Taxes are the main source of income for governments as well as a powerful political tool worldwide. Globalization however has progressively opened the business transaction flows, regardless of borders or state lines. As such taxation on international corporations has become increasingly complex to regulate. The G20 will have to weigh the advantages and problems caused by corporations which seek banking abroad in order to avoid taxation. Written by Milain Fayulu and Helen Combes
- Developing countries need to increase tax revenues to fund essential public services and meet UN Millennium Development Goals like universal primary education, but many raise significantly less than wealthier nations as a percentage of national income. Increasing tax revenues by just 1-2% of GDP could provide hundreds of billions annually to fight poverty.
- Globalization and tax havens allow multinational corporations and wealthy individuals to evade taxes in developing countries through practices like transfer mispricing and profit shifting to tax havens, costing these countries tens or hundreds of billions in lost revenues annually. Increased transparency and cooperation are needed to curb these illicit financial flows.
- Reforms to international tax rules and greater assistance to strengthen domestic
Bringing Taxation into the Post-2015 Development FrameworkDr Lendy Spires
This document discusses options for including taxation in the post-2015 development framework. It proposes: 1) Ensuring international treaties protect developing countries' taxing rights on cross-border income and capital. 2) Increasing transparency around tax havens and multinational companies. 3) Supporting regional agreements to address tax competition and incentives. It also discusses how increased tax revenues could fund development goals by potentially raising corporate tax takes by 20% and overall tax-to-GDP ratios to 25%. Making taxation a greater source of development finance globally would require action to ensure fairer international tax rules and enforcement.
Submission to the International Monetary Fund's Consultation on Economic "Spi...Dr Lendy Spires
This document provides recommendations from ActionAid International to the IMF's consultation on international tax spillovers. Key points include:
1) International tax reforms should consider macroeconomic impacts and inter-nation equity, not just domestic revenue impacts. Broader effects on financial stability, debt management, and development policy coherence should be analyzed.
2) The IMF is well-placed to develop methodologies for quantifying tax spillovers between countries from changes to domestic tax regimes. Baseline measurements of the international distribution of the corporate tax base would aid future assessments.
3) Reforms aimed at preventing base erosion and profit shifting should explicitly protect lower-income countries' tax bases and rights. Measures permitting source-based
This document summarizes how taxing wealthy individuals is changing globally due to increased scrutiny and enforcement efforts. Key points include:
- Media leaks of offshore bank accounts in 2013 triggered public outrage and government actions to target tax evasion by the wealthy.
- Since 2010, governments have increased taxes on high-income individuals through higher income tax rates, reducing tax relief on pensions, taxing dividends, introducing wealth taxes, and increasing taxes on inheritances and property.
- International cooperation on exchanging taxpayer information and enforcement efforts like the US Foreign Account Tax Compliance Act have reduced banking secrecy and increased disclosure requirements.
The document provides background information on governance issues related to corruption and tax justice that the C20 Governance Working Group will focus on in developing policy recommendations for the G20. It discusses the significant losses developing countries face from illicit financial flows due to tax evasion, corruption and weak transparency. The G20 has made commitments to anti-corruption efforts and tax base erosion but more progress is still needed, including ensuring less developed economies can meaningfully participate in the BEPS process. The C20 working group will build on previous G20 commitments and civil society work in forming concrete policy suggestions on anti-corruption and tax justice.
Speech by Antonis Samaras, Key Points, Zappeio II (12/5/2011)Notis Mitarachi
Antonis Samaras, leader of the New Democracy Party, gave a speech outlining a plan to "restart" the Greek economy through tax cuts, deregulation, and combating tax evasion. The plan calls for (1) reducing income, corporate, VAT, and fuel taxes, (2) abolishing the "means test" for home purchases and restrictions on capital repatriation, and (3) overhauling the tax system to be simpler with stricter penalties for evasion. The goal is to stimulate business investment and consumer spending through pro-growth policies to help Greece become competitive and prosperous again.
Uganda’s tax treaties: a legal and historical analysisMartin Hearson
This document summarizes a presentation on Uganda's tax treaties given in Arusha, Tanzania in December 2014. It discusses Uganda's motivations and objectives for signing tax treaties in the past, issues with the current treaties, and options for Uganda's tax treaty policy going forward. Some of the key points made include that Uganda's past motivations like tax sparing provisions are now outdated, the treaties do little to attract investment, and many are vulnerable to treaty shopping abuse. The presentation argues Uganda should comprehensively review its treaty network and negotiating positions.
- Developing countries need to increase tax revenues to fund essential public services and meet UN Millennium Development Goals like universal primary education, but many raise significantly less than wealthier nations as a percentage of national income. Increasing tax revenues by just 1-2% of GDP could provide hundreds of billions annually to fight poverty.
- Globalization and tax havens allow multinational corporations and wealthy individuals to evade taxes in developing countries through practices like transfer mispricing and profit shifting to tax havens, costing these countries tens or hundreds of billions in lost revenues annually. Increased transparency and cooperation are needed to curb these illicit financial flows.
- Reforms to international tax rules and greater assistance to strengthen domestic
Bringing Taxation into the Post-2015 Development FrameworkDr Lendy Spires
This document discusses options for including taxation in the post-2015 development framework. It proposes: 1) Ensuring international treaties protect developing countries' taxing rights on cross-border income and capital. 2) Increasing transparency around tax havens and multinational companies. 3) Supporting regional agreements to address tax competition and incentives. It also discusses how increased tax revenues could fund development goals by potentially raising corporate tax takes by 20% and overall tax-to-GDP ratios to 25%. Making taxation a greater source of development finance globally would require action to ensure fairer international tax rules and enforcement.
Submission to the International Monetary Fund's Consultation on Economic "Spi...Dr Lendy Spires
This document provides recommendations from ActionAid International to the IMF's consultation on international tax spillovers. Key points include:
1) International tax reforms should consider macroeconomic impacts and inter-nation equity, not just domestic revenue impacts. Broader effects on financial stability, debt management, and development policy coherence should be analyzed.
2) The IMF is well-placed to develop methodologies for quantifying tax spillovers between countries from changes to domestic tax regimes. Baseline measurements of the international distribution of the corporate tax base would aid future assessments.
3) Reforms aimed at preventing base erosion and profit shifting should explicitly protect lower-income countries' tax bases and rights. Measures permitting source-based
This document summarizes how taxing wealthy individuals is changing globally due to increased scrutiny and enforcement efforts. Key points include:
- Media leaks of offshore bank accounts in 2013 triggered public outrage and government actions to target tax evasion by the wealthy.
- Since 2010, governments have increased taxes on high-income individuals through higher income tax rates, reducing tax relief on pensions, taxing dividends, introducing wealth taxes, and increasing taxes on inheritances and property.
- International cooperation on exchanging taxpayer information and enforcement efforts like the US Foreign Account Tax Compliance Act have reduced banking secrecy and increased disclosure requirements.
The document provides background information on governance issues related to corruption and tax justice that the C20 Governance Working Group will focus on in developing policy recommendations for the G20. It discusses the significant losses developing countries face from illicit financial flows due to tax evasion, corruption and weak transparency. The G20 has made commitments to anti-corruption efforts and tax base erosion but more progress is still needed, including ensuring less developed economies can meaningfully participate in the BEPS process. The C20 working group will build on previous G20 commitments and civil society work in forming concrete policy suggestions on anti-corruption and tax justice.
Speech by Antonis Samaras, Key Points, Zappeio II (12/5/2011)Notis Mitarachi
Antonis Samaras, leader of the New Democracy Party, gave a speech outlining a plan to "restart" the Greek economy through tax cuts, deregulation, and combating tax evasion. The plan calls for (1) reducing income, corporate, VAT, and fuel taxes, (2) abolishing the "means test" for home purchases and restrictions on capital repatriation, and (3) overhauling the tax system to be simpler with stricter penalties for evasion. The goal is to stimulate business investment and consumer spending through pro-growth policies to help Greece become competitive and prosperous again.
Uganda’s tax treaties: a legal and historical analysisMartin Hearson
This document summarizes a presentation on Uganda's tax treaties given in Arusha, Tanzania in December 2014. It discusses Uganda's motivations and objectives for signing tax treaties in the past, issues with the current treaties, and options for Uganda's tax treaty policy going forward. Some of the key points made include that Uganda's past motivations like tax sparing provisions are now outdated, the treaties do little to attract investment, and many are vulnerable to treaty shopping abuse. The presentation argues Uganda should comprehensively review its treaty network and negotiating positions.
UN Model Tax Convention Vs OECD Model Tax Convention Significance of Distinctiontaxguru4
As the world moves increasingly towards economic integration and globalization there is a lot of cross border trade, investment and business which will only increase as more and more developing and least developed countries open up their borders for more business with the international community....
Trends in the conclusion of tax treaties by developing countriesMartin Hearson
This document summarizes key points from a presentation on trends in tax treaties between developing and developed countries. It finds that while most developing country treaties follow the OECD model, treaty terms have slowly begun to favor developing countries more with lower withholding tax rates balanced by broader permanent establishment definitions and more rights to tax services. However, many treaties were signed decades ago and do not reflect modern norms. While treaties may signal openness, evidence suggests they do little to increase investment and often redistribute tax revenue from poor to rich nations. Developing countries often agree to treaties for political reasons rather than clear economic benefits.
