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OECD Tax Talks #4 - 5 December 2016


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With a number of important recent and upcoming developments in the OECD's international tax work, we invite you to join the OECD's Centre for Tax Policy and Administration (CTPA) for the latest tax update.

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  • OECD Tax Talks 28 March 2017; Dear Panel, I have a question and possible Global solution to the issue of Global Multinational Tax Avoidance, which is to do with Tax Deductible Expenses. Q1 Given that Global Multinational Tax Avoidance seems to have occurred over many decades involving the transfer of complex monetary data between countries due to variations in Tax Regulation complexity within different jurisdictions, is it possible that the simple solution is for a GLOBAL Ceiling on Tax Deductible expenses and for Global Taxation regulators to both apply and enforce a minimum taxable assessment for all taxation entities Corporate, Trusts and Individuals. • Based on data published by the Australian ATO which I have summarised (please refer to Excel spreadsheet attachment) , such an initiative would almost double the taxation revenue received by the TOP 1904 Corporations, without raising the Corporate Tax Rate, and would allow the Australian Federal Government to reduce Company Tax Rates in Australia from 30¢ in the A$ to 20¢ in the A$ within the first twelve months of collecting this extra revenue. • I am keen to know the OECD thoughts on this concept and whether the OECD believe this could be implemented Glob
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OECD Tax Talks #4 - 5 December 2016

  1. 1. OECD Tax Talks CENTRE FOR TAX POLICY AND ADMINISTRATION 5 December 2016 2:00pm – 3:00pm (CET)
  2. 2. 2 Join the discussion Ask questions and comment throughout the webcast Via e-mail Via Twitter using #OECDTaxTalks
  3. 3. 3 Topics • Update on G20 • Inclusive Framework on BEPS • Multilateral Instrument • Tax policy
  4. 4. Update on G20 4
  5. 5. • First Germany Presidency meeting, Berlin, 1 Dec 2016 • German Presidency tax priorities: – Transparency – BEPS implementation – Tax and Development – Tax Certainty – Tax and digitalisation 5 Update on G20 2017
  6. 6. • Next steps: – G20 Finance Ministers, 17-18 March 2017 – G20 Leaders Summit: 7-8 July 2017 6 Update on G20 2017
  7. 7. Inclusive Framework on BEPS 7
  8. 8. • Latest developments • Peer Review mechanisms • Multilateral Instrument 8 Inclusive Framework on BEPS
  9. 9. • Membership – 90 members, including most recently Macao China, Ukraine and Mauritius – Meeting in BVI on 13 December to engage Caribbean jurisdictions • Progress on establishing review mechanisms for the four BEPS minimum standards • Next IF plenary meeting: January 2017 9 Inclusive Framework on BEPS – Latest developments
  10. 10. • Action 5: FHTP – continuing review of patent boxes and transparency framework • Action 6: Review will follow the MLI • Action 13: Start of review expected in 2017 • Action 14: Reviews starting today 10 Peer Review of the four BEPS Minimum Standards
  11. 11. Interpretation guidance issued: - last June on transitional issue (including on voluntary parent surrogate filing in the parent jurisdiction) - this week on notification requirements for MNEs during a transitional period 11 Action 13 – Guidance from the OECD
  12. 12. Country implementation information collected and published on OECD’s website this week: 12 Action 13 – Providing information on jurisdictions’ implementation
  13. 13. 13 Action 14 – Context: Preventing and Resolving Disputes • Co-operative taxpayer compliance programmes including taxpayer engagement programmes • Bilateral APAs; advance rulings • Joint audits/examinations • Exchange of information Preventing Disputes On OECD tax agenda • Domestic remedies (e.g. judicial, administrative or statutory dispute resolution process) • MAP • Arbitration Resolving Disputes BEPS
  14. 14. 14 Action 14 – Dispute resolution Key documents released on 20 October 2016 Peer Review  Implementation of the Action 14 minimum standard  compliance with implementation peer reviewed  peer review to begin in 2016; first set of reports published in 2017  Peer review to be conducted based on Terms of Reference and Assessment Methodology MAP Statistics Reporting  reporting of MAP statistics in accordance with MAP statistics reporting framework MAP Profile  Publication of MAP profile in accordance with MAP Profile Template
  15. 15. • Publishing of MAP profiles on OECD website pursuant to agreed template is part of the Action 14 minimum standard • New MAP profile:  provide information in an easy to read format, structured around the four key areas (preventing disputes; availability and access to MAP; resolution of MAP cases; implementation of MAP agreements)  contains more information, including: • New MAP profiles of most OECD and G20 countries already available on the OECD website ( • MAP profiles of all members of the Inclusive Framework forthcoming 15 New MAP Profiles available
