Review of the OECD’s Working Paper on Tax Design for Inclusive Economic Growth

By: Hafiz Choudhury, ITIC Senior Advisor (2016)
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On 20 July 2016 the OECD’s Centre for Tax Policy and Administration issued a working paper entitled Tax Design for Inclusive Economic Growth, which examines the design features of tax systems and how they can be strengthened to support inclusive economic growth. The paper was discussed at the ministerial-level G20 Tax Symposium on 23 July, just before the meeting of G20 Finance Ministers and Central Bank Governors on 23-24 July 2016.

This latest working paper follows an OECD report in 2008 entitled Tax and Economic Growth, which analyzed the impact of taxes on economic growth from an efficiency perspective. The current paper attempts a fresh assessment of the 2008 policy recommendations with a greater emphasis on equity considerations based on developments in academic literature and tax policy over the last several years. 


Dispute Resolution: The Next Frontier

By: Jeffrey Owens, ITIC Distinguished Fellow (2015)
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Over the last few years more and more tax treaties have been concluded in order to eliminate double taxation and double non-taxation. The BRICS and developing countries are stepping on this train. Many developing countries are perceived as having a tough tax environment and with a high rate of unresolved tax disputes. 

The international community deserves better, especially as the outcome from this large number of unresolved disputes does not always lead to significant additional revenues. Multinational enterprises have many choices as to where to invest and the tax environment is a factor that may tip the scale in favor or against one country. Multinationals want to invest, but they need to know that they are not going to waste resources dealing with the threat of tax litigation. The ongoing social and political discourse mainly focuses on what is expected from multinationals. They have to become more transparent, more open, more prepared to explain their business models and tax strategies to the revenue authorities and more willing to follow the spirit of the law.


Tax and Investment: UNCTAD's Contribution to the BEPS Debate

By: Jeffrey Owens, ITIC Distinguished Fellow (2015)
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This article was first published in the October 2015 edition of International Tax Review.


The debate about international tax reform has received a valuable boost from the UN’s annual investment report, argues Jeffrey Owens of Vienna University of Economic and Business.

On June 24 2015, the UN Conference on Trade and Development (UNCTAD) released its annual World Investment Report on “Reforming International Investment Governance”.

The report provides an impressive range of statistics on global investment trends. A special chapter (on which the author was the senior adviser) deals with taxation. This article discusses trends in investment flows, the broader environment within which tax and investment issues have to be examined and the main conclusions and recommendations from the UNCTAD study.


ASEAN Excise Tax Reform: A Resource Manual

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(2015) ASEAN Excise Tax Reform: A Resource Manual represents the final phase of the most comprehensive analysis of excise taxation of the ASEAN region ever undertaken. The purpose of this publication is to act as a resource manual for policymakers and a roadmap to excise tax reform. In addition to this Resource Manual, experts have developed the “ASEAN Excise Working Tariff Schedule” which maps out the taxation of all excisable goods and services in the 10 member states, including links to all the relevant national excise tax legislation and a comprehensive “Discussion Paper.” 





The Brisbane G20 and Cairns Communiqué and Recent Developments in the Forum on Tax Administration: Implications for Business

By: Jeffrey Owens, ITIC Distinguished Fellow (2014)
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The Brisbane communiqué contained one paragraph on tax. It read:

13. We are taking actions to ensure the fairness of the international tax system and to secure countries’ revenue bases. Profits should be taxed where economic activities deriving the profits are performed and where value is created. We welcome the significant progress on the G20/OECD Base Erosion and Profit Shifting (BEPS) Action Plan to modernize international tax rules. We are committed to finalizing this work in 2015, including transparency of taxpayer-specific rulings found to constitute harmful tax practices. We welcome progress being made on taxation of patent boxes. To prevent cross-border tax evasion, we endorse the global Common Reporting Standard for the automatic exchange of tax information (AEOI) on a reciprocal basis. We will begin to exchange information automatically with each other and with other countries by 2017 or end-2018, subject to completing necessary legislative procedures. We welcome financial centers’ commitments to do the same and call on all to join us. We welcome deeper engagement of developing countries in the BEPS project to address their concerns. We will work with them to build their tax administration capacity and implement AEOI. We welcome further collaboration by our tax authorities on cross-border compliance activities.