This document outlines an action plan to address base erosion and profit shifting (BEPS). It identifies 15 specific actions to strengthen international tax rules and ensure multinational enterprises pay taxes in the countries where economic activities occur and value is created. The plan calls for fundamental changes to align rights to tax with economic activity and adopt new anti-abuse rules. It establishes deadlines to implement actions by 2015 and calls for continued international cooperation to tackle issues not addressed by current standards.
A new european tax on financial transactions is set to go globalManfredNolte
A new European financial transaction tax is set to take effect in 2014. The tax is expected to raise approximately $45 billion annually from 11 European countries for uses such as offsetting debt or funding social programs. The tax applies extraterritorially to financial transactions made by non-EU companies and investors, which has led to opposition from the US and UK. Supporters argue the tax will make the financial sector pay its fair share, while critics say it could harm the global economy by shifting financial activity to other regions.
Presentation at the European Economic & Social Committee hearing on 'EU development partnerships and the challenge posed by international tax agreements'
This document provides an overview of international taxation concepts. It discusses how residency is a key factor in determining tax jurisdiction, as countries either tax worldwide income for residents or only income from domestic sources for non-residents. There can be conflicts when countries define residency differently, such as based on place of incorporation versus management and control, which can lead to double taxation. Treaties aim to resolve such conflicts but different countries take different approaches in their treaties. The concepts of residency, jurisdiction, and relief from double taxation are important aspects of international tax.
1) Tax treaties are agreements between countries to eliminate double taxation of business profits earned across borders. However, treaties often shift the taxing rights and revenue away from developing countries where investments are made.
2) Developing countries have expressed concerns that international tax rules and most bilateral tax treaties favor residence-based taxation, benefiting companies' home countries over source countries where economic activity takes place. Analysis of Vietnam's treaties found they did not fully align with the country's declared negotiating positions.
3) Interviews with former negotiators revealed that developing countries often lacked experience and awareness of revenue impacts when concluding early treaties. The speaker recommends developing countries conduct analysis of treaty impacts, formulate coherent policy
This document discusses patent boxes, which are special tax regimes some countries have implemented that allow income from intellectual property to be taxed at a lower rate. It provides background on how multinational companies are utilizing tax havens and lack of geographical location of intangible assets to lower their tax liability. It then discusses the OECD's BEPS project which aims to address tax avoidance strategies and fix problems in the global tax system that enable harmful tax practices. The document aims to discuss the theoretical constructs and implications of the U.S. potentially adopting its own patent box, considering factors like implementation costs and impact on tax revenue.
Tax Sovereignty and Digital Economy in Post-BEPS TimesRamon Tomazela
This chapter discusses challenges that digital transactions pose to traditional concepts of tax sovereignty, especially as international tax regimes need to adapt to the new digital economy. It first discusses how the principle of territoriality and recognition of tax jurisdiction developed in international law. It then addresses how tax jurisdiction has expanded due to the development of e-commerce and new business models, demonstrating the process of reconfiguring the concept of tax sovereignty. Finally, it focuses on how the consumer market now stands out as the main connecting factor for taxing income derived from e-commerce, representing a new facet of tax sovereignty in a globalized world.
1) Ghana signed tax treaties with Switzerland and the Netherlands in 2008 that reduced the royalty and technical service fee taxes Ghana could collect on payments flowing out of the country from 15% to 8%, resulting in increased tax losses.
2) Tax treaties are not always necessary to prevent double taxation and empirical studies do not find they increase investment, while they always result in developing countries giving up some taxing rights to developed countries.
3) Developing country tax officials are often not well trained in international taxation and tax treaties, leading to weaker negotiating positions and treaties that more strongly reflect the positions of developed country partners.
The International Tax Competitiveness Index (ITCI) seeks to measure the extent to which a country’s tax system adheres to two important aspects of tax policy: competitiveness and neutrality.
A competitive tax code is one that keeps marginal tax rates low. In today’s globalized world, capital is highly mobile. Businesses can choose to invest in any number of countries throughout the world to find the highest rate of return. This means that businesses will look for countries with lower tax rates on investment to maximize their after-tax rate of return. If a country’s tax rate is too high, it will drive investment elsewhere, leading to slower economic growth. In addition, high marginal tax rates can lead to tax avoidance.
To measure whether a country’s tax system is neutral and competitive, the ITCI looks at more than 40 tax policy variables. These variables measure not only the level of taxes, but also how taxes are structured. The Index looks at a country’s corporate taxes, individual income taxes, consumption taxes, property taxes, and the treatment of profits earned overseas. The ITCI gives a comprehensive overview of how developed countries’ tax codes compare, explains why certain tax codes stand out as good or bad models for reform, and provides important insight into how to think about tax policy.
This seminar discusses tax havens and their problems and potential solutions. It begins by defining tax havens as countries that offer little to no tax liability and financial transparency to attract foreign businesses and individuals. It then lists several well-known tax havens and notes that some have signed agreements to provide more financial information to foreign governments. The presentation outlines the factors used to rank jurisdictions on the Financial Secrecy Index, and provides the top 10 rankings. It then discusses problems caused by tax havens, such as depriving governments of revenue, enabling criminal activity, and increasing inequality. Potential solutions proposed include country-by-country reporting of multinational taxes, unitary taxation, automatic information exchange, public registers of company owners, and
This document provides an overview of international taxation. It discusses the author's background working in international tax. It then defines international taxation, noting there are no international tax laws and it involves the interaction of multiple countries' tax laws and rules applied to cross-border transactions. Key topics in international taxation are also listed. The document discusses the features of international taxation, including differences in tax systems, rates, and practices between countries. It provides a brief history of developments in international taxation laws. It also summarizes the growth of the author's former employer's international tax practice over time. Examples of cross-border transactions are given along with risks involved in determining tax residence and source of income. Basic principles of international taxation including capital export neutrality
BEPS position paper_clean_final_20161223_logoamendedWinston Szeto
The document is a response from Oxfam Hong Kong to the Hong Kong government's consultation on measures to counter base erosion and profit shifting (BEPS). It raises several concerns with the government's proposals, arguing they do not go far enough. It calls on Hong Kong to fully implement the OECD's BEPS actions and adhere to international standards on issues like penalties, multilateral information exchange, public country-by-country reporting, and beneficial ownership disclosure. Oxfam urges stronger measures to deter tax avoidance by multinationals and ensure Hong Kong is not considered a tax haven.
Hidden Profits: The EU's role in supporting an unjust global tax system 2014Dr Lendy Spires
This report examines the actions of EU member states to combat tax dodging and ensure tax transparency. It finds that while some countries have made commitments, more action is needed across all states. Specifically, the report evaluates countries on four issues: the fairness of tax treaties with developing nations; efforts to end anonymous shell companies and trusts; support for requiring multinational company transparency; and attitudes towards helping the poorest countries collect tax revenue. The report aims to compare EU member states' progress and encourage stronger efforts to build a just global tax system.
International Taxation - Tax Treaties, OECD, BEPS, MLITaxmann
Make your research easier on International tax with Taxmann's International Taxation Module: https://ilt.taxmann.com/. This module covers case laws, tax treaties, beps, mli, commentaries, acts, rules, ILT videos, all about international taxation, oecd articles, tax appellate tribunal etc. Subscribe to this module & stay updated.
1) The document discusses how tax havens like London, New York, and Hong Kong enable $21-32 trillion in wealth to be hidden from governments, depriving developing nations of tax revenue that could help end poverty and hunger.
2) It specifically calls out the City of London Corporation for creating regulations that undermine other jurisdictions and enable secrecy and offshore tax evasion.
3) Indians have more than $500 billion illegally stashed in foreign tax havens, more than any other country, which could help India achieve its development goals in areas like nutrition, education, and healthcare.
Professionals in the tax community are tasked with developing planning strategies under existing statutory schemes that minimize or eliminate their clients’ global tax burden. It is these planning structures that draw the attention of tax authorities as causing the “erosion” of taxable income bases and consequently, the tax revenues for their respective countries.
Experiencias nacionales de gestión escolar de la I.E I.E “José Abelardo Quiñones Gonzales” de Lambayeque, en el Seminario Internacional de Gestión Escolar, Lima 4 y 5 de Setiembre del 2014.
UN Model Tax Convention Vs OECD Model Tax Convention Significance of Distinctiontaxguru4
As the world moves increasingly towards economic integration and globalization there is a lot of cross border trade, investment and business which will only increase as more and more developing and least developed countries open up their borders for more business with the international community....
Trends in the conclusion of tax treaties by developing countriesMartin Hearson
This document summarizes key points from a presentation on trends in tax treaties between developing and developed countries. It finds that while most developing country treaties follow the OECD model, treaty terms have slowly begun to favor developing countries more with lower withholding tax rates balanced by broader permanent establishment definitions and more rights to tax services. However, many treaties were signed decades ago and do not reflect modern norms. While treaties may signal openness, evidence suggests they do little to increase investment and often redistribute tax revenue from poor to rich nations. Developing countries often agree to treaties for political reasons rather than clear economic benefits.
This document outlines an action plan to address base erosion and profit shifting (BEPS). It identifies 15 specific actions to strengthen international tax rules and ensure multinational enterprises pay taxes in the countries where economic activities occur and value is created. The plan calls for fundamental changes to align rights to tax with economic activity and adopt new anti-abuse rules. It establishes deadlines to implement actions by 2015 and calls for continued international cooperation to tackle issues not addressed by current standards.
