Taxsutra conclave pb
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EMERGING INTERNATIONAL TAX TRENDS – PREPARING FOR THE NEW WORLD ORDER Philip Baker QC Field Court Tax Chambers 3 Field Court Gray’s Inn London WC1R 5EP Tel: 020 3693 3700 [email protected] FIELD COURT TAX CHAMBERS TAXSUTRA CONCLAVE 16 th October 2015
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Transcript of Taxsutra conclave pb
EMERGING INTERNATIONAL TAX TRENDS – PREPARING FOR THE NEW
WORLD ORDER Philip Baker QC
Field Court Tax Chambers3 Field Court
Gray’s InnLondon WC1R 5EPTel: 020 3693 3700
FIELD COURT TAX CHAMBERS
TAXSUTRA CONCLAVE16th October 2015
FIELD COURT TAX CHAMBERS
OUTLINE
BEPS – a false dawn The new international tax architecture Transparency and the real world A focus on taxpayers’ rights
NOTE: any views are personal views, and Chatham House rules
FIELD COURT TAX CHAMBERS
BEPS – A FALSE DAWN
The Final BEPS Reports do not constitute a new, international tax, world order
The building blocks of the old order remain the same: source vs residence taxation; bilateral tax treaties; the arm’s length principle; the separate entity concept; leadership by the OECD
The focus of the project was on MNCs and on direct tax – perceived as a problem by some countries only
It had little relevance to other taxes and other taxpayers (though there is a fair degree of collateral damage)
FIELD COURT TAX CHAMBERS
BEPS – A FALSE DAWN
There are some very good aspects of the BEPS Final Reports E.g. the Multilateral Instrument – hugely overdue as a
way of updating bilateral treaties E.g. some of the proposals on minimum standards on
MAP, and the commitments to arbitration
FIELD COURT TAX CHAMBERS
BEPS – A FALSE DAWN
There are some aspects of the BEPS Final Reports that are not so good The uncertainty created by the work on tax treaty abuse The uncertainty created by the PE changes The failure to make any real progress on the digital
economy or on CFC reform The increased opportunities for disputes
FIELD COURT TAX CHAMBERS
BEPS – A FALSE DAWN
The impact of some aspects of the BEPS project may be far-reaching (though may yet to be seen) Country by country reporting The transfer pricing changes The clamp-down on tax treaty abuse The restriction on interest deductibility The multilateral instrument
FIELD COURT TAX CHAMBERS
BEPS – A FALSE DAWN
Why didn’t BEPS create a new world tax order? NB comments as an outsider to the process
The focus of the project was too narrow No time was spent analysing the causes of BEPS Too much was attempted in too short a time A consensus approach was adopted which allowed some
countries to prevent further progress being made
FIELD COURT TAX CHAMBERS
BEPS – A FALSE DAWN
BUT BEPS may have incidentally pointed the way to a new international tax architecture
FIELD COURT TAX CHAMBERS
THE NEW INTERNATIONAL TAX ARCHITECTURE The BEPS project involved the OECD and G20 countries
as equal participants Other countries were drawn in to the project This continues a trend for global activities – e.g. the
global fora The multilateral instrument work has already attracted
over 100 countries
FIELD COURT TAX CHAMBERS
THE NEW INTERNATIONAL TAX ARCHITECTURE We can never go back to the 34 OECD member
countries making international tax rules – the BEPS project has proved that
A consensus model is outmoded – it gives too much power to individual countries
FIELD COURT TAX CHAMBERS
THE NEW INTERNATIONAL TAX ARCHITECTURE A short excursus: the OECD as an accident of history Work between the World Wars was led by the League
of Nations The UN Commission on Taxation was wound up in
1954 The OECD (OEEC originally) stepped in How different would the world be if the UN had
