Download - Presentations: Tax Certainty Day 2019 - search.oecd.org · 16/09/2019 · TAX CERTAINTY DAY Item 2 –Tax certainty and the bigger picture Achim Pross 16 September 2019, OECD Conference

TAX CERTAINTY DAY

Item 2 – Tax certainty and the bigger picture

Achim Pross

16 September 2019, OECD Conference Centre

© OECD |

Why international tax certainty matters?

2Tax certainty and the bigger picture

• It matters to government 60% of businesses indicated that

tax uncertainty affects investment and location decisions,

impacting growth and jobs.

• It matter to business 90% indicated that uncertainty adversely

affects their business operations and costs.

• It matters to tax administrations the largest businesses are

responsible for around half of total tax revenue.

© OECD |

Why large business matters to tax administrations


Around 50% of

net revenue …

0%

50%

100

%

Ne

t re

ve

nu

e c

olle

cte

d

by t

ax a

dm

inis

tratio

ns

Around 8 thousand MNE groups controlling around

90% of corporate revenues file CbC Reports

… received from 2% of corporate taxpayers.

90%

© OECD |

We know the legislative design tools…

Simple and clear rules

Compatible and consistent with those of other jurisdictions

Keep stable, do not change them too often, but keep up with changes in business environment


© OECD |

Unilateral audit Co-ordinated / Joint audit

MAP

Arbitration

To

wa

rds ta

x c

erta

inty

Dis

pu

te p

reve

ntio

nD

isp

ute

reso

lutio

nUnilateral APA Bilateral / Multilateral APA

Binding APA

legal

Audit outcomes

legal

legal

legal

Unilateral co-operative compliance Bilateral / Multilateral co-operative compliance

Co-operative compliance outcomes

de facto

Unilateral risk assessment Co-ordinated risk assessment Multilateral risk assessment (ICAP)

Risk assessment outcomes

de facto

And where uncertainty remains in the international space-

tax administration have the tools…


© OECD |

Tax certainty tools in FTA jurisdictions (53)


MAP

53 (100%)

APA Joint

audits

Committed to

Arbitration

ICAP

45 (85%)

25+ (47%)24 (45%)

18 (34%)

© OECD |

Where are we? Does today’s system provide the right level of tax certainty ? Lets hear from you. Please go to www.menti.com and enter

code 83 07 30


Only provide an answer for your

respective group (e.g. if you are a

business representative, please

“skip” the part where you are

asked to provide the “government /

tax administration” perspective).

http://www.menti.com/

2018 MAP STATISTICS AT A GLANCE

8

© OECD |

Reporting jurisdictions

• Up to 89 jurisdictions (85 in 2017)

• Covering almost all jurisdictions with MAP cases

2018 MAP statistics – what’s new?

Third year of use of the common framework to report MAP statistics

=> Increased consistency in the

analysis

Publication of key indicators on MAP

statistics (time, overall performance)


© OECD |

2018 MAP statistics – overview

0

1000

2000

3000

4000

5000

6000

7000

8000

Start inventory01.01.2018

Cases started Cases closed End inventory31.12.2018

Total MAP Caseload actual numbers

Cases pre-2016 or year of IF membership Cases post-2016 or year of IF membership


© OECD |

2018 MAP statistics - Global trends

0

500

1000

1500

2000

2500

2016 2017 2018

Cases started

Transfer pricing cases

Other cases

0

500

1000

1500

2000

2500

2016 2017 2018

Cases closedapproximation

Transfer pricing cases

Other cases


© OECD |

Transfer pricing cases: 33 months (30 months in 2017)

Other cases: 14 months (17 months in 2017)

MAP cases closed in 2018

Average time necessary to close MAP cases

2% 1%6%

4%

6%

1%

4%

17%

2%

57%

MAP Outcomesno agreement including agreement to disagree

any other outcome

denied MAP access

objection is not justified

withdrawn by taxpayer

agreement that there is no taxation not in accordance with tax treaty

resolved via domestic remedy

unilateral relief granted

agreement partially eliminating double taxation / partially resolving taxation not in accordancewith tax treatyagreement fully eliminating double taxation / fully resolving taxation not in accordance with taxtreaty


MAP AWARDS

13

© OECD |

Co-operationCaseload

managementInventory reduction

Speed

MAP AWARDS – What is measured?


