Update on tax policy developments in the OECD (the 'BEPS' initiative) EC (agressive tax planning) and the Dutch response

Transcription

1 Update on tax policy developments in the OECD (the 'BEPS' initiative) EC (agressive tax planning) and the Dutch response Caroline Silberztein (BM Paris), Erik Scheer and Wouter Paardekooper

2 Current Tax Policy Developments Base Erosion and Profit Shifting (BEPS) Introduction of the OECD BEPS Project BEPS Timeline BEPS Highlights and Contents Parallel Developments EU Action Plan on Tax Evasion and Avoidance G20, G8, BRICS, US Tax Reform, UK PAC, French Report on Digital Economy, Introduction of GAARs The Dutch Response 2013 Baker & McKenzie Amsterdam N.V. 2

3 The OECD s BEPS Project 2013 Baker & McKenzie Amsterdam N.V. 3

4 OECD Base Erosion and Profit Shifting (BEPS) Project Growing concern has been expressed regarding base erosion and profit shifting by MNEs Increased attention of civil society to corporate tax affairs Spreading perception that MNEs dodge taxes all around the world and in particular in developing countries G20 meetings of June and November 2012 focused on BEPS issue and requested OECD action 2013 Baker & McKenzie Amsterdam N.V. 4

5 Recent OECD Reports on Aggressive Tax Planning Tackling Aggressive Tax Planning through Improved Transparency and Disclosure (2011) Corporate Loss Utilisation through Aggressive Tax Planning (2011) Hybrid Mismatch Arrangements - Tax Policy and Compliance Issues (2012) Agressive Tax Planning based on After-Tax Hedging (2013) 2013 Baker & McKenzie Amsterdam N.V. 5

6 Other Ongoing OECD Work Aggressive Tax Planning Directory Discussion Draft on the Transfer Pricing Aspects of Intangibles Discussion Draft on the Interpretation of Article 5 (Permanent Establishment) 2013 Baker & McKenzie Amsterdam N.V. 6

7 OECD BEPS Report (February 12, 2013) G20 Finance Ministers Moscow, February 16: In the tax area, we welcome the OECD report on addressing base erosion and profit shifting and acknowledge that an important part of fiscal sustainability is securing our revenue bases. We are determined to develop measures to address base erosion and profit shifting, take necessary collective actions and look forward to the comprehensive action plan the OECD will present to us in July Baker & McKenzie Amsterdam N.V. 7

8 OECD BEPS Project OECD s Pascal Saint-Amans to Bloomberg BNA Daily Tax Report, February 13, 2013 [The BEPS project could end up] redefining the architecture of international taxation, rules, tax treaties, guiding principles, recommendations, and decisions within the OECD 2013 Baker & McKenzie Amsterdam N.V. 8

9 OECD BEPS Project OECD 2nd Global Forum on Transfer Pricing held in Paris on 6 March 2013, opening remarks by Angel Gurría (OECD Secretary General) 1. Our tax rules have not kept pace with the way business operates 2. Transfer pricing is a key area of reform 3. Challenges require a global coordinated response 4. Base erosion is a serious threat to the viability of our countries. It constitutes a major risk to tax revenues, tax sovereignty and tax fairness. Tackling this problem through decisive measures, effective policies and multilateral cooperation is essential to help countries leave the crisis behind and build a stronger, cleaner and fairer global economy Baker & McKenzie Amsterdam N.V. 9

10 OECD BEPS Project Fast Track Timeline (1/2) OECD Committee on Fiscal Affairs (CFA) discussion of scope of project January 22-23, 2013 OECD progress report for G20 Finance Ministers Meeting released publicly February 12, 2013 G20 Finance Minsters welcome OECD progress report February 15-16, 2013 BIAC to host conference at OECD for business community March 26, Baker & McKenzie Amsterdam N.V. 10

11 OECD BEPS Project Fast Track Timeline (2/2) Detailed action plan for project to be developed by certain OECD member countries and OECD Secretariat late May 2013 Specific measures Means to implement those measures Timetable for implementation steps Action plan to be approved by OECD CFA June 2013 Action plan to be forwarded to G20 July 2013 Implementation steps to be agreed 2013/ Baker & McKenzie Amsterdam N.V. 11

