The Drive Towards Coordinating Trade Regulation and International Tax Rules


By Pascal Lamy and Hafiz Choudhury


Speed Read: 
More thought needs to be given about the interaction of tax and trade regimes. Global trade policy has focused on the broad scope of obstacles to trading, while international tax policy has traditionally focused on avoiding double taxation. Both tax and trade are key drivers for economic policy; however, in recent years, there have been instances where taxes have distorted trade rules, and vice versa. e rising awareness of potentially abusive tax practices has resulted in recent multinational initiatives, such the BEPS Action Plan and EC rulings on illegal state aid, which are designed to deliver greater ‘fairness’ in tax. Whilst this is a generally acceptable goal, governments should ensure that global tax and trade policies are supportive of each other. Global trade rules should not move away from the principle of equal treatment and the goal of a fair and equitable trading system. An transparent tax system, consistent with trade obligations, can be nation’s most important trade policy. Full article


Current & Quotable: The New Political Economy of Taxation 

Reprinted from Tax Notes Int’l, November 30, 2015, p. 759

Daniel A. Witt presented the following report at ITIC’ s 23rd annual Board of Directors’ meeting in London on November 3. 

Globalization and Governance

"Since ITIC’s founding in 1993, globalization has become a reality. Barriers between national markets continue to fall. The share of world trade represented by multinational enterprises (MNEs) continues to grow, and new technology facilitates cross-border activities. Countries continue to compete for foreign direct investment while trying to maintain domestic investments. Companies that were once national enterprises have become MNEs. Many of the so-called capital-importing ‘‘emerging markets’’ have become net capital exporters while continuing to attract inward investment. We have witnessed a dramatic transformation in investment opportunities and investment flows." Full article


GST Bill - Enough room for compromise, in national interests

By Sumit Dutt Majumder, ITIC Senior Advisor


"As it seems now, the fate of the Goods & Services Tax Bill (the 122nd Constitution Amendment Bill) depends on the resolution of the issues raised by the Congress, the main Opposition Party. It is important for the Bhartiya Janata Party (BJP), the ruling party, to resolve these issues urgently so as to garner the Congress support in the Rajya Sabha. That is essential for getting the GST Bill cleared this Winter Session of the Parliament. It has been almost 10 years of long wait since Mr P Chidambaram, the then Finance Minister, had announced the Government's intention to introduce GST in his Budget Speech of February, 2006. And, for the first time the prospect of ushering in GST is looking bright. In the national interest, leaders of both the parties will have to show statesmanship, and come to an amicable settlement of the issues raised. The Prime Minister has now reached out to the Congress by inviting its President and the former Prime Minister for a dialogue on the GST issues which have been narrowed down to three. Lets have a look at the issues." Full article


MNEs' tax avoidance & overdealt response

By Parthasarathi Shome 

"The Group of 20 Nations (G20) asked the Organisation of Economic Cooperation and Development (OECD) based in Paris to suggest comprehensive measures to address egregious tax avoidance by multinational enterprises (MNEs) that the latter typically structure through a process of tax base erosion by shifting profits (BEPS) among their parent companies, branches and subsidiaries across national boundaries. Essentially they locate profits in low tax jurisdictions and successfully minimise their total tax contribution in terms of their global profits. Though their operations were legal, advanced country tax administrations began to perceive such practices as unreflective of the intention of the law." Full article


Encouraging tax and trade ties across Eurasia through dialogue

Sander Loones and Blake Marshall appeared in Issue 418 (7 September 2015) of The Parliament Magazine.

"In July, Brussels was the venue for an important gathering of finance ministry and tax administration officials from across the former Soviet Union, in an annual expert dialogue called the Eurasia Tax Forum, hosted by the International Tax and Investment Centre. This two-day conference offered Eurasian officials an opportunity to discuss international best practices with relevant officials from the European Commission, the OECD, leading European academic specialists and private sector representatives." Full article


IMF Staff Discussion Note: Fair Taxation in the Middle East and North Africa

Andrew Jewell, Mario Mansour, Pritha Mitra, and Carlo Sdralevich

"This paper explores how tax systems can be improved to meet demands for more economic fairness in MENA countries. In recent years, IMF policy advice has focused on spending reforms—for example, how reforming energy subsidies can generate resources for pro-poor expenditures. But tax policy can play an important role in creating fairness, by determining how the tax burden is distributed, how much tax revenue is raised, and how taxation is implemented in practice. The analyses and recommendations in this paper are tailored to two distinct groups of countries: those with well-established non-hydrocarbon-based tax systems (mostly oil importers), and those with primarily hydrocarbon-based revenue systems (mostly oil exporters)." Full paper

 

One minute with...Dan Witt

One minute with Dan Witt, president of the International Tax and Investment Center.

"The International Tax and Investment Centre (ITIC) aims to improve the investment climate in transition and developing countries. As president, what’s in your in-tray?
 