 

Extending the G20 Mandate

By: Jeffrey Owens, ITIC Distinguished Fellow (2014)
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The Cairns G20 Summit communiqué (paragraph 8) contained one paragraph on tax which reconfirms the G20 commitment to the broad policy principles behind the BEPS project, without being too specific, and to making automatic exchange of information the new international standard. Firm actions on BEPS, however, will have to wait until the 2015 Summit - since nothing is agreed until everything is agreed.

What most commentators have missed in their reading of the Cairns communiqué is the way that it extends the G20 tax work. This omission may reflect the fact that these proposals were tucked away in an annex. So what new mandates are there in this annex?

 

Tax Administration Priorities in Emerging and Frontier Markets

By: Dave Hartnett, Former Permanent Secretary for Tax, Her Majesty’s Revenue and Customs, and Hafiz Choudhury, ITIC Senior Advisor (2014)
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The subject of global corporations not paying their “fair” share of taxes has been the subject of public discourse for more than three years, and international tax rules such as transfer pricing a subject for discussion in daily newspapers. There are widespread concerns that multinational enterprises (MNEs) are active participants in undermining the tax base of developed as well as developing countries, and the new Action Plan on BEPS can be seen as one outcome of this thinking. Concerted global action on addressing risks to tax bases from cross-border activity is at an unprecedented level, and the tax world is presently full of uncertainty. National action following publication of the full action plans for BEPS are very much an unknown, and this is most true of emerging and frontier markets.


Global Taxes and International Taxation: Mirage and Reality

By: Richard Bird, Professor Emeritus, Joseph L. Rotman School of Management, University of Toronto and ITIC Senior Economic Advisor (2014)
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Global taxes have been proposed in the past for many reasons including financing international development aid, reducing carbon emissions and, most recently, restraining financial speculation. This study reviews the more important global tax proposals that have been made in recent years. It concludes that while many such ideas seem inappropriate or inadequately thought through others are worth taking seriously. However, although good arguments can be made for taking a more global approach to taxation the reality is that no global governance structure that can impose such taxes exists or is likely to emerge in the near future. Global taxation – a dream for some and a nightmare for others – thus is, and is likely to remain for years to come, little more than a mirage. 


The Role of Tax Administrations in the Current Political Climate

By: Jeffrey Owens, ITIC Distinguished Fellow (2014)
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Over the last year there has been unprecedented attention focused on the role of tax administrations in delivering the revenues that governments need. Much of this attention has been on the question of whether or not multinational enterprises (MNEs) and high net wealth individuals (HNWIs) pay the right of amount of tax. There has also been a renewed interest in tax gap analysis. Yet, in many countries governments are cutting back on the resources available to tax administrations and, at the same time, asking them to do more, including the delivery of expenditure programmes. This article places this current political debate on tax evasion and avoidance in a broader perspective.

It suggests that, despite the current focus on adopting a tougher stance on tax enforcement, effective tax compliance will only be achieve is it is combined with good taxpayer service and where there is a constructive and transparency dialogue between tax authorities, taxpayers and their advisors. It also counters the impression that nations, such as the United Kingdom and the United States, have become nations of tax evaders. The reality is that the vast majority of taxpayers pay the right amount of tax, in the right place and at the right time. 


Trade Agreements and Taxation: Removing the Final Barrier to Trade

By: Hafiz Choudhury, ITIC Senior Advisor, and Jeffrey Owens, ITIC Distinguished Fellow (2014)
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The interplay of international trade and tax rules has not been the subject of much analysis, and practitioners in one area have generally eschewed a role in the other. This concept paper analyses the inter-relationship of tax and trade rules, in particular since the formation of the WTO, and considers how tax regimes affect the intent and actual implementation of trade rules.