© OECD |

Average time to close MAP cases


© OECD |

Average time


38.35

35.34

34.98

31.04

30.64

29.93

29.4

28.58

27.7

24.52

0 5 10 15 20 25 30 35 40

India

France

United States

Spain

Netherlands

Japan

Italy

United Kingdom

Denmark

Canada

Months

Transfer pricing cases (top 10 - more than 50 cases closed)

18.65

17.71

16.97

16.97

15.49

13.72

13.29

10.8

8.83

6.1

0 5 10 15 20

Austria

France

Switzerland

Sweden

Canada

Belgium

Germany

Luxembourg

Netherlands

United Kingdom

Months

Other cases (top 10 - more than 20 cases closed)

Time taken to close MAP cases - Cases closed in 2018

1

2

3

1

2

3

© OECD |

Inventory evolution


-16% -16%

-7%

-5% -5%-3%

-3%

-1%

0% 1%

-25%

-20%

-15%

-10%

-5%

0%

5%

Canada China(People's

Republic of)

Belgium UnitedKingdom

Netherlands Germany Denmark Luxembourg United States Austria

Top 10 jurisdictions with more than 100 cases in end inventory

Comparison total 2018 end inventory with total 2018 start inventory

1 2 3

© OECD |

Caseload management


© OECD |

Caseload management

19

19%

21%

25%

29%

29%

30%

31%

43%

48%

56%

0% 20% 40% 60% 80%

Mexico

Ireland

Czech Republic

Portugal

Indonesia

Greece

South Africa

Japan

Singapore

Australia

Top 10 jurisdictions with more than 20 and fewer than 100 cases left in end inventory

31%

33%

37%

41%

42%

47%

56%

62%

72%

83%

0% 20% 40% 60% 80% 100%

Denmark

France

Switzerland

Norway

Germany

United Kingdom

Canada

Belgium

Netherlands

Luxembourg

Top 10 jurisdictions with more than 100 cases left in end inventory

Tax certainty and the bigger picture Comparison cases closed in 2018 with actual caseload

(start inventory + new cases)

1

2

3

1

2

3

© OECD |

Co-operation


© OECD |

United Kingdom +

France

41%

France + United States

50%

United States + Canada

54%

Co-operation


Transfer pricing cases Other cases

Belgium + Netherlands

79%

Germany + United

Kingdom

83%

Germany + Luxembourg

83%

Note: data analysed for pairs of jurisdictions that had more than 20 cases of a type to resolve in 2018

Comparison cases closed in 2018 with actual caseload

(start inventory + new cases) for each pair of jurisdictions

1

2

3

1

2

3

© OECD |

MAP awards – conclusion

22

Congratulations

to all participants!

… See you next

year!

Tax certainty and the bigger picture

TAX CERTAINTY DAY

Item 3 – Advance Pricing Agreements


© OECD |

Introduction to the panel

2

Alexandra MacLean, DG International Business, Canada Revenue Agency

Katherine Amos, Global Head, Transfer Pricing, Johnson & Johnson

Rocio Bermudez, Global Transfer Pricing Manager, REPSOL

John Hughes, Director, Advance Pricing & Mutual Agreement, IRS

Kristina Juth, Senior Adviser, Tax Finland

Jere Törmänen, Head of Tax, Bata Corporation

Mark Johnson, Head of Unit, OECD

© OECD |

Unilateral audit Co-ordinated / Joint auditCo-ordinated / Joint Audit

MAP

Arbitration

Towards tax certainty

Dis

pute

pre

vent

ion

Dis

pute

re

solu

tion

Unilateral APA Bilateral / Multilateral APA

Binding APA

legal

Audit outcomes

legal

legal

legal



de facto



de facto

Global Trends in Achieving Tax Certainty:Routes to Certainty for International Tax

3

© OECD |


MAP

Arbitration


Dis

pute

pre

vent

ion

Dis

pute

re

solu

tion


Binding APA

legal

Audit outcomes

legal

legal

legal



de facto



de facto


4

© OECD |

Bilateral/multilateral APAs and other routes to tax certainty

5

By providing legal certainty over specific transactions for a defined multi-year period, APAs eliminate the need for additional work on risk ratings, tax audit and/or MAP, but…..

– unilateral APAs only provide one-sided tax certainty– bilateral APAs are time-consuming and resource intensive – multilateral APAs pose greater challenges and are currently

infrequently agreed in practice

© OECD |

Extract from the FTA Plenary CommuniquéSantiago, Chile – March 2019

6

“The FTA MAP Forum, in conjunction with the FTA Large Business International Programme, will study other avenues to advance on the tax certainty agenda, including by identifying improvements that could be made to the APA process and exploring the potential for the wider use of multilateral APAs and MAPs. In addition, we will explore the potential use and sharing of benchmarks for standard situations in the area of transfer pricing.”