  16. 16. • MAP statistics for 2015 reporting period is now available - last reporting period for statistics provided under old format. • For 2016 and subsequent years, MAP statistics of members of the BEPS Inclusive Framework will be reported and published pursuant to an agreed reporting framework:  Timely and complete reporting of MAP statistics is part of the Action 14 minimum standard • Objectives of new MAP statistics reporting framework:  Collaborative approach by competent authorities to resolution of MAP cases through use of common start date regardless of which competent authority receives the MAP request from taxpayer  Consistency - reporting strictly based on defined terms  Transparency - more detailed reporting of MAP cases and outcomes, including jurisdiction specific reporting 16 New MAP Statistics Reporting Framework
  17. 17. (C) Resolution of MAP cases 17 Action 14 – Terms of Reference (D) Implementation of MAP Agreements (A) Preventing Dispute TOR: Key features of an efficient & effective MAP process (B) Availability and Access to MAP
  18. 18. 18 Action 14 – Assessment Methodology Formal launch today Evaluation of: •Legal framework - tax treaties, domestic law & regulation •MAP programme guidance & implementation of the minimum standard in law and practice Jurisdiction specific report: •Identify & describe the strengths and any shortcomings •Recommendations to address shortcomings First Stage 1 reports published by 2017 2 stage approach Stage 2: Peer Monitoring Process  launched one year from the adoption of the Stage 1 Peer Review Report by the Inclusive Framework
  19. 19. 19 Action 14 – Assessment Methodology
  20. 20. Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting 20
  21. 21. • Why? – Bilateral renegotiations? – Model protocol to amend tax treaties? – Multilateral treaty to sit on top of and modify bilateral tax treaties • What? – Implementing BEPS minimum standards of Action 6 and Action 14 – Implementing the other treaty related BEPS measures – Optional provision on mandatory binding MAP arbitration 21 MLI – Background – Model protocol to amend tax treaties? – Multilateral treaty to sit on top of and modify bilateral tax treaties
  22. 22. 22 Key Features More than 100 countries and jurisdictions involved Parties can cover potentially thousands of treaties Flexibility: options and reservations Clarity & Transparency: Explanatory Statement, guidance, depositary tools English and French text authentic. Countries will prepare additional language versions
  23. 23. Excluding specified tax treaties Meeting a minimum standard in another way Opting out of non-minimum standard provisions Opting out of provisions for treaties with specific characteristics Choices to apply optional and alternative provisions (including opting in to Part VI on Arbitration) Flexible Instrument
  24. 24. Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting MLI I II III IV VII Preamble Part I (Scope and Interpretation of Terms) Part II (Hybrid Mismatches) Part III (Treaty Abuse) Part IV (Avoidance of Permanent Establishment Status) Part V (Improving Dispute Resolution) Part VI (Arbitration) Part VII (Final Provisions) VI V
  25. 25. Hybrid Mismatches – Action 2 & Action 6II 3 4 5 Transparent entities 1. New Article 1(2) OECD MTC 2. Changes to exemption or credit method 3. Interaction with savings clause Dual Resident Entities New Article 4(3) OECD MTC Application of Methods for Elimination of Double Taxation Three options reflecting alternative ways in which countries may address problems arising from the inclusion of the exemption method in treaties with respect to items of income that are not taxed in the source state.
  26. 26. Treaty Abuse (Highlights) – Action 6III 7 Action 6 minimum standard – Prevention of Treaty Abuse  Flexibility on how to meet the minimum standard Reminder: • Principal Purpose Test (PPT) only; • PPT and simplified or detailed LOB Provision, OR • Detailed LOB provision + mechanism against conduit arrangements MLI: 1. PPT Follows paragraph 26 of the Action 6 Report 2. Alternative: Simplified LOB Provision 3. Opt-out of PPT and reach bilateral agreement on detailed LOB
  27. 27. Arbitration – Action 14VI Reflects work of the Sub-Group on Arbitration Optional Applies only between Parties that expressly choose to apply Part VI Different types of Arbitration Processes • Default rule: “Final offer arbitration” • Alternative: “Independent opinion arbitration” Flexibility Competent authorities may mutually agree on different rules, which may apply to all cases or to a particular case
  28. 28. Country Y - Artificial Avoidance of the Permanent Establishment Status 13 Reserve on entire Art 13 • Substantive provision Sometimes including different options • Compatibility clause • Reservation clause • Clarity: Notification clause reflecting choice of options • Certainty: Notification clause clarifying existing provisions within scope Art 5(4.1) OECD MTC – Fragmentation Option A or Option BOption A – Art 5(4) OECD MTC Option B – Par. 30.1. Commentary Art 5(4) None Reserve on Option A for certain CTAs Reserve on fragmentation provision Compatibility clause 2-3 4 5 6 7-8 Make notification hereArt 5(4) of the Convention with X Notify choice for Option A Option A – Art 5(4) OECD MTC