A new european tax on financial transactions is set to go globalManfredNolte
A new European financial transaction tax is set to take effect in 2014. The tax is expected to raise approximately $45 billion annually from 11 European countries for uses such as offsetting debt or funding social programs. The tax applies extraterritorially to financial transactions made by non-EU companies and investors, which has led to opposition from the US and UK. Supporters argue the tax will make the financial sector pay its fair share, while critics say it could harm the global economy by shifting financial activity to other regions.
Presentation at the European Economic & Social Committee hearing on 'EU development partnerships and the challenge posed by international tax agreements'
This document provides an overview of international taxation concepts. It discusses how residency is a key factor in determining tax jurisdiction, as countries either tax worldwide income for residents or only income from domestic sources for non-residents. There can be conflicts when countries define residency differently, such as based on place of incorporation versus management and control, which can lead to double taxation. Treaties aim to resolve such conflicts but different countries take different approaches in their treaties. The concepts of residency, jurisdiction, and relief from double taxation are important aspects of international tax.
1) Tax treaties are agreements between countries to eliminate double taxation of business profits earned across borders. However, treaties often shift the taxing rights and revenue away from developing countries where investments are made.
2) Developing countries have expressed concerns that international tax rules and most bilateral tax treaties favor residence-based taxation, benefiting companies' home countries over source countries where economic activity takes place. Analysis of Vietnam's treaties found they did not fully align with the country's declared negotiating positions.
3) Interviews with former negotiators revealed that developing countries often lacked experience and awareness of revenue impacts when concluding early treaties. The speaker recommends developing countries conduct analysis of treaty impacts, formulate coherent policy
This document discusses patent boxes, which are special tax regimes some countries have implemented that allow income from intellectual property to be taxed at a lower rate. It provides background on how multinational companies are utilizing tax havens and lack of geographical location of intangible assets to lower their tax liability. It then discusses the OECD's BEPS project which aims to address tax avoidance strategies and fix problems in the global tax system that enable harmful tax practices. The document aims to discuss the theoretical constructs and implications of the U.S. potentially adopting its own patent box, considering factors like implementation costs and impact on tax revenue.
Tax Sovereignty and Digital Economy in Post-BEPS TimesRamon Tomazela
This chapter discusses challenges that digital transactions pose to traditional concepts of tax sovereignty, especially as international tax regimes need to adapt to the new digital economy. It first discusses how the principle of territoriality and recognition of tax jurisdiction developed in international law. It then addresses how tax jurisdiction has expanded due to the development of e-commerce and new business models, demonstrating the process of reconfiguring the concept of tax sovereignty. Finally, it focuses on how the consumer market now stands out as the main connecting factor for taxing income derived from e-commerce, representing a new facet of tax sovereignty in a globalized world.
1) Ghana signed tax treaties with Switzerland and the Netherlands in 2008 that reduced the royalty and technical service fee taxes Ghana could collect on payments flowing out of the country from 15% to 8%, resulting in increased tax losses.
2) Tax treaties are not always necessary to prevent double taxation and empirical studies do not find they increase investment, while they always result in developing countries giving up some taxing rights to developed countries.
3) Developing country tax officials are often not well trained in international taxation and tax treaties, leading to weaker negotiating positions and treaties that more strongly reflect the positions of developed country partners.
The International Tax Competitiveness Index (ITCI) seeks to measure the extent to which a country’s tax system adheres to two important aspects of tax policy: competitiveness and neutrality.
A competitive tax code is one that keeps marginal tax rates low. In today’s globalized world, capital is highly mobile. Businesses can choose to invest in any number of countries throughout the world to find the highest rate of return. This means that businesses will look for countries with lower tax rates on investment to maximize their after-tax rate of return. If a country’s tax rate is too high, it will drive investment elsewhere, leading to slower economic growth. In addition, high marginal tax rates can lead to tax avoidance.
To measure whether a country’s tax system is neutral and competitive, the ITCI looks at more than 40 tax policy variables. These variables measure not only the level of taxes, but also how taxes are structured. The Index looks at a country’s corporate taxes, individual income taxes, consumption taxes, property taxes, and the treatment of profits earned overseas. The ITCI gives a comprehensive overview of how developed countries’ tax codes compare, explains why certain tax codes stand out as good or bad models for reform, and provides important insight into how to think about tax policy.
This seminar discusses tax havens and their problems and potential solutions. It begins by defining tax havens as countries that offer little to no tax liability and financial transparency to attract foreign businesses and individuals. It then lists several well-known tax havens and notes that some have signed agreements to provide more financial information to foreign governments. The presentation outlines the factors used to rank jurisdictions on the Financial Secrecy Index, and provides the top 10 rankings. It then discusses problems caused by tax havens, such as depriving governments of revenue, enabling criminal activity, and increasing inequality. Potential solutions proposed include country-by-country reporting of multinational taxes, unitary taxation, automatic information exchange, public registers of company owners, and
This document provides an overview of international taxation. It discusses the author's background working in international tax. It then defines international taxation, noting there are no international tax laws and it involves the interaction of multiple countries' tax laws and rules applied to cross-border transactions. Key topics in international taxation are also listed. The document discusses the features of international taxation, including differences in tax systems, rates, and practices between countries. It provides a brief history of developments in international taxation laws. It also summarizes the growth of the author's former employer's international tax practice over time. Examples of cross-border transactions are given along with risks involved in determining tax residence and source of income. Basic principles of international taxation including capital export neutrality
BEPS position paper_clean_final_20161223_logoamendedWinston Szeto
The document is a response from Oxfam Hong Kong to the Hong Kong government's consultation on measures to counter base erosion and profit shifting (BEPS). It raises several concerns with the government's proposals, arguing they do not go far enough. It calls on Hong Kong to fully implement the OECD's BEPS actions and adhere to international standards on issues like penalties, multilateral information exchange, public country-by-country reporting, and beneficial ownership disclosure. Oxfam urges stronger measures to deter tax avoidance by multinationals and ensure Hong Kong is not considered a tax haven.
Hidden Profits: The EU's role in supporting an unjust global tax system 2014Dr Lendy Spires
This report examines the actions of EU member states to combat tax dodging and ensure tax transparency. It finds that while some countries have made commitments, more action is needed across all states. Specifically, the report evaluates countries on four issues: the fairness of tax treaties with developing nations; efforts to end anonymous shell companies and trusts; support for requiring multinational company transparency; and attitudes towards helping the poorest countries collect tax revenue. The report aims to compare EU member states' progress and encourage stronger efforts to build a just global tax system.
International Taxation - Tax Treaties, OECD, BEPS, MLITaxmann
Make your research easier on International tax with Taxmann's International Taxation Module: https://ilt.taxmann.com/. This module covers case laws, tax treaties, beps, mli, commentaries, acts, rules, ILT videos, all about international taxation, oecd articles, tax appellate tribunal etc. Subscribe to this module & stay updated.
1) The document discusses how tax havens like London, New York, and Hong Kong enable $21-32 trillion in wealth to be hidden from governments, depriving developing nations of tax revenue that could help end poverty and hunger.
2) It specifically calls out the City of London Corporation for creating regulations that undermine other jurisdictions and enable secrecy and offshore tax evasion.
3) Indians have more than $500 billion illegally stashed in foreign tax havens, more than any other country, which could help India achieve its development goals in areas like nutrition, education, and healthcare.
Professionals in the tax community are tasked with developing planning strategies under existing statutory schemes that minimize or eliminate their clients’ global tax burden. It is these planning structures that draw the attention of tax authorities as causing the “erosion” of taxable income bases and consequently, the tax revenues for their respective countries.
Experiencias nacionales de gestión escolar de la I.E I.E “José Abelardo Quiñones Gonzales” de Lambayeque, en el Seminario Internacional de Gestión Escolar, Lima 4 y 5 de Setiembre del 2014.
1) El documento presenta las fórmulas fundamentales de la trigonometría, incluyendo las funciones seno, coseno, tangente y cotangente. 2) Se definen las funciones trigonométricas para diferentes ángulos en los cuadrantes y se establecen relaciones entre ellas. 3) Se presentan fórmulas adicionales para transformar entre las diferentes funciones trigonométricas.
Freeport McMoran is one of the largest copper and gold producers in the world. It has operations across North America, South America, Europe, Africa and Indonesia. While Freeport has posted record profits in recent years, its stock price has fallen as investors demand greater returns. An analysis of Freeport's financial ratios shows it has a lower return on equity and assets than its main competitor Southern Copper, but a liquid capital structure. Freeport's stock is currently undervalued and trading well below its estimated intrinsic value, making it a strong buy.
The document describes several personality disorders including paranoid, schizoid, schizotypal, antisocial, borderline, histrionic, narcissistic, avoidant, dependent, obsessive-compulsive personality disorders. Each disorder is defined and their core symptoms are listed such as distrust of others, social isolation, unstable relationships, attention-seeking behaviors, and rigidity.
The document provides insights into creating effective content marketing campaigns from Merrie Beth Salazar of Cox Media. It discusses establishing a content strategy by defining goals, audiences, areas of expertise, and publication timing. The creative process ties these elements to developing assets like eBooks, checklists, and videos. Cox Media's 2014 campaign generated over 750 downloads through an integrated library. The presentation emphasizes measuring engagement and amplifying content through distribution channels to maximize ROI.