12 OECD BEPS Report Highlights (1/4) Unanimously approved by OECD member countries (?) Focuses more on perceptions than technical analysis Acknowledges that data are incomplete or inconclusive Acknowledges that project relates to technically legal arrangements and transactions But emphasizes compliance, fairness, undesirable results, and public perception concerns 2013 Baker & McKenzie Amsterdam N.V. 12

13 OECD BEPS Report Highlights (2/4) Suggests that increased globalization requires changes to major international tax principles, including Reconsideration of the balance between source and residence taxation Better alignment of rights to tax with real economic activity Quick changes to existing tax treaty provisions where they present difficulties 2013 Baker & McKenzie Amsterdam N.V. 13

14 OECD BEPS Report Highlights (3/4) Calls for cooperation and quick action at both OECD and national levels Not necessarily identical Call for immediate action by tax administrations to improve compliance Acknowledges need for OECD to hear input of all stakeholders, including BRICS, business, and civil society (NGOs) But does not invite comments or provide a process for engagement with business 2013 Baker & McKenzie Amsterdam N.V. 14

15 OECD BEPS Report Highlights (4/4) Key pressure areas include: Transfer pricing Hybrid mismatches and arbitrage Related party debt financing, captive insurance, and intra-group financial transactions generally Anti-avoidance measures, including GAAR and CFC regimes, thin cap rules, and rules against treaty abuse Application of PE and other treaty provisions to profits from delivery of digital goods and services (not limited to Internet companies and commissionnaire structures) Harmful preferential regimes 2013 Baker & McKenzie Amsterdam N.V. 15

16 OECD BEPS Report -- Contents (1/2) Executive summary Chapter 1. Introduction Chapter 2. How big a problem is BEPS? An overview of the available data Chapter 3. Global business models, competitiveness, corporate governance and taxation Chapter 4. Key tax principles and opportunities for base erosion and profit shifting 2013 Baker & McKenzie Amsterdam N.V. 16

17 OECD BEPS Report -- Contents (2/2) Chapter 5. Addressing concerns related to base erosion and profit shifting Annex A. Data on corporate tax revenue as percentage of GDP Annex B. A review of recent studies relating to BEPS Annex C. Examples of the tax planning structures of multinational enterprises Annex D. Current and past OECD work related to base erosion and profit shifting 2013 Baker & McKenzie Amsterdam N.V. 17

18 OECD BEPS Report Transfer Pricing (1/3) The Report calls for a broader reflection on transfer pricing rules improvements or clarifications to transfer pricing rules to address specific areas where the current rules produce undesirable results from a policy perspective Focuses on: shifting of risks and intangibles artificial splitting of ownership of assets between legal entities within a group transactions between such entities that would rarely take place between independents 2013 Baker & McKenzie Amsterdam N.V. 18

19 OECD BEPS Report Transfer Pricing (2/3) Renewed focus on risk The evaluation of risk often involves discussions regarding whether, in fact, a low-tax transferee of intangibles should be treated as having borne, on behalf of the MNE group, significant risks related to the development and use of the intangibles in commercial operations. The OECD Guidelines touched upon these issues in the context of work on business restructuring, and they are also being addressed in connection with the ongoing work on intangibles Baker & McKenzie Amsterdam N.V. 19

20 OECD BEPS Report Transfer Pricing (3/3) Renewed focus on risk (cont d) In summary, the TPG are perceived by some as putting too much emphasis on legal structures (as reflected, for example, in contractual risk allocations) rather than on the underlying reality of the economically integrated group, which may contribute to BEPS. Query whether Term clarifications may suggest an effort to apply with retrospective effect? OECD Guidelines will remain a consensus document? 2013 Baker & McKenzie Amsterdam N.V. 20

21 OECD BEPS Report Hybrid Mismatches and Arbitrage Report calls for instruments to put an end [to] or neutralize the effects of hybrid mismatch arrangements and arbitrage Appears to be converging with the European Commission recommendation on hybrids Note that appendix includes examples of check-thebox structures 2013 Baker & McKenzie Amsterdam N.V. 21

22 OECD BEPS Report Anti-Avoidance Measures Report identifies pressure area regarding the effectiveness of anti-avoidance measures (e.g. GAARs, CFC regimes, thin capitalization rules) and calls for more effective measures Expresses particular concerns regarding Channelling of financing through independent 3 rd party Use of derivatives to circumvent thin cap rules Use of inversions and hybrid entities to avoid CFC rules 2013 Baker & McKenzie Amsterdam N.V. 22