continued its work on taxation? Greater transparency Greater concern with the interests of the developing world Greater focus on indirect taxation
FIELD COURT TAX CHAMBERS
THE NEW INTERNATIONAL TAX ARCHITECTURE We can struggle on with the OECD providing support
to a series of wider, global groupingsOR We can establish a proper structure at the UN level
and transfer resources there This needs a proper, inter-governmental committee
operating on a majority-vote and coalition-building model Plus a series of specialist sub-committees and organs It takes power out of the hands of tax administrators OECD countries and some tax administrators will fight this
FIELD COURT TAX CHAMBERS
THE NEW INTERNATIONAL TAX ARCHITECTURE The current position is the most dangerous and
inefficient while we struggle on with an inappropriate architecture
FIELD COURT TAX CHAMBERS
TRANSPARENCY AND THE REAL WORLD The move to greater transparency pre-dates
BEPS: FATCA , UK-FATCA, EU-FATCA, CRS
BUT BEPS has given it new impetus: CbCR Disclosure of tax rulings Disclosure of Tax Avoidance Schemes
FIELD COURT TAX CHAMBERS
TRANSPARENCY AND THE REAL WORLD Greater transparency is now a fact of life All businesses and HINWIs will have to accept a
much higher level of scrutiny than previously in their tax affairs
NGOs will keep up their scrutiny of tax matters; so will journalists
FIELD COURT TAX CHAMBERS
TRANSPARENCY AND THE REAL WORLD The disclosures which led to BEPS (the UK Public
Accounts Committee; the Senate Permanent Committee on Investigations) have disclosed a gap between the tax world (the world of tax advisors) and the real world
The general public (and hence politicians) do not understand / believe / trust the tax world
FIELD COURT TAX CHAMBERS
TRANSPARENCY AND THE REAL WORLD Do we really believe in:
BVI IBCs? That companies are “resident” where they are
incorporated or are “managed and controlled”? That companies in a corporate group behave as
separate entities? The arm’s length principle?
FIELD COURT TAX CHAMBERS
TRANSPARENCY AND THE REAL WORLD Do we need to restore taxation to the realm of
reality? (or reality to the realm of taxation)? Taxation in accordance with reality works both
ways: the tax authorities also need to respect reality
(Remember: the arm’s length world doesn’t exist)
FIELD COURT TAX CHAMBERS
A FOCUS ON TAXPAYERS’ RIGHTS
Greater powers to tax authorities require a balance of greater safeguards
The justification is the need for greater voluntary compliance
OR Simply the right to respect for individual rights
FIELD COURT TAX CHAMBERS
A FOCUS ON TAXPAYERS’ RIGHTS
THE OECD has been woefully remiss in this area E.g. pressurizing countries to drop safeguards on
data exchange E.g. not developing standards for conduct of tax
authorities The UN would not have been so remiss
(probably)
FIELD COURT TAX CHAMBERS
A FOCUS ON TAXPAYERS’ RIGHTS
IFA 2015 Congress Report: The Practical Protection of Taxpayers’ Fundamental Rights
This is part of the new, world international tax order
It sets out minimum standards and best practices
It requires monitoring
FIELD COURT TAX CHAMBERS
A FOCUS ON TAXPAYERS’ RIGHTS
E.g. Prohibition / restriction on retroactive tax legislation
E.g. Safeguarding of taxpayer’s confidential data
E.G. Safeguarding taxpayers’ rights in the audit process
Taxpayer’s rights will be an issue when BEPS has been long forgotten
FIELD COURT TAX CHAMBERS
SOME CONCLUDING COMMENTS
If the BEPS project did not create a new international tax world order, who will?
Isn’t the process an on-going one?
EMERGING INTERNATIONAL TAX TRENDS – PREPARING FOR THE NEW
WORLD ORDER Philip Baker QC
Field Court Tax Chambers3 Field Court
Gray’s InnLondon WC1R 5EPTel: 020 3693 3700
FIELD COURT TAX CHAMBERS
TAXSUTRA CONCLAVE16th October 2015