The document summarizes the global efforts to reform international corporate taxation of multinational corporations (MNCs). It discusses existing issues like base erosion and profit shifting (BEPS) and measures taken by OECD and countries. It then summarizes the recent agreement by G7 countries to support OECD's two pillar approach for taxing MNCs. Pillar One aims to reallocate some profits to market jurisdictions. Pillar Two proposes a global minimum corporate tax of 15%. The agreement could significantly impact tax havens and boost tax revenues but also faces challenges in implementation.
Key Takeaways:
- Background and Overview of Legal Provision
- Facts of the Case
- Contentions of the Assessee and Revenue
- Supreme Court’s Verdict
- Key Learnings and Way Forward
The OECD's new work program would fundamentally change the way multinationals are taxed in the digital age, raising numerous questions of economic effects, compliance costs, and coordination between countries.
The four elements necessary for the OECD to be successful:
1.Identification of the scope and magnitude of the issues being addressed and how they are left unresolved by previous BEPS efforts.
2.A clear set of recommendations on both taxing rights and anti-base erosion policies that do the least amount of harm to economic growth.
3.Economic assessment of the potential impact of the policies on cross-border investment, cost of capital, foreign direct investment, compliance and administration costs, and countries’ tax revenue.
4.Commitment from countries to remove policies that conflict with the recommendations
Over the years, tax competition has led some countries to adopt more neutral, pro-growth business tax policies. This project could directly undermine that progress.
A Level Playing Field: The Need for non-G20 Participation in the BEPS' processDr Lendy Spires
This document summarizes the key arguments made in a paper endorsing non-G20 participation in the OECD's Base Erosion and Profit Shifting (BEPS) project. It argues that corporate income tax is even more important for developing country public finances than developed countries. However, the BEPS process currently excludes non-G20 countries. It recommends ensuring non-G20 countries can fully participate in rewriting international tax rules through the BEPS process. The success of BEPS should be judged on reducing double non-taxation while safeguarding developing country tax bases, not just aligning taxes with substance in G20 economies. Solutions must apply to all countries and support less resourced tax administrations
Registering for Growth: Tax and the Informal Sector in Developing CountriesDr Lendy Spires
Roughly half of all non-agricultural workers in developing countries work in very small enterprises with fewer than five employees. Indeed, between one-quarter and one-third of the non-agricultural workforce in most low- and lower-middle-income countries is self-employed (Gollin 2002).
Most of these micro-enterprises operate without registering as legal entities and, as a result, are a part of what is commonly referred to as the informal sector. Informal activity is estimated to comprise a much larger share of the economies of low-income countries – on average around 42% of GDP in a sample of 31 low-and lower-middle-income countries – than a comparable sample of 32 higher-income countries (22% of GDP) in the Organisation for Economic Co-operation and Development (OECD).1 Why is such a high proportion of the labour force in lower-income countries employed in the informal sector? De Soto (1989) famously proposed that governments – and Peru’s specifically – push firms into the informal sector by raising the barriers and costs of formalization.
By excluding firms from the formal sector, these barriers stifle entrepreneurship and reduce the dynamism of the private sector. Others (Levy 2008) have claimed that the high levels of informality represent an escape by small firms. This ‘exit’ view leads to a vicious cycle: firms escape because the state does not make formal status appealing. For example, financial markets and courts may be dysfunctional, and public procurement processes may be corrupt.
But by being in the informal sector, firms avoid paying taxes that would provide resources the state might use to improve the provision of these goods, or to force firms to become formal. In this view, informality may still stifle entrepreneurship, as firms sometimes remain small deliberately to avoid attracting the attention of regulators and tax collectors. If high rates of taxation push economic activity out of the formal economy, one would expect to see more informal activity in countries with higher tax collections.
However, just the opposite is the case. Across countries, there is a strong negative correlation between state revenue and informal activity. Indeed, another characteristic of low-income countries is that tax collec-tion by governments is very low. Government revenue 1 Estimates from Schneider, Buehn and Montenegro (2010). Taxes as a % of GDP 0 Shadow economy as a % of GDP Australia Austria Belgium Canada Chile Czech Republic Denmark Finland France Germany Greece Hungary Iceland Ireland Israel Japan Korea, Republic of Netherlands New Zealand Norway Slovenia Spain Sweden Turkey United Kingdom United States Italy Figure 1: Taxes and informality, OECD countries Source: World Bank (2013)
Why Ireland Has Attracted Inward Foreign Direct Investment...Victoria Burke
The articles discuss the Republican tax plan that aims to cut individual and corporate tax rates significantly to spur economic growth, however Democrats argue it will mostly benefit the wealthy. GDP growth increased to 3.1% in the second quarter attributed to personal consumption, investments and exports. However, recent hurricanes are expected to negatively impact the economy in the next quarter and the long term effects of tax cuts on the budget deficit and industries are uncertain.
alterDomus International Annual Update 2015-16Chris Casapinta
The document provides an overview of key developments in international taxation from 2015-2016, focusing on topics like the Base Erosion and Profit Shifting (BEPS) action plan from the OECD, the Alternative Investment Fund Managers Directive (AIFMD), and automatic exchange of information standards. It summarizes country-specific tax law changes for several jurisdictions and contacts for further information. The BEPS project concluded in 2015 with recommendations to align profits with economic activity and prevent double non-taxation. This will require changes to transfer pricing guidelines and country-by-country reporting for some multinationals. Implementation of BEPS continues through 2016 with ongoing work on several action items and monitoring adoption.
The digitalization of the global economy has amplified the problem of tax avoidance and tax fairness and led to a rise in digital taxes around the world. This webinar seeks to discuss ways for East Africa to address two crucial issues:
Linking taxation rights to where value is created
Reforming the current corporate income tax system to disincentivize transfer pricing to the jurisdiction with the lowest tax rate.
The document summarizes the key issues regarding taxation of the digitalized economy. It provides an overview of recent developments at both the OECD and EU levels to address these issues. At the OECD level, there is no consensus on interim measures. The EU has proposed both a digital services tax as an interim measure, as well as a "significant digital presence" proposal as a long term solution that would create a new permanent establishment based on digital factors. Challenges to both the OECD and EU approaches are discussed. The US opposes proposals that single out digital companies.
► Digital economy is raising complex issues for VAT systems
► OECD (November 2015): “International VAT/GST Guidelines” published with a heavy
focus on the place of supply of cross-border supplies of services and intangibles and the
application of the principles of destination and neutrality
► Trend toward digital supplies becoming taxable in the country of consumption
► Businesses increasingly needing to make VAT decisions in real time (at the point
of sale)
► Policymaking is developing – typical developments:
► Joint and several liability for online marketplaces
► Active searches for non-established ESS suppliers
► Removal of low value import thresholds
► Tax authorities are going digital
► Plus increasing inter-governmental cooperation
► Reputational risk rising
The document discusses actions the UN Secretary General could take regarding tax havens. It notes that while European countries are implementing spending cuts, wealthy individuals are sheltering capital in tax havens. It argues the Secretary General should encourage new rules on tax haven assignment and crack down on legal tax avoidance, which costs European countries billions annually. Currently, states provide amnesties rather than aggressively inspecting avoidance, incentivizing more aggressive schemes. A real agreement among major OECD countries is needed to change the system and allow states to regain control over multinational taxation to preserve social democratic systems.
Applications of EU Fiscal Harmonization Plans in BelgiumPhilippe Soweid
This document discusses the potential challenges that EU fiscal harmonization plans may pose for Belgium given its unique fiscal rules. It begins by outlining the EU's goals of fiscal harmonization to reduce tax avoidance among member states. It then examines two of Belgium's key fiscal policies - the notional interest deduction and excess profit scheme. While the notional interest deduction mechanism is not inherently incompatible with EU law, it can enable tax avoidance when used by foreign companies. The excess profit scheme was recently ruled illegal by the EU for violating state aid rules. The document considers how Belgium may need to adapt its fiscal policies if the EU pushes forward with harmonization reforms.
Deloitte in Africa: Advising Big Businesses on how to avoid Tax in some of th...Dr Lendy Spires
Deloitte, one of the largest financial services companies, provided tax avoidance strategies through Mauritius at a conference for businesses investing in Africa. The strategies showed how to reduce taxes in Mozambique, one of the poorest countries, by 60% on withholding taxes and 100% on capital gains taxes. While legal, these strategies deprive developing countries of much needed tax revenue that could fund education, healthcare, and development.
This document provides the 2020 rankings and scores for the International Tax Competitiveness Index, which evaluates tax systems based on competitiveness and neutrality. Estonia ranks first overall due to low corporate and individual tax rates and a territorial international tax system. Italy ranks last with high taxes and complexity. Some countries saw changes from last year's rankings due to tax rate changes, including Belgium rising due to a lower corporate rate and Japan falling due to a higher VAT rate.
Emergence Of A Global Trading Arena
The document discusses the emergence of globalization and the creation of a global trading arena. It notes that countries realized the importance of integrating their economies and encouraging trade of goods and services across borders. However, parties face various challenges like changes in economic conditions and taxation rates that can discourage business transactions. The concept of cross-border shopping and how governments aim to maximize tax revenue through policies is also examined.
The document discusses the changing landscape of international tax. It summarizes that:
1. Increasing scrutiny of corporate tax practices has been driven by budget deficits following the global financial crisis, rising expectations of corporate social responsibility, greater media attention, and the growing internationalization and digitization of business.