With over 85 countries participating in ITIC programmes, my in-tray varies widely by the hour rather than the day or the week. We’ve just concluded a very successful Eurasia Tax Forum and are laying the groundwork for other regional initiatives this fall. I’m also spending a fair bit of time these days on tax and customs issues in Iraq and Libya, and most likely soon in Iran, as they relate to oil and gas development and services provision. And we are continually responding to requests for expert advice in an expanding range of ‘new markets’ around the world." Full article

 

Licensing and upstream petroleum fiscal regimes: Assessing Lebanon's choices

By: Dr. Carole Nakhle, Program Advisor, International Tax and Investment Center

Executive Summary: Doubts have been raised and criticisms continue to be made about Lebanon’s choice of upstream petroleum fiscal terms and strategies to award oil and gas licenses. This is not surprising given the fact that it is a completely new experience for Lebanon, a country often stuck in stalemates stemming from political disagreements. Despite this, there are some internationally recognized guiding principles that Lebanese policymakers can follow. In terms of the allocation strategy, Lebanon selected competitive bidding, which is a positive step since this method is increasingly popular and supported by the international community. The key concern in Lebanon, however, is the choice of biddable parameters, which should be reviewed further. In terms of block delineation, Lebanon’s offshore block sizes do not fall outside the reasonable range, especially when the exploration risk and the relinquishment rule are taken into consideration. With respect to petroleum regulations, Lebanon seems to offer a middle ground between Cyprus and Israel. Some question whether the choice of petroleum fiscal regime Lebanon made is the correct one. In reality, the type of regime is less relevant. Fiscal regimes can be made equivalent in terms of both control and overall economic impact, for given oil and gas prices. The design of the regime, the interactions of different fiscal and quasi fiscal instruments, the details related to the imposition of different instruments, among others, are by far more important. The government should not focus on a specific instrument and instead take into account the net impact on the fiscal regime and the investment climate. Full article


Realizing Obama's Eurasian Vision

By Vladimir Socor, Richard Weitz, and Daniel Witt

"In the last few months, the Obama administration has declared a new multi-pronged Central Asian strategy designed to advance U.S. interests in Eurasia in a novel era. The strategy has three main goals: strengthening security partnerships, forging closer economic ties; and advancing governance and human rights. The test case for this policy’s effectiveness lies in Kazakhstan, which is already the region’s economic powerhouse and aspires to join the ranks of the world’s most developed countries." Full article


Shome leaves ministerial adviser role behind

Partho Shome’s 30-year career as a tax official and adviser to Indian governments and multilateral organisations may be at an end for now, but he will still take a keen interest in tax policy, as this exclusive interview with International Tax Review reveals. Full interview


Building a bridge between MNCs and tax administrations

Daniel Witt (International Tax and Investment Centre) and Dave Hartnett (consultant) highlight the work of the ITIC.

Speed Read: For some developing countries, putting in place an effective, efficient and fair tax system is the greatest challenge that policymakers face in their search to attract investment capital and strengthen their revenue base. This requires transparency, predictability and equity in tax administration, which in turn enhance tax compliance. Because international businesses understand how taxes affect trade and investment decision making, they can play a vital role in sharing best practices based on their global experiences. The International Tax and Investment Center (ITIC), a non-profit research and education organisation, provides a forum for ongoing dialogue and engagement among taxpayers, tax officials and academic experts through a series of demand driven consultations and capacity building programmes with finance ministries and revenue agencies in transition economies in Africa, Asia, the Middle East and Eurasia. Full article


Lebanon's Gas Future: Interview with Dr. Carole Nakhle

Natural Gas Europe had the pleasure to interview Dr Carole Nakhle, Director of Crystol Energy. Dr Nakhle has more than 17 years of experience in energy economics. She worked in academia (University of Surrey), the oil and gas industry (Eni and Statoil), policy making (Special Parliamentary Advisor in the House of Lords), and as a consultant to the IMF, World Bank and Commonwealth Secretariat. She is a Research Fellow at the Lebanese Centre for Policy Studies and a Scholar at the Carnegie Middle East Centre. Dr Nakhle has published two books and numerous articles and writes for academic journals as well as newspapers and magazines. As Energy Expert, she is a regular contributor to the Geopolitical Information Service. She lectures, among others at the Graduate School of International and Development Studies in Geneva, and is a sought after commentator on energy and geopolitics in the press and on TV. Dr Nakhle is the founder and director of the non-for-profit organisation “Access for Women in Energy”. Full interview


Conversations: Jeffrey Owens and Pascal Saint-Amans

Reprinted from Tax Notes Int’l, March 2, 2015, p. 797

Jeffrey Owens, director of the WU Global Tax Policy Center at the Institute for Austrian and International Tax Law (Vienna University of Economics and Business), has created a series of Fireside Chats with people in the tax world who influence the way we approach tax policy and administration. Owens is the former head of the Centre for Tax Policy and Administration at the OECD. In this installment, Owens talks to Pascal Saint-Amans, current head of the Centre for Tax Policy and Administration at the OECD. Full interview


Reintroduce wealth tax as a small tax, simplify declaration form: Parthasarathi Shome

The Financial Express - The chairman of the Tax Administration Reform Commission (TARC) and former advisor to the finance minister, Parthasarathi Shome, is of the view that higher income tax on the super-rich should be embedded in the tax structure itself, instead of being collected as surcharge. In this email interview from London, he explains Santosh Tiwari the likely impact of critical Budget proposals and expresses concerns that the current goods and services tax (GST) model could end up being a tax that satisfies policy-makers, but has less to do to propel economic activity. Full article
 



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