAT/GSTpurposes and/or uncertaintyabout the tax burden of other
consumption taxes (e.g.excises, sales taxes, custom
duties)
The anticipated neutrality ofVAT/GST (e.g through the
availability of input taxcredit, refund and other relief
arrangements) or the taxburden of other consumption
taxes (e.g. Excises, salestaxes, custom duties)
Existence of tax treaties
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Top 5 tax factors by importance for investment (financial sector only)
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
4.0
Uncertainty about theeffective tax rate on profit
The anticipated effectivetax rate on profit
Existence of tax treaties Uncertainty about inputtax credits refunds placeof supply issues for VAT
GST purposes and oruncertainty about the tax
burden of otherconsumption taxes e g
excises sales taxes customduties
Uncertainty about theability to effectively obtainrelief for withholding taxes
Top 10 sources of tax uncertainty
3.0
3.1
3.2
3.3
3.4
3.5
3.6
Considerablebureaucracy tocomply with tax
legislation,including
documentationrequirements
Unpredictable orinconsistent
treatment by thetax authority
Inability toachieve earlycertainty pro-
actively throughrulings or other
similarmechanisms (e.gAdvance PricingArrangement)
Inconsistenciesor conflicts
between taxauthorities on
theirinterpretations ofinternational tax
standards (e.gon transferpricing orVAT/GST )
Tax legislationnot in line withthe evolution of
new businessmodels
Lack of expertisein tax
administrationon aspects ofinternational
taxation
Lengthy decisionmaking of the
courts tribunalsor other relevant
bodies
Unpredictableand inconsistenttreatment by the
courts
Complexity in thetax legislation(e.g. differentdefinition ofpermanent
establisment forVAT/GST and CIT
purposes)
Unclear, poorlydrafted taxlegislation
Tax Administration Specific International Dimensions Dispute Resolution Legal Systems
14
15
Top 5 sources of tax uncertainty (financial sector only)
3.35
3.4
3.45
3.5
3.55
3.6
3.65
Unpredictable orinconsistent treatment by
the tax authority
Inconsistencies or conflictsbetween tax authorities on
their interpretations ofinternational tax standardse g on transfer pricing or
VAT GST
Considerable bureaucracyto comply with tax
legislation includingdocumentationrequirements
Tax legislation not in linewith the evolution of new
business models
Unclear poorly drafted taxlegislation
Top 10 tools to enhance tax certainty
3.60
3.65
3.70
3.75
3.80
3.85
3.90
3.95
4.00
4.05
4.10Legal Systems Dispute
ResolutionTax Administration
16
17
Top 5 tools to enhance tax certainty (financial sector only)
3.85
3.9
3.95
4
4.05
4.1
4.15
4.2
Detailed guidance in taxregulations
Reduced frequency ofchanges in the tax
legislation
Changes in statutory taxsystem announced in
advance
Increased transparencyfrom tax administrations
in relation to theircompliance approaches
Reduction of bureaucracyto comply with tax
legislation
• Multilateral Advance Pricing Agreements (APAs )
– 36% of respondents say very important and extremely important
– This figure is 44% when we only consider MNEs
• Multilateral audits
– 25% of respondents say very important and extremely important
• Multilateral cooperative compliance programmes
– 31% of respondents say very important and extremely important
– This figure is 36% when we only consider MNEs
Tools to support certainty in international tax
Some innovative options received strong support
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The tax administration survey (1)
• Conducted with members of the Forum on Tax Administration (FTA)
• Allow tax administrations to respond to results of business survey
– Is tax certainty a priority for tax administrations?
– What creates uncertainty for tax administrations?
– Which measures effective in increasing certainty?
– 25 OECD and G20 countries
The OECD/FTA Tax Certainty Survey of Tax Administrations
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The tax administration survey (2)
• Tax certainty is a high priority for tax administrations too
• Over 80% of respondents: very high/extremely high priority for tax administration
• Tax administrations recognise tax uncertainty important concern for business
• For tax administration, an important source of tax uncertainty is taxpayers’ behaviour, especially when involving aggressive tax planning
The OECD/FTA Tax Certainty Survey of Tax Administrations
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Top 10 sources of tax uncertainty
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Bureaucracy Inconsistenttreatment by
the taxauthority
Inconsistentinterpretation
of internationaltax standards
Lengthydecision making
of the courts
Complexity inthe tax
legislation
Tax legislationnot in line with
evolution ofnew business
models
Inconsistenttreatment by
the courts
Unclear, poorlydrafted taxlegislation
TaxAdministration'slack of expertiseon international
taxation
Inability toachieve earlycertainty pro-
actively
Business perspective Tax Administration perspective
N.A
.
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0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Reduction ofbureaucracy
Efficientcommunicationwith taxpayers
Increasedtransparency in
relation tocompliance /
risk assessment
Mutualagreementprocedures
Timelycommunication
during taxaudits
Simplifiedapproaches fortax compliance
MultilateralAPAs
Domestic co-operative
complianceprogrammes
Unilateral APAs Multilateral co-operative
complianceprogrammes
Top 10 tools to enhance tax certainty controlled by the tax administration
Business perspective Tax Administration perspective22
Cooperative compliance programmes
• bi/multilateral • unilateral
APA
• bi/multilateral• unilateral
Filing of tax return
Co-ordinated audits (joint, simultaneous
abroad)
MAP
Arbitration
Taxpayer
Tax certainty
Dis
pu
te p
reve
nti
on
Disp
ute reso
lutio
n(B
EPS)
Practical solutions
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• Standardised system for claiming withholding tax relief at source on portfolio investments
• Developed jointly with business and adopted in January 2013 and subsequently aligned to Common Reporting Standard (CRS) in 2015
• Based on CRS infrastructure and technical solutions
TRACE: common standard for source country taxation
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• OECD 2016 business survey
• For multinationals’ investment and location decisions, existence of treaties between countries
– 2nd most important feature of the tax system, after certain corporate tax environment and before level of corporate taxation
– 3rd most important factor for the financial sector
• “Streamlined and effective withholding tax relief reclaim systems”: 59% of the respondents in financial sector rated such factor as very or extremely important to resolve uncertainty
TRACE: is it important for investors?
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One standard for residence country reporting (CRS) combined with one for source country reporting (TRACE); based on same infrastructure for overall efficiency at lowest possible cost to all
Addresses clear and consistent request from business, worried about compliance costs
With the introduction of the CRS, TRACE can be done more easily and at lower cost
Improves tax certainty and addresses such uncertainty created by BEPS action 6
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Context and key drivers – Why now?
4. Policy coherence
Adopting TRACE assists in the implementation of the CRS and makes it stronger2. Reinforces CRS
3. Lower implementation cost
1. Improves tax certainty
5. Request from business
• OECD working on its technical implementation
• Until recently, actual country implementation on
hold: both governments and business busy
implementing CRS and FATCA
TRACE: where are we?
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Contact details on TRACE
Philip KERFS
Centre for Tax Policy and Administration
2, rue André Pascal - 75775 Paris Cedex 16 Tel: + 33 (01) 45 24 93 52
[email protected] || www.oecd.org/tax
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Contact details
Giorgia Maffini
Deputy Head of the Tax Policy and Statistics DivisionCentre for Tax Policy and Administration
2, rue André Pascal - 75775 Paris Cedex 16 Tel: +33 1 45 24 15 14
[email protected] || www.oecd.org/tax29