2. The 2010 Greek debt crisis highlighted issues of tax evasion and avoidance, shifting attention to fair taxation. Protests in the UK against perceived tax avoidance by certain companies further brought tax issues into public debate.
3. Politicians in the UK have condemned aggressive tax avoidance as morally wrong and put pressure on companies to pay their fair share in taxes.
Tax management within multinational enterprises (MNEs) has never been more challenging. 'Getting to grips with the BEPS Action Plan' is the latest Grant Thornton report exploring the OECD’s planned overhaul of the international tax system, what it means for businesses and how they can prepare.
Similar to Milain Fayulu - G20 - Corporate Tax Evasion (20)
Financial Assets: Debit vs Equity Securities.pptxWrito-Finance
financial assets represent claim for future benefit or cash. Financial assets are formed by establishing contracts between participants. These financial assets are used for collection of huge amounts of money for business purposes.
Two major Types: Debt Securities and Equity Securities.
Debt Securities are Also known as fixed-income securities or instruments. The type of assets is formed by establishing contracts between investor and issuer of the asset.
• The first type of Debit securities is BONDS. Bonds are issued by corporations and government (both local and national government).
• The second important type of Debit security is NOTES. Apart from similarities associated with notes and bonds, notes have shorter term maturity.
• The 3rd important type of Debit security is TRESURY BILLS. These securities have short-term ranging from three months, six months, and one year. Issuer of such securities are governments.
• Above discussed debit securities are mostly issued by governments and corporations. CERTIFICATE OF DEPOSITS CDs are issued by Banks and Financial Institutions. Risk factor associated with CDs gets reduced when issued by reputable institutions or Banks.
Following are the risk attached with debt securities: Credit risk, interest rate risk and currency risk
There are no fixed maturity dates in such securities, and asset’s value is determined by company’s performance. There are two major types of equity securities: common stock and preferred stock.
Common Stock: These are simple equity securities and bear no complexities which the preferred stock bears. Holders of such securities or instrument have the voting rights when it comes to select the company’s board of director or the business decisions to be made.
Preferred Stock: Preferred stocks are sometime referred to as hybrid securities, because it contains elements of both debit security and equity security. Preferred stock confers ownership rights to security holder that is why it is equity instrument
<a href="https://www.writofinance.com/equity-securities-features-types-risk/" >Equity securities </a> as a whole is used for capital funding for companies. Companies have multiple expenses to cover. Potential growth of company is required in competitive market. So, these securities are used for capital generation, and then uses it for company’s growth.
Concluding remarks
Both are employed in business. Businesses are often established through debit securities, then what is the need for equity securities. Companies have to cover multiple expenses and expansion of business. They can also use equity instruments for repayment of debits. So, there are multiple uses for securities. As an investor, you need tools for analysis. Investment decisions are made by carefully analyzing the market. For better analysis of the stock market, investors often employ financial analysis of companies.
Abhay Bhutada, the Managing Director of Poonawalla Fincorp Limited, is an accomplished leader with over 15 years of experience in commercial and retail lending. A Qualified Chartered Accountant, he has been pivotal in leveraging technology to enhance financial services. Starting his career at Bank of India, he later founded TAB Capital Limited and co-founded Poonawalla Finance Private Limited, emphasizing digital lending. Under his leadership, Poonawalla Fincorp achieved a 'AAA' credit rating, integrating acquisitions and emphasizing corporate governance. Actively involved in industry forums and CSR initiatives, Abhay has been recognized with awards like "Young Entrepreneur of India 2017" and "40 under 40 Most Influential Leader for 2020-21." Personally, he values mindfulness, enjoys gardening, yoga, and sees every day as an opportunity for growth and improvement.
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"Does Foreign Direct Investment Negatively Affect Preservation of Culture in the Global South? Case Studies in Thailand and Cambodia."
Do elements of globalization, such as Foreign Direct Investment (FDI), negatively affect the ability of countries in the Global South to preserve their culture? This research aims to answer this question by employing a cross-sectional comparative case study analysis utilizing methods of difference. Thailand and Cambodia are compared as they are in the same region and have a similar culture. The metric of difference between Thailand and Cambodia is their ability to preserve their culture. This ability is operationalized by their respective attitudes towards FDI; Thailand imposes stringent regulations and limitations on FDI while Cambodia does not hesitate to accept most FDI and imposes fewer limitations. The evidence from this study suggests that FDI from globally influential countries with high gross domestic products (GDPs) (e.g. China, U.S.) challenges the ability of countries with lower GDPs (e.g. Cambodia) to protect their culture. Furthermore, the ability, or lack thereof, of the receiving countries to protect their culture is amplified by the existence and implementation of restrictive FDI policies imposed by their governments.
My study abroad in Bali, Indonesia, inspired this research topic as I noticed how globalization is changing the culture of its people. I learned their language and way of life which helped me understand the beauty and importance of cultural preservation. I believe we could all benefit from learning new perspectives as they could help us ideate solutions to contemporary issues and empathize with others.
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
OJP data from firms like Vicinity Jobs have emerged as a complement to traditional sources of labour demand data, such as the Job Vacancy and Wages Survey (JVWS). Ibrahim Abuallail, PhD Candidate, University of Ottawa, presented research relating to bias in OJPs and a proposed approach to effectively adjust OJP data to complement existing official data (such as from the JVWS) and improve the measurement of labour demand.
Vicinity Jobs’ data includes more than three million 2023 OJPs and thousands of skills. Most skills appear in less than 0.02% of job postings, so most postings rely on a small subset of commonly used terms, like teamwork.
Laura Adkins-Hackett, Economist, LMIC, and Sukriti Trehan, Data Scientist, LMIC, presented their research exploring trends in the skills listed in OJPs to develop a deeper understanding of in-demand skills. This research project uses pointwise mutual information and other methods to extract more information about common skills from the relationships between skills, occupations and regions.
The Rise of Generative AI in Finance: Reshaping the Industry with Synthetic DataChampak Jhagmag
In this presentation, we will explore the rise of generative AI in finance and its potential to reshape the industry. We will discuss how generative AI can be used to develop new products, combat fraud, and revolutionize risk management. Finally, we will address some of the ethical considerations and challenges associated with this powerful technology.
1. WIRC 2014
Brief by | Milain David Fayulu with Helene Combes
G20 CORPORATE TAX EVASION
2. G20|CORPORATE TAX EVASION 2
“It is more important now than ever that taxpayers pay the right amount of tax at
the right time and in the right place.”
Masatsugu Asakawa,Chair of the OECD Committee on Fiscal Affairsand Deputy Vice-Minister of Finance for International Affairs, Japan in World
Commerce Review, June 2012
OVERVIEW
Taxes are the main source of income for governments as well as a powerful political tool
worldwide. Globalization however has progressively opened the business transaction flows,
regardless of borders or state lines. As such taxation on international corporations has become
increasingly complex to regulate. The G20 will have to weigh the advantages and problems
caused by corporations which seek banking abroad in order to avoid taxation.
Corporate tax evasion has seen a growth in the past decade with the spread of profit
shifting. The OECD’s Base Erosion and Profit Shifting Project1
has exposed, international
corporations use more and more creative ways to use tax competition to their advantage by
shifting their profits and assets to different tax jurisdictions. The current challenge is to create a
level tax playing field worldwide and create a harmonized taxation system which would
counteract the spread of tax evasion. The G20 has had difficulty reaching a long lasting
agreement on the Corporate Tax Evasion issue because of the double standards some
countries utilize to ignore incriminating practices in their own jurisdictions. The abundance of
existing bilateral tax treaties have also made any resolution more complex because of the legal
intricacies they have created.
The international community’s previous attempts to solve the global tax dilemma have
lead to more legislation that has merely exacerbated the problem. As the G20 has pledged to
find a durable solution to the global tax problem, this committee will attempt to tackle this issue
of the globalized world.
1
OECD (2013), Addressing Base Erosion and Profit Shifting, OECD Publishing, Paris
3. G20|CORPORATE TAX EVASION 3
KEY ACTORS AND INTERESTS
Globally, the equivalent of more than 5.1 percent of global gross domestic product never
reaches the coffers of 145 national governments in the form of taxes, according to a report by
The Tax Justice Network2
, an independent group that promotes financial transparency. The
OECD underlines the increasing imbalance between increasing corporate revenue in the
national GDPs and a decrease in tax payments from these same corporations.3
The issue of tax avoidance is very complex because it conflicts most with moral
principles rather then legal ones and differs from tax evasion in that tax evasion is illegal as well
as morally reprehensible. Although most states and non-states actors have different views on
the issue, the ministerial level of the OECD council released a Declaration on the status of tax
evasion and the possible means to repress tax evasion.4
The countries that rely heavily on their
status as tax havens use their status to maintain their competitive advantage and dread the
forthcoming regulations.
Definitions
A tax jurisdiction is the land authority to which any company or individual will pay taxes
for living or working in the area of the jurisdiction.
A tax haven is a state, country or territory with a tax jurisdiction where certain taxes are
levied at a low rate or are absent. Different jurisdictions tend to be havens for different types of
taxes and for different categories of companies. We can distinguish between the following broad
categories: No tax havens, No tax on foreign income havens, low tax havens and special tax
havens.5
2 "The Cost of Tax Evasion Worldwide." www.taxjustice.net. Tax Justice Network, 23 Nov. 2011. Web. 23 Sept. 2013.
