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IFA: Don't Mention The B-Word!

by Caroline Huggett,, Copenhagen

02 September 2013

Well, yesterday a sing-song was threatened, but today we actually got one, courtesy of the "Recent Developments in International Taxation" session, chaired for the third (and sadly last) year by Philip Baker, celebrated QC and tax expert, and also member of IFA’s UK Committee.

After the focus in previous sessions on the OECD’s Base Erosion and Profit Shifting Action Plan, Mr Baker employed a BEPS "swear jar," requiring a contribution every time the subject was mentioned by a panel member or speaker. Needless to say, and despite the best efforts of all concerned, by the end of the session the jar was quite full…

The topics of the panel had been kept under wraps (or rather left undecided) until the last minute, in order to ensure that recent developments were not missed, but the spread of expertise demonstrated by the panel – which included Jeffrey Owens (formerly the head of the OECD’s Centre for Tax Policy and Administration), Tilokchand Ostwal (senior partner with Ostwal Desai & Kothari, and international tax expert of long-standing), Ana Claudia Utumi (head of the tax practice group at TozziniFreire Advogados), with Tomas Balco (Associate Professor at KIMEP University in Kazakhstan) acting as secretary – ensured that the audience were educated and entertained in equal measure.

A number of guest speakers, including the incoming head of IFA, Porus Kaka, added their perspectives on the issues under discussion, and a number of "surprise" topics were inserted into the proceedings, in order to keep things interesting. Starting with a look at issues relating to beneficial ownership, discussion moved on to broader anti-avoidance rules (don’t say the B-word!), with a brief look at the General Anti-Abuse Rule which came into force in the UK earlier this year.

Mr Ostwal then went on to detail the problems that the Indian authorities have faced in their attempts to introduce their own GAAR, and explained that in order to reassure investors spooked by the potential implications of India’s very detailed plans in this area, it has been decided to delay the introduction of the new rules until April 2016. He went on to recommend, however, that the legislation be dramatically simplified, suggesting a three word substitution: "Substance over form."

Following the delivery of the Latin American perspective in this area, the first "surprise" topic was introduced by Jeffrey Owens, with a backward and forward look at how tax administration and the role of tax administrators has evolved over recent years, and how it is likely to change in the future. Continuing the theme of other seminars over the course of the week, Mr Owens stressed the need for cooperation to become coordination, both between national tax administrations, and between taxpayers and tax authorities.

Special witness, Jacques Sasseville (head of the Tax Treaty Unit of the Fiscal Affairs Division at the OECD) discussed a recent tax dispute which took place between a UK taxpayer (or not!) and the tax authorities in the United Kingdom and South Africa over assistance in collecting tax debts owed in the latter by the former (following the entry into force after the disputed tax years of a protocol to their bilateral tax agreement permitting such assistance), before Liselott Kana (Head of the International Tax Legislation Department of the Revenue Administration in Chile’s Ministry of Finance) talked about UN plans to help developing countries to find a voice with regard to tax matters, and the new UN Committee established with this aim in mind.

Leading into the break, Mr Baker led the auditorium in a chorus of (what else?) "Wonderful, Wonderful Copenhagen." After the audience had re-caffeinated, a mini-debate was held on the morality of tax minimization activity undertaken by corporations, with an audience vote showing that the majority remained unconvinced by the arguments advanced by some of the panel members that although taxes should be governed by and collected in accordance with the law, there should be a moral element, and that in the current climate, a concern for reputation should also inform tax planning decisions.

After a brief discussion on the tax treatment of indirect disposals in various parts if the world, Mr Ostwal gave an update on the ongoing wrangling between India and Mauritius over their bilateral double tax treaty renegotiations, stressing the importance of the agreement, as a significant amount of the FDI routed into India comes via Mauritius, and the Indian authorities are keen to avoid the generous provisions of the agreement being taken advantage of by Indian companies "round-tripping" their investment via Mauritius.

Professor Robert Danon then came on as a guest speaker to discuss Swiss corporate tax reforms, following the European Union’s arguments that the privileges often afforded under the Swiss cantonal tax system to foreign source income (over Swiss source income), in order to attract foreign investment constitute prohibited state aid. He emphasized that harmonized action in this area among cantons is necessary, and outlined several potential options being considered by the Swiss authorities in this area.

The session concluded with an examination of the issues raised by the Indian draft Safe Harbor rules, with the final "surprise" topic being a look at the reasons for the termination by Mongolia of several of its tax treaties in the past year.

Concluding, the panelists suggested that tax advisors are unlikely to be bored over the coming years, with a number of reform plans and initiatives coming down the pipeline, both on a national, international and multilateral level. They won’t be bored…and neither were we!

TAGS: court | South Africa | Finance | tax | investment | Chile | India | Mauritius | interest | law | audit | Mongolia | United Kingdom | legislation | tax planning | Kazakhstan | tax reform | Europe | Africa | Tax

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