A number of key rulings of the WTO dispute settlement bodies on the US FSC and ETI regimes, and a larger group of decisions on indirect tax issues in respect of Chile, the Philippines, Korea and Japan are some of the most notable examples where international trade rules have impacted national tax issues. Further, there have been a number of other tax issues raised within the dispute settlement mechanisms of the WTO and those under the GATT 1947 rules, which formed the basis of international trade regulation prior to the formation of the WTO. 


Are we ready to deal with the tsunami of upcoming tax disputes?

By: Jeffrey Owens, ITIC Distinguished Fellow (2014)
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The statement by Jean Baptiste Colbert, French Economist and Minister of Finance under King XIV of France that “The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing,” is very relevant to the issue of avoiding and solving disputes. I think that we would all like to keep the level of hissing to a minimum, but the tension between taxman and taxpayer is as old as taxation. That does not mean that we have to resign ourselves to the fact that disputes are an inevitable consequence of taxation. Both the taxman and the goose can benefit from a better relationship and enhanced rules of engagement.


Economic Prospects in the Eurasian Region and BEPs

By: Jeffrey Owens, ITIC Distinguished Fellow (2014)
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I would like to set the scene for our discussion by giving a quick overview of where the global economy stands.

It has been more than half a decade since the global financial crisis burst upon us.  Much has been achieved since then and new financial rules have been put in place. But there is still much to be done. “Too big to fail” institutions are still a problem. EU financial integration is incomplete. The Euro crisis is waiting to erupt again.


Some Fiscal Parameters of the Investment Climate in Select Countries of Eurasia

Edited by: Douglas Townsend, ITIC Senior Advisor
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This nineteenth annual Special Report seeks to shed light upon the critical role played by tax policy, law and administration in business formation and investment attraction and retention, factors which are vital for producing sustainable and equitable economic development in the countries of the Region. As a note of caution, Regional agglomerations can mask critical country differences; equally, national averaging can mask critical inter-sectoral impacts. Therefore, this Special Report seeks also to take into account that element when addressing relevant fiscal parameters of the investment climate, the improvement of which has continuously guided the programs of ITIC since the Center inaugurated in the Russian Federation and Kazakhstan in 1993. 


Bilateral Investment Treaties and Bilateral Tax Treaties

By: Hafiz Choudhury, ITIC Senior Advisor, and Jeffrey Owens, ITIC Distinguished Fellow (2015)
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Media reports of meetings of heads of governments or of ministers of finance often consist of a report of signature of agreements for avoidance of double taxation and for investment protection.1 These bilateral investment treaties (BITs) and double taxation agreements (DTAs) are significant parts of the regulatory framework that support cross border investment; however, the interaction between the two is largely unexamined.

The reliance by Vodafone International Holdings BV on the India-Netherlands bilateral investment treaty (BIT),2 to solve one of the most significant international tax disputes during present times, is an important example of the interaction between DTAs and BITs. Vodafone chose to seek formal redress by way of service of a notice of dispute against the Indian government, initiating the dispute settlement process under the BIT. It is significant that Vodafone chose the formal route in the BIT rather than the mutual agreement procedures in the DTA. It is important to note that a big difference between DTAs and BITs is that whereas in the latter the taxpayer can initiate proceedings, this is not the case in the former. 

 

The Illicit Trade in Tobacco Products and How to Tackle It - Second Edition

(2014) The second edition of this publication aims to raise awareness of the growing and evolving nature of the illicit trade in tobacco products. It is a compilation of facts and views from a wide range of sources, including respected academics, private sector consultants, journalists, international enforcement organizations, government revenue authorities and industry. It defines the different aspects of illicit trade and provides information on ways of measuring its size. It analyzes the nature of the problem, its causes and consequences, and offers authorities best practice guidance on implementing anti-illicit trade strategies. Examples and case studies are used to provide evidence of good practice and global efforts to tackle this serious problem.
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