3 OECD, Addressing Base Erosion and Profit Shifting, OECD Publishing, Paris, 2013 chap. 2.
4
OECD Concil, Ministerial Level. Declaration on Base Erosion and Profit Sharing. May 29
th
2013. Paris
5
Orlov, Mykola. "The Concept Of Tax Havens." Asterlaw.com. N.p., n.d. Web. 02 Dec. 2013.
4. G20|CORPORATE TAX EVASION 4
No–tax havens are countries that have no income, capital gains, or wealth capital taxes,
and in which you can incorporate and form a trust. Primary examples are Bermuda, Bahamas
and Cayman Islands.
No-tax on foreign income havens are countries that impose income taxes, both on
individuals and corporations, but only on locally derived income. They exempt from tax any
income that is earned from foreign sources. Panama, Jersey and the Isle of Man are the best
examples.
Low Tax Havens are countries that impose some taxes on all corporate income,
wherever earned. However, most have double taxation agreements with high taxation countries
that may reduce the withholding tax imposed on income derived from the tax countries. The
British Virgin Islands is a good example.
Special tax havens are countries that impose most taxes but exempt companies in
specific fields to pay taxes. Liechtenstein is a tax haven that specializes in trusts structures for
companies. All these tax havens will be affected differently by different regulations and none of
them is willing to fully relinquish its status. Therefore, there needs to be an organism that
mitigates all the parties’ interests.
Actors
The Organization for Economic Co-operation and Development (OECD) is a body of 34
developed countries founded in 1961 to stimulate economic progress and world trade. In
response to public outcry in several nations that multinational corporations are using tax havens
to effectively avoid paying taxes in the countries where they do business the OECD is
spearheading three initiatives that are aimed directly at this objective. The first initiative is the
creation of a Global Forum on Transparency and Exchange of Information for Tax Purposes.
Secondly, as mentioned before, the OECD’s is committed to tackle what they label “Base
Erosion and Profit Shifting”, namely the booking of revenues in jurisdiction where a company
has limited or no operations. In line with the report presented to G20 Finance Ministers in
5. G20|CORPORATE TAX EVASION 5
February 20136
, the OECD has developed an action plan to respond to BEPS. The OECD
together with the G20 countries is developing a global model for automatic exchange of
information as the new standard and plans to have this work completed by 2014.7
This latter
initiative is controversial because certain financial institutions could incur a loss of clientele if the
exchange of information is implemented.8
The OECD provides a forum in which member states
can work together to solve common problems. Consequently, the policies promoted by the
organization are a reflection of negotiations between members.
The United States government has agreed with the G20 plan to curb tax evasion
worldwide as well as with the OECD BEPS framework. One of the federal government’s
interests is to gain a better hold over the complex web of overseas tax havens and subsidiaries
used by America’s largest corporations. However, the U.S’ position is not that simple due to the
fact that recent tax initiatives in a number of foreign countries, including several of its G20
partners, appear to be primarily targeting American companies with global operations.9
This
could potentially harm both the US companies’ competitive position and subsequently the US
Treasury. That is why the current position of the administration is ambiguous. While the US
government concedes that the rules need to be updated and changed to some extent, they are
pushing for moderate change because they are committed to the success of their local
companies who appear to be very involved in the issue.
6
Gurria, Angel. "SG Report to G20 Leaders." Oecd.org. Organisation For Economic Cooperation and Development,
n.d. Web. 01 Dec. 2013.
7
OECD (2013), Action Plan on Base Erosion and Profit Shifting, OECD Publishing.
7
http://dx.doi.org/10.1787/9789264202719-en
8
Guria, Angel. "OECD SECRETARY-GENERAL REPORT TO THE G20 FINANCE MINISTERS AND CENTRAL
BANK GOVERNORS." Oecd.org. Organisation For Economic Cooperation and Development, 20 July 2013. Web. 01
Nov. 2013.
9
Norris, Floyd. "G-20 Backs Plan to Curb Tax Avoidance by Large Corporations."Nytimes.com. New York Times, 19
July 2013. Web. 15` Oct. 2013.
6. G20|CORPORATE TAX EVASION 6
European Union officials believe “tax fraud and firms' aggressive cross-border schemes
to avoid taxes, cost the bloc's governments an estimated 1 trillion Euros ($1.3 trillion) a year”.10
Similarly to the United States, tax evasion limits the capacity of EU member states to raise
money and implement their economic and social policies. That could mean cuts in public
services and a slower economy. While many within the EU argue for a level playing field, many
countries like Ireland and Belgium are unhappy with the current push for more regulation due
their status of tax havens.11
Their interests collide with countries like France and Germany who
have relatively high tax rates and see their richest residents flee to more tax friendly jurisdiction
within the EU. A good illustration of the situation is the recent attempt by France’s richest man,
Bernard Arnault, to acquire Belgian citizenship to avoid paying taxes in France.12
Paradoxically,
when the European finance ministers met in Vilnius,Lithuania on the 14th
of September 2013 to
discuss the issue of tax avoidance, Jeroen Djisselbloem the Dutch finance minister, declared:
“the meeting consisted of cannon shots going back and forth”.13
This declaration is symptomatic
of the current atmosphere within the union regarding the issue of taxation. There is a common
consensus around the necessity to take actions but countries like Luxembourg, Ireland or
Belgium that have built their reputation as destinations for foreign assets are not willing to
sacrifice their competitive advantage beyond a certain limit. Additionally, the city of London,
which is the backbone of the largest network of tax havens in the world and operates as a
government within the United Kingdom, makes it very difficult to agree on issues pertaining to
tax evasion and avoidance.14
10
Chalabi, Mona. "Tax Evasion: How Much Does It Cost?" Theguardian.com. Guardian News and Media, 27 Sept.
2013. Web. 04 Dec. 2013.
11
"Ireland Pledges to Close Apple Tax Loophole." Financial Times. N.p., 12 Apr. 2010. Web. 04 Dec. 2013.
12
Masidlover, Nadia. "LVMH's Arnault Withdraws Belgian Citizenship Bid." Wsj.com. Wall Street Journal, 10 Apr.
2013. Web. 01 Dec. 2013.
13
"EU Finance Ministers Seek Ways to Combat Tax Evasion." CTVNews. Canada TeleVision, 23 Sept. 2013. Web.
04 Dec. 2013.
14
Shaxon, Nicholas. "The Tax Haven in the Heart of Britain." The Tax Haven in the Heart of Britain. News Statesmen,
24 Feb. 2011. Web. 04 Dec. 2013.
7. G20|CORPORATE TAX EVASION 7
China has agreed to join the global fight against tax evaders by signing on to the G20
agreement. Global Financial Integrity, a financial watchdog group, has estimated that more
money flows out of China from illicit financial activity than any other developing country.15
Figures released by China's State Administration of Taxation showed that anti-tax evasion
efforts by the Chinese government generated an additional income of some $5.7 billion last year,
nearly 30 times the amount in 2008.16
The Chinese position is unclear as the state apparatus
and the politburo of the communist party are involved and benefit greatly from failures in the
taxation system, notably through flows to the financial hubs of Macau and Hong Kong. Even
though the official position is in favor of more regulation, in practice it is highly unlikely that the
authorities implement any regulation to its full extent.
Multinationals like Apple, Starbucks and Google aggressively put income in countries
where the corporate tax rate is extremely low. In some instances these companies employ
another pervasive technique, which consist in sourcing the revenues “nowhere at all”. This is
referred to as the “stateless income” or “double Irish”.17
The goal for a company is to maximize
shareholders profits. Under the current global tax system, companies are obligated to take
advantage of tax breaks offered all around the world. The CEO of Google Eric Schmidt raised
an important point when he said, “with respect to the current sort of issues, I don’t think a
company should decide what tax policies should be, I think governments should.”.18
Multi-
National Corporations (MNC) are benefiting from loopholes in order to compete globally.
Recently, Apple’s CEO Tim Cook was heard by the senate finance committee concerning
15
Dawson, Stella. "China to Join Global Crackdown on Tax Evasion." Reuters. Thomson Reuters, 21 Aug. 2013.
Web. 04 Dec. 2013.
16
Nignzu, Zhu. "China Joins Global Combat Tax Evasion Efforts by Signing Multilateral Tax Convention - Xinhua |
English.news.cn." China Joins Global Combat Tax Evasion Efforts by Signing Multilateral Tax Convention - Xinhua |
English.news.cn. Xinhua, 27 Aug. 2013. Web. 04 Dec. 2013.
17
Wood, Robert W. "Excuse Me Apple, Google, Starbucks & H-P: IRS Wants To Tax Stateless Income." Forbes.
Forbes Magazine, 06 Aug. 2013. Web. 04 Dec. 2013
18
Barker, Alex. "EU Rushes out Corporate Tax Transparency Law." Financial Times. N.p., 23 May 2013. Web. 04
Dec. 2013.
8. G20|CORPORATE TAX EVASION 8
Apple’s deferral income practices, which consist in recording income generated in Asia, Africa,
and Europe in Ireland, as Apple’s subsidiary in that country holds the company’s patents and
trademarks for those regions. Because the Irish company is not an operating entity, it pays no
taxes to the Irish government on the income it receives from other Apple operating entities.19
Echoing Mr. Schmidt’s comment, Apple is just using the tax system to its advantage. Ironically,
shareholders have criticized Apple’s management for not using the same loophole for their Latin
American operations (taxed in the U.S). MNCs are currently in favor of the status quo.