23 OECD BEPS Report Intra-Group Financial Transactions Report expresses concerns regarding related party debt-financing, captive insurance, and other intragroup financial transactions Notes that current law provides incentive for debtfinancing Report indicates that rules will be developed on the treatment of such transactions, such as rules on Deductibility of payments Application of withholding taxes 2013 Baker & McKenzie Amsterdam N.V. 23

24 OECD BEPS Report Application of Treaties to the Digital Economy Report calls for updated solutions to the issues related to jurisdiction to tax, in particular in the areas of digital goods and services Solutions may include a revision of treaty provisions Unspecified but likely to center on PE issues Some implication that proposed PE solutions may apply only to certain sectors But likely not limited to Internet companies and commissionaires 2013 Baker & McKenzie Amsterdam N.V. 24

25 OECD BEPS Report Harmful Preferential Regimes Report indicates that solutions will be proposed to counter harmful regimes more effectively, taking into account also factors such as transparency and substance Focus in past has been primarily on transparency Report appears to raise question as to whether low tax rates and substance will be more important considerations than in the past in determining whether a regime is harmful 2013 Baker & McKenzie Amsterdam N.V. 25

26 OECD BEPS Report What s missing? Other general reactions? 2013 Baker & McKenzie Amsterdam N.V. 26

27 Parallel Developments Elsewhere 2013 Baker & McKenzie Amsterdam N.V. 27

28 Movement on Many Fronts (1/3) EU Action Plan on Tax Evasion and Avoidance G20 G8 BRICS Communiqué on Prevention of Cross- Border Tax Evasion and Avoidance Obama s Framework for Business Tax Reform US Tax Reform Proposals Coming? UK Public Accounts Committee Report on Taxation of MNEs French Report on Taxation of the Digital Economy and Roadmap for the Digital Economy French National Anti- Fraud Council Report 2013 Baker & McKenzie Amsterdam N.V. 28

29 Movement on Many Fronts (2/3) UK Public Accounts Committee this month turns its attention towards IT companies that supply UK public sector UK Public Accounts Committee hearings and report (2012) February 14, 2013 new draft UK Government procurement policy: from April 2013, suppliers to UK central Govt will have to certify UK tax compliance. Sanctions can include termination of Govt contract Baker & McKenzie Amsterdam N.V. 29

30 Movement on Many Fronts (3/3) Australian Specialist Reference Group on Taxation of MNEs, and Countering Tax Avoidance Bill 2013 GAARs in UK, India 2013 Baker & McKenzie Amsterdam N.V. 30

31 EU Action Plan-Tax Evasion and Avoidance Some key elements of plan, published on December 6, 2012: Recommendation regarding toolbox of defensive measures (e.g., blacklisting, treaty suspension) intended to encourage third countries to apply minimum standards of good governance in tax matters Recommendation on aggressive tax planning, including: Introduction of a subject to tax clause in tax treaties; and Adoption of a GAAR Baker & McKenzie Amsterdam N.V. 31

32 Dutch point of view OECD BEPS report The issues discussed in the BEPS Report are not new for the Netherlands Aggressive tax planning has been on the political agenda, inter alia in connection with substance discussion, tax treaties with less developed countries and role of the Netherlands as facilitator to tax planning The Dutch government has indicated to support the Action Plan and the efforts of the European Commission to strengthen the fights against tax fraud and tax evasion (letter to Parliament 17 January 2013) 2013 Baker & McKenzie Amsterdam N.V. 32

33 Dutch point of view continued Key items that are important for the Netherlands (wishlist): Solutions should be hard law (binding) and not soft law (non-binding recommendations) Level playing field Inconsistencies create new mismatches: joint and consistent approach required Solutions should take into account different nature of economies involved: the Netherlands operate in an open economy that should encourage in- and outbound investments 2013 Baker & McKenzie Amsterdam N.V. 33

34 Thank you for your attention Baker & McKenzie Amsterdam N.V. 34

35 Contact Erik Scheer Partner Tax Wouter Paardekooper Partner Tax Caroline Silberztein Partner Tax Baker & McKenzie Amsterdam N.V. 35

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