  29. 29. Country Y - Prevention of Treaty Abuse7 Reserve an agree on LOB bilaterally Option A or Option BPrincipal Purpose Test Principal Purpose Test and simplified LOB Reserve for certain CTAs Reserve on S-LOB for certain CTAs 1/8- 13 15 Principal Purpose Test
  30. 30. Tax Convention with Country B 15 July 1953 Tax Convention with Country F 21 April 1981 Tax Convention with Country G 18 March 1983 Tax Convention with Country T 1 December 2001 Tax Convention with Country X 18 July 2015 Covered Tax Agreements of Country Y 2 Tax Convention with Country C 23 July 1972 Tax Convention with Country M 2 October 1989 Tax Convention with Country P 30 June 1992 Tax Convention with Country V 1 December 2001 Tax Convention with Country Y 18 July 2015 Covered Tax Agreements of Country X 2 Country X Country Y
  31. 31. Depositary tool Impact on the tax convention between Country X and Country Y 13 Art 5(4.1) does not apply (Country Y reserved) Compatibility clause: Option A applies in place of the relevant parts of Article 5(4) of the X-Y Convention that describe a list of specific activities deemed not to constitute a permanent establishment even if the activity is carried on through a fixed place of business. 2-3 4 5 6 7-8 Option A applies – Principles of Art 5(4) MTC Country Y - Artificial Avoidance of the Permanent Establishment Status 13 Reserve on entire Art 13 Art 5(4.1) OECD MTC – Fragmentation Reserve on Option A for certain CTAs Reserve on fragmentation provision Compatibility clause 2-3 4 5 6 7-8 Notified Option A Option A –Art 5(4) OECD MTC Notified Art 5(4) of the Convention with X8 Country X - Artificial Avoidance of the Permanent Establishment Status 13 Reserve on entire Art 13 Art 5(4.1) OECD MTC – Fragmentation Reserve on Option A for certain CTAs Reserve on fragmentation provision Compatibility clause 2-3 4 5 6 7-8 Notified Option A Option A –Art 5(4) OECD MTC Notified Art 5(4) of the Convention with Y8
  32. 32. Domestic procedures for ratification Domestic procedures for signature 32 MLI – Timeline October 2015 November 2016 June 2017 Entry into Force Entry into Effect Explanatory Statement GuidanceDepositary tools
  33. 33. • Matching exercises – Speed dating meeting February 2017 – Facilitating bilateral contacts • Enhancing clarity – Software tools – Consolidated texts – support and guidance 33 MLI – Further OECD work
  34. 34. • Preparation for signature • Signing ceremony – Participation of significant number of countries expected – Week of 5 June 2017 Back-to-back with OECD Ministerial Council Meeting • Ratification – Procedures vary per country – Translations, language versions and addressing differences of language 34 MLI – Next Steps
  35. 35. Tax Policy 35
  36. 36. • G20 Leaders' Communique Hangzhou Summit, 4-5 Sept 2016 “We emphasize the effectiveness of tax policy tools in supply-side structural reform for promoting innovation-driven, inclusive growth, as well as the benefits of tax certainty to promote investment and trade and ask the OECD and IMF to continue working on the issues of pro-growth tax policies and tax certainty” • OECD requested by G20 to work on tax certainty, with IMF • OECD likely request by G7 to work on inclusive growth 36 Background
  37. 37. • Initial report to G20 – Source of tax uncertainty • Working on final report – Practical measures to effectively, concretely make the system more certain • Important inputs for the project – Business survey – Survey of tax administrations – Consultation with other stakeholders 37 Tax certainty – Work scope
  38. 38. • Completely anonymous, and results will be aggregated • Introductory sections on characteristics of the firm • Two final sections with very practical questions about sources and solutions for more certainty in tax system • Some innovative solutions such as Multilateral APAs, Multilateral audits, Multilateral cooperative compliance programmes • None of the questions are compulsory • To date: 244 completed responses, with +6000 still uncompleted 38 Tax certainty – Survey of business
  39. 39. • Deadline: 16 December 2016 • Responding will make a difference • Consultation also with tax administrations & civil society • Report with results presented to G20 in March 2017 • Feed directly into G20 tax policy 39 Tax certainty – Next steps
  40. 40. • Report in May for G7 Finance Ministers • Work should be seen in context of latest Revenue Statistics results where we see: – The average tax to GDP ratio for OECD countries in 2015 was 34.3%, the highest since 1965 – Since the financial crisis, tax revenues have shifted towards labour (PIT + SSCs) and consumption (particularly VAT) – Corporate tax revenues have not yet returned to their pre-crisis levels as a percentage of GDP, or total tax revenues. 40 Tax and Inclusive Growth
  41. 41. What’s next? 41
  42. 42. • BEPS implementation • MLI implementation • CRS implementation • US tax reform? 42 What’s next?
  43. 43. Questions? 43
  44. 44. 44 Join the discussion Via e-mail Via Twitter using #OECDTaxTalks