Banks are central to the issue because the money flows through their channels
worldwide. Therefore, they hold crucial information regarding multinational financial activities.
Tax authorities in many countries including the United States have pressured governments and
financial institutions in countries like Switzerland and Liechtenstein, who abide by the “banking
secrecy”, to surrender information. This highlights the double-sided problem of tax evasion. On
the one hand banks are competing to attract deposits, on the other they are forced to comply
with revenue-damaging regulations. The intrinsic competitive advantage Swiss banks hold has
been the fact that they were never required to share information about their clients. The current
regulatory framework, proposed by the OECD and adopted by the G20 and if implemented
successfully, will result in a loss of competitiveness for the Helvetic banks.
CHRONOLOGY
Corporate tax evasion is a problem that traces back to the Greek civilization. Empirical
evidence even suggests that ever since taxation was introduced, people and organizations alike
have been trying to decipher ways to circumvent them.
19
"Summary: Tim Cook’s Senate Grilling on Taxes." Corporate Intelligence RSS. Wall Street Journal, 21 May 2013.
Web. 04 Dec. 2013.
9. G20|CORPORATE TAX EVASION 9
1920s/30s: The technical use of the words evasion/avoidance in the modern sense originated in
the USA where it was well established by the 1920’s, as multinational companies began to
emerge as forces in world markets. The 1920’s were an interesting era because it led to one of
the biggest financial crisis in the history of the world, the Great Depression. After America was
hit by the 1929 stock market crash, President Roosevelt decided to tax American businesses
heavily in order to finance the reconstruction of the country. During his tenure as President he
went as far as proposing a 100% marginal tax rate on the rich. During this time rich Americans
and corporations began strategizing about ways to hide some of their profits. The issue was
brought to national attention during the Bullen v. Wisconsin case20
where lines were officially
drawn between tax evasion and avoidance.
1930s: Most of Europe was facing some combination of political instability, powerful labor
movements, and strong political pressures to raise public revenues to placate those movements.
Switzerland began to provide a convenient and secure tax haven when the world was in dire
need for it in the 1920s. Although England had the larger economy, Switzerland held a key
advantage because of the legal leeway Swiss bankers possessed through the highly
decentralized state. In contrast, the UK’s policy involved balancing the temptations to become a
tax haven against the pressures of raising money for urgent public purposes.
The deregulation of the 1970s:The trend of deregulation was particularly pronounced in
America and Britain. Ronald Reagan campaigned by touting tax cuts as a means to rescue the
American economy from stagnation. According to data from the economist, during his
administration, top marginal tax rates dropped in steps from 70% to 28%. In Britain Margaret
20 "Bullen v. Wisconsin - 240 U.S. 625 (1916)." Justia US Supreme Court Center. N.p., n.d. Web. 07 Dec. 2013.
10. G20|CORPORATE TAX EVASION 10
Thatcher slashed the top marginal income tax rate from 83% to 40% between 1979 and 1988.21
As the financial liberalization pushed by Reagan and Thatcher began having an effect, it
increasingly allowed companies to “shop” around for jurisdictions to escape tax and circumvent
regulations. These measures were designed to strengthen the economy, but the easy flow of
capital worldwide that resulted from this era of deregulation encouraged many companies and
rich individuals to move more money around and participate in tax evasion
In August 2007: The IRS issued the first round of guidance on the Foreign Account Tax
Compliance Act (FATCA) which is a law aimed at foreign financial institutions and other financial
intermediaries, to prevent tax evasion by US citizens and corporations through the use of
offshore accounts. The first round of guidance was published with two models of
intergovernmental agreements. In the first, financial institutions in the partner country would
report information about U.S. accounts to the tax authority of the partner country either with
reciprocal information (Model 1A) or without (Model 1B). In the other (Model 2) where partner
country financial institutions reported directly to the U.S. Internal Revenue Service, and the
partner country agrees to lower any legal barriers to that reporting.22
FATCA implementation
faces legal hurdles because it may be illegal in foreign jurisdictions for financial institutions to
disclose the required account information. There is a controversy regarding the appropriateness
of intergovernmental agreements to solve any of these problems.
2 April 2009: The G20 gathered in London to discuss the financial outlook and discuss policy
changes aimed at stabilizing the ailing global economy.23
Some of the changes brought forward
included growth, jobs, repairing the financial system to restore lending and strengthening
financial regulation to rebuild trust. This summit marked the awakening of the international
21
GI. "How Mrs Thatcher Smashed the Keynesian Consensus." The Economist. The Economist Newspaper, 09 Apr.
2013. Web. 01 Dec. 2013.
22 http://www.irs.gov/Businesses/Corporations/Foreign-Account-Tax-Compliance-Act-(FATCA)
23
http://www.imf.org/external/np/sec/pr/2009/pdf/g20_040209.pdf
11. G20|CORPORATE TAX EVASION 11
community to the catastrophic consequences of the global crisis of 2008. As a result of this
awakening, financial regulation worldwide was put at the forefront of the legislative agendas.
18 March 2010: FATCA is signed into law in the United States.
FATCA will have a far-reaching impact on US-based companies as well as foreign companies
with US assets or clients. Under the new provisions, a Foreign Financial Institution (FFI) may
enter into an agreement with US tax authorities (IRS) requiring it, among other things, to report
information on the foreign institution’s US accounts. A FFI that enters into such an agreement
becomes a "participating FFI”.24
According to the law, if a FFI does not enter into an agreement
with the IRS, all relevant US-sourced payments, such as dividends and interest paid by US
corporations, will be subject to a 30% withholding tax. The same 30% withholding tax will also
apply to gross sale proceeds from the sale of relevant US property. All FFIs must comply with
FATCA or be subject to withholding. Given the significant lead times large companies may need
to comply with FATCA requirements particularly for it system changes.
May-November 2011: Protest Movements. Worldwide protests rose to challenge social and
economic inequality, greed, corruption and the perceived undue influence of corporation on
governments particularly from the financial services sector. Movements such as the Spanish
Indignados or Occupy Wall Street used direct democracy to emphasize direct action. These
Movements and the subsequent ones lead governments worldwide to act more aggressively on
issues such as tax evasion, a subset of the many inequalities highlighted by the protesters.
September 11 2012: Bradley Birkenfeld a former UBS banker transmitted crucial information to
the IRS about schemes used by Swiss banks to help clients evade money. The disclosure of
24 "FATCA Knowledge Center." Foreign Account Tax Compliance Act (FATCA) Resources. Ernst & Young, n.d. Web.
29 Nov. 2013.
12. G20|CORPORATE TAX EVASION 12
Swiss banking information, which caused a fierce political debate in Switzerland before winning
approval from the country’s Parliament set off such a panic among wealthy Americans that more
than 14,000 of them joined a tax amnesty program. I.R.S. officials say the amnesty program has
helped recover more than $5 billion in unpaid taxes.25
April 2013: Offshore leaks. A cache of 2.5 million files revealed the secrets of more than
120,000 offshore companies and trusts, exposing hidden dealings of politicians and wealthy
individuals. The secret records obtained by the International Consortium of Investigative
Journalists exposed the names behind covert companies and private trusts in the British Virgin
Islands, the Cook Islands and other tax havens. The leaks are said to include information about
various major corporations and their dealings in fiscal paradise as well as high net worth
individuals26
. The leaked files provide facts and figures, cash transfers, incorporation dates,
links between companies and individuals that illustrate how offshore financial secrecy has
spread aggressively around the globe.
May 2013: England cracks down on ownership secrecy. David Cameron announced plans
to crack down on UK accountants, lawyers and business figures who use shell companies to
hide the identity of ultimate beneficiaries. Firms registered in Britain will come under a legal
obligation to obtain and hold adequate, accurate and current information on the ultimate owner
who benefits from the company and be required to place the information on a central register
that would be maintained by Companies House. In a speech to the Open Government
25
Kocienwiski, David. "Whistleblower Awarded $104 Million by I.R.S." Nytimes.com. New York Times, 11 Sept. 2011.
Web. 04 Dec. 2013.
26 Ryle, Gerard. "Center for Public Integrity." Center for Public Integrity. N.p., 20 Nov. 2013. Web. 24 Oct. 2013.
13. G20|CORPORATE TAX EVASION 13
Partnership Summit in London Cameron surprised some business leaders by insisting the
register must be open to the public as well as officials.27
June 2013: G8 Summit. G8 leaders gathered in Lough Erne in Northern Ireland to agree to
further transparency on the sharing of tax information and bring the international tax rules into
the modern age. As the summit closed the G8 leaders’ communiqué announced that they will
move to establish the automatic exchange of information between tax authorities as the new
global standard. The G8 leaders stated their support for the OECD’s work to tackle tax
avoidance by multinational companies, and announced that they will draw up a template for
global corporations to report to tax authorities where they make their profits and pay taxes
around the world. This would give governments a new tool against tax avoidance by
multinationals and would be particularly helpful to the governments of developing countries.
Under the agreement reached the G8 seek to provide support to developing countries to collect
the tax they are owed.
