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IFA: BEPS And The Future

by Caroline Huggett,, Copenhagen

30 August 2013

Day Three of the Copenhagen IFA Congress kicked off with the greatly-anticipated "Base Erosion and Profit Shifting" seminar, chaired by the University of Sydney’s Professor Richard Vann, who was joined by panel members William Morris (chair of the Business and Industry Advisory Committee to the OECD), Paul Oosterhuis (senior international tax partner in the Washington, D.C. office of law firm Skadden, Arps, Slate, Meagher & Flom), Pascal Saint-Amans (Director of the OECD’s Center for Tax Policy and Administration) , and Mike Williams (Director of Business and International Tax with the UK Treasury).

The session started with a look at the background from which the OECD’s Action Plan on Base Erosion and Profit Shifting (BEPS) has arisen, examining the financial impetus provided by the economic crisis and the subsequent measures taken by governments to maximize revenues, and the political and "emotional" climate created by the discovery and depiction of various companies’ tax planning strategies.

Commenting with regard to the UK perspective on this, Mike Williams observed that the three firms that have come under the most scrutiny in the United Kingdom (Google, Amazon and Starbucks) have been somewhat lumped together by the media, and by campaigning groups, with the battle depicted to an extent as one between digital and non-digital retailers. He further explained that the current climate of corporate tax scrutiny had been facilitated by the UK’s G8 Presidency role, and the decision to focus on the issue of BEPS as a priority.

In the United States, meanwhile, Paul Oosterhuis revealed, the priority is the outbound taxation of US-based multinationals, with political pressure from politicians such as Senator Carl Levin leading to increased scrutiny of the tax affairs of US firms such as Hewlett Packard, Apple, and Microsoft. He suggested that due to the difference in focus, international tax reforms in the United States are likely to run parallel to the international BEPS project for the most part, rather than to feed into it, and at any rate are likely to be a long time coming.

Commenting on the willingness of countries to participate in the BEPS initiative, Pascal Saint-Amans observed that coordinated action is necessary in order to prevent the "chaos" which would likely ensue were different states to pursue their own agendas in this area, and revealed that even countries which benefit from their arguably preferential tax regimes (such as Ireland) see the advantages of a negotiated and consensual series of changes. Governments, he explained, are beginning to see the need for international coherence between their sovereign tax regimes, noting that: "There was a story, and the actions have been built, based on that story."

The panel then went on to discuss the BEPS action plan points as broadly grouped by the OECD, namely: Addressing the challenges of the digital economy (Action 1); establishing international coherence (Actions 2-5); restoring international standards (Actions 6-10); and looking at transparency and instruments (Actions11-15). For each action (or group of actions), the panel discussed the perspectives of various countries including the UK, the United States, and Australia, before looking at the broader issues, and at possible outcomes of the work of the OECD and other multilateral bodies in the area under examination.

The talk concluded by stressing the need for businesses as well as governments to be involved in the development of new rules (or in some cases the refinement or rejuvenation of existing rules), and Pascal Saint-Amans observed that although there are challenges involved in coordinating the wants and needs of governments, businesses, NGOs and other multilateral bodies, and the deadlines set in the action plan are tight, putting an end to double taxation and double non-taxation is a desirable outcome for all, and one that stands a good chance of being reached.

In the afternoon, in one of the most lively sessions of the Congress so far, "How will the tax system look in 25 years" the panel took a (sometimes playful) look at developments that they expect to take place in various areas of taxation over the next 25 years, with some panel members hoping to come back to IFA and be vindicated in their predictions at that point, while others were equally determined not to!

Chaired by Michael Lang (Professor of Tax Law at the Vienna University of Economics and Business), the other panellists were Wei Cui (currently associate professor at the University of British Columbia Faculty of Law), Keith Engel (former Chief Director of Legal Tax Design with the South African Treasury, now a partner in Ernst & Young’s Africa tax practice), Liselott Kana (Head of the International Tax Legislation Department of the Revenue Administration in Chile’s Ministry of Finance), Rick Krever (Professor and Director of the Taxation Law and Policy Research Institute at Monash University in Australia), and Scott Wilkie (high-profile corporate tax lawyer with Blake Cassels & Graydon) giving their predictions for the Asian, South African/Sub-Saharan African, South American, Australian, North American regions respectively.

The speakers gave expert regional perspectives (and made predictions) on issues as broad ranging as the composition of the tax mix (direct vs. indirect taxes), the future shape of VAT, GST and other indirect tax systems, the survival (or not) of the arm’s length principle as enshrined in international transfer pricing standards, potential new taxes which may be introduced, the future nature of the relationship between taxpayers and tax administrations, and the evolution of the role of tax advisors.

However, in addition, a number of other expert speakers were drafted in to give snapshot (60 second) opposing perspectives, and the audience were asked to cast their vote on each of the issues. The session threatened to – but did not – end with a rousing chorus of "Que Sera, Sera," which apparently actually happened at a previous IFA seminar!

So really…audience participation and a sing-song (nearly). What more could you ask for?

TAGS: South Africa | Finance | tax | business | Chile | Ireland | mining | law | Australia | United Kingdom | multinationals | United States | tax reform | standards | retail | North America | Africa | South America | Tax

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