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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EMERGING INTERNATIONAL TAX TRENDS – PREPARING FOR THE NEW
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)
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
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
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
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
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