ROOT CAUSES
Human Nature
The main origin of tax avoidance is simply human nature. Individuals will do whatever it
takes to maintain and strengthen any form of superiority they hold. Hence they act in their own
best interest when it comes to giving up wealth. The basic theory28
used in nearly all compliance
research builds on the economics-of-crime model, in which an individual “maximizes the
expected utility of the tax evasion gamble, balancing the benefits of successful cheating against
the risky prospect of detection and punishment”. This approach asserts that compliance
27 Wintour, Patrick. "Register Revealing Firms' True Owners Will Be Open to Public, Says Cameron." The Guardian. Guardian News and Media,
31 Oct. 2013. Web. 02 Dec. 2013.
28
[1] Alm, J. "Tax Compliance and Administration." In Handbook on Taxation, edited by W. B. Hildreth and J. A.
Richardson (741-68). New York: Marcel Dekker, Inc., 2000.
28
28
14. G20|CORPORATE TAX EVASION 14
depends largely upon audit and fine rates. Indeed, its central conclusion is that an individual
pays taxes only because of the fear of being caught and the resulting punishment. However, it is
clear that compliance cannot be explained entirely by the level of enforcement. The levels of
audit and penalty rates are set at such low levels that most individuals would evade if they were
rational simply because it is unlikely to get caught. Although it must be noted that government
are drastically changing their behavior in regards to tackling tax evaders due to budget
constraints.
A Legal Limbo
Taxes depend on definitions of legal terms, which are usually vague. For example, the
distinction between "business expenses" and "personal expenses" is of much concern for
taxpayers and tax authorities, as the proper distinction between the two is not properly defined.
As a result, any term of tax law becomes a potential source of tax avoidance As legislators act
independently of their constituents on many issues, tax laws do not reflect the interest of the
majority of a jurisdiction’s population (poor and middle income). In an article for the Guardian,
Joseph Stieglitz noted, “Companies like General Electric lobbied for provisions that enabled
them to avoid even more taxes”.29
MNC, like General Electric lobby for, and usually obtained,
amnesty provisions that allow them to comply with the letter of law, while avoiding its intent. In
the case of tax law, GE can bring their revenue back to the US at a special low rate, on the
promise that the money would be invested in the country. The lack of clearly established
definitions as well as the exemption and amnesty provisions create a legal limbo which allows
for more tax avoidance and evasion.
29
Stiglitz, Joseph. "Globalisation Isn't Just about Profits. It's about Taxes Too." The Guardian. N.p., 23 May 2013.
Web. 29 Oct. 2013.
15. G20|CORPORATE TAX EVASION 15
Tax shelters
Tax shelters are investments that allow, a reduction in one's income tax liability. The
term "tax shelter" was originally used to describe primarily certain investments made in the form
of limited partnerships, some of which were deemed by the U.S. Internal Revenue Service30
to
be abusive. These loopholes allow financial engineers and advisors to devise strategies to pay
as little tax as possible within the law. In 2003 the Senate's Permanent Subcommittee on
Investigations held hearings about tax shelters which are entitled U.S. tax shelter industry: the
role of accountants, lawyers, and financial professionals.31
Many of these tax shelters were
designed and provided by accountants at the large American accounting firms. Examples of U.S.
tax shelters include: Foreign Leveraged Investment Program (FLIP) and Offshore Portfolio
Investment Strategy (OPIS). Partners at the accounting firm, KPMG, devised both programs.
These tax shelters were also known as "basis shifts". Contrarily to the overall vague legal
definitions of taxation, clear laws govern tax shelters.
POLICY OPTIONS
Governments worldwide generally use two types of tax compliance policies. On the one
hand, policy options aimed at coercing tax compliance by increasing risks for practicing tax
evasion, and on the other hand a set of policies emphasizing development of supportive tax
paying values among citizens via service improvement and informational strategies.
Governments’ tax agencies tend to favor coercive policies.
The first policy option or strategy is directed at enacting statutes and adopting
administrative powers and procedures which coerce compliant behavior. The strategy of taking
these actions is what we are witnessing throughout the developed world in these days of budget
30
"Tax Information for Individuals." Tax Information for Individuals. Internal Revenue Services N.p., n.d. Web. 30 Oct.
2013.
31
"Senate Report 109-54 - THE ROLE OF PROFESSIONAL FIRMS IN THE U.S. TAX SHELTER INDUSTRY."
Senate Report 109-54 -
16. G20|CORPORATE TAX EVASION 16
constraints. Coercive policies are based on increasing the risks incurred when practicing tax
evasion. These policies are improving evasion discovery capabilities32
, increasing evasion
penalties and strengthening delinquent tax collections capabilities. Hiring more auditors and
supplying them with computer technology improve discovery capabilities.33
Another policy which
may be enforced and has been implemented in many European countries, would be to make
evasion penalties more stringent by increasing interest rates on delinquent accounts and raising
fines, and by elevating tax evasion from misdemeanor to felony status.34
These practices are
designed to influence taxpayers' mental calculations in such ways as to induce compliance.
Although there is a long list of individual countries with good methods to decrease tax evasion,
the problem of the globalized nature of the economic system and the use of other jurisdictions to
bypass national laws remains the main cause of the continued issue of tax evasion.
The second policy course would be to encourage compliance through a variety of
services such as instructing taxpayers about tax regulations, and through installing a firm sense
of civic duty and moral obligation among citizens. In opposition to the first strategy, which
constructs a threatening environment, the second aims to establish a cooperative relationship
between taxpayers and their government. Governments can instill string compliance values so
that obedience to tax laws becomes more an automatic or natural act. Values can be reinforced
through promotional campaigns and other means that inform citizens of the societal costs of tax
evasion and which illustrate the positive externalities a society gains from it. Furthermore,
improved service and tax education efforts can empower citizens with the knowledge they need
to comply and avoid mistakes in calculating taxes owed, and contribute to removing frustrations
32 "
Internal Revenue Manual - 25.1.1 Overview/Definitions." Internal Revenue Manual - 25.1.1 Overview/Definitions.
Internal Revenue Services, 16 Dec. 2011. Web. 03 Dec. 2013.
33
Kristof, Kathy. "Obama Budget Surprise: More Tax Audits." Cbsnews.com. Cable News Network, 15 Feb. 2011.
Web. 02 Dec. 2013.
34
Wood, Robert W. "Not Even Probation For Stephen Baldwin's Tax Evasion, Jail For Wesley Snipes." Forbes.
Forbes Magazine, 02 Apr. 2013. Web. 02 Dec. 2013.
17. G20|CORPORATE TAX EVASION 17
and the sense of mystery in tax filing. In the UK for instance, the government is working to
prevent tax evasion by giving people the opportunity to declare what they owe. They are running
campaigns to encourage people to tell HMRC (Tax agency) what they owe. So far HMRC has
“raised 547 million dollars from voluntary disclosures and almost 140 million from follow up
activity including 20 000 completed investigations”.35
This type of initiative should be expanded.
Monitoring tax evasion is a very complex endeavor. Ultimately, there are only two broad
course of action possible; one being reactive, meaning acting after the fact to recoup what was
lost through fines and penalties, the other being proactive, by developing a set of tools to
prevent tax evasion from happening in the first place. Changes in policies and the so-called
“fiscal instability” will constantly reshape citizens’ behavior. The emphasis therefore needs to be
utilized for improvement to occur.
PROJECTIONS
The tax evasion issue has increased impact on the global world and could reach new
heights. The income inequality gap between the very rich and the rest of the world’s population
will widen to levels that will pose serious threats to the market economy. When a system fosters
inequalities cracks will start to appear. As a direct consequence of the non-confidence in the
system, people that are marginalized economically will take to the street and social unrest will
cause many developed nations to implode. We already witnessed this phenomenon in
countries like Greece and Spain. In those two countries the potential consequences of
prolonged protestation were mitigated by the intervention of the IMF, Germany and the
European Central Bank. However, if this was to happen in bigger economies, namely France
and/or Italy, the magnitude of the disaster would be extremely hard to combat.
35
"Tell Us What You Think of GOV.UK." Reducing Tax Evasion and Avoidance. Her Majesty Revenue and Customs,
08 Oct. 2013. Web. 03 Dec. 2013.
18. G20|CORPORATE TAX EVASION 18
Another potential consequence of a failure to reach a long-term agreement would be the
unbalancing of the world economy, with risks of destabilization for entire economies due to a
possible sudden repatriation of huge amounts of liquidity. As a matter of fact, a recent report
commissioned by the tax justice network and written by former McKinsey chief economist
James Henry found that wealthy individuals and corporation have accumulated $21 trillion in
secretive offshore accounts.36
That’s a sum equal to the gross domestic product of the United
States and Japan combined. In the event that this money was to be brought back “on shore”,
entire economies would collapse under the pressure caused by the influx of cash.
In conclusion, the issue of tax evasion is simply the mirror of the society we have
decided to build for ourselves. So long as we believe the system the way we conceived, which
is the most adequate to ensure relative stability and prosperity, we will see the issue of tax
evasion remain. It is deeply rooted at the core of the free market economy. It is unlikely that
there will ever be a full end to tax evasion, but this committee has the chance to take great
strides to significantly diminish the problem.
36
Allen, Frederick E. "Super Rich Hide $21 Trillion Offshore, Study Says." Forbes. Forbes Magazine, 23 July 2012.
Web. 08 Dec. 2013.
19. G20|CORPORATE TAX EVASION 19
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