© OECD |

Strengths of APAs

7

• Legal certainty• Co-operative and transparent process• Multilateral relationships• Other?

© OECD |

Obstacles to the broader use of APAsPlease go to www.menti.com and enter code: 35 00 43

What are the main causes for delay in concluding bilateral or multilateral APAs?

Complexity of transactions

Tax administration

resourcesMNE

resources

Time for multilateral discussions

Lack of clear deadlines / timeframes

8


© OECD |

Tools to tackle obstacles to the broader use of APAsPlease go to www.menti.com and enter code: 26 21 14

9

What focus would best tackle obstacles to the broader use of APAs?

Target timeframes for

each stage

More targeted documentation / information

Increased tax administration

resources

Focus on multilateral

APAs

Greater use of benchmarks / safe harbours


© OECD |

Tools to tackle obstacles: Cross Border Dialogue

10

Cross-Border Dialogue is a tool for tax administrations and taxpayers

• to enhance predictability and tax certainty

• to enter into a bilateral or multilateral dialogue procedure to determine in advance or in real time

• the tax treatment of a specified international tax issue

• related to two or more countries

© OECD |

Fee structures

12

• Various fee structures globally:– Fixed fee– No fee– Hourly fee– Graduated fee– Revenue neutral structure

© OECD |

Concluding remarks

13

TAX CERTAINTY DAY

Item 4 – MAP and arbitration


© OECD |

Unilateral audit Co-ordinated / Joint audit

MAP

Arbitration


Dis

pute

pre

vent

ion

Dis

pute

re

solu

tion


Binding APA

legal

Audit outcomes

legal

legal

legal



de facto



de facto


2MAP and Arbitration

© OECD |

BEPS Action

14

FTA MAP

Forum

Peer reviews

MAP statistics

3

What’s going on in the MAP world?

130+ members of the BEPS Inclusive

Framework

80+ jurisdictions peer reviewed

(last batch to be launched in Dec 2019)

MAP and Arbitration

MAP trainings

© OECD |

Action 14 is already delivering…

•Increased resources

•Reorganisation of CA

•Treaties modified / measures taken to enable implementation of all MAP agreements

•Access in TP cases, even if the treaty does not include Article 9(2)

•New or updated MAP guidance

•Allowing roll-back of bilateral APAs

Prevention Access

ResolutionImplementation


© OECD |

Treaty provisions are not always in line with the minimum standard and

may not be fixed by the MLI

Timely resolution of MAP cases remains a challenge - about 60% of

reporting jurisdictions met the 24 months target in 2018

5

… but we are not there yet

MAP and Arbitration

© OECD | 6

Trends in the main jurisdictions

0

200

400

600

800

1000

1200

1400

Germany United States France India Italy Belgium UnitedKingdom

Spain Switzerland Netherlands

MAP inventory in number of cases (all cases)Top 10 jurisdictions

2016 Start inventory 2017 Start inventory 2018 Start inventory 2018 End inventory

MAP and Arbitration

© OECD |

How well is MAP currently working for your jurisdiction on a scale from 1 to 10?

7

Mentimeter question for tax administration officials

MAP and Arbitration

© OECD |

Mentimeter question for business representatives

What is your MAP experience since 2016? We do not even try MAP Issues with accessing MAP Issues with timely resolution It takes time to implement the agreement MAP has improved


© OECD |


9

John Hughes, Director, Advance Pricing & Mutual Agreement, IRS

Karsten Flüchter, Head of Division, MAPs and APAs, German Federal Central Tax Office

Sharon Katz-Pearlman, Head of KPMG’s Global Tax Dispute Resolution & Controversy Team

Erik Knijnenburg, Global Head of Tax & Transfer Pricing, H&M

Evelyn Lio, Assistant Commissioner, Inland Revenue Authority of Singapore

Martin O’Rourke, Competent Authority Transfer Pricing, HMRC

Sandra Knaepen, Head of MAP Unit, OECD

MAP and Arbitration

MAP and Arbitration –How are we doing?

MAP and Arbitration –What about developing countries?

MAP and Arbitration –How to deal with continuous increase of MAP cases?

MAP and Arbitration –Other ways to avoid MAP

TAX CERTAINTY DAY

Item 6 – Co-operative Compliance & the International Compliance Assurance Programme (ICAP)


© OECD |


MAP

Arbitration


Dis

pute

pre

vent

ion

Dis

pute

re

solu

tion


Binding APA

legal

Audit outcomes

legal

legal

legal



de facto



de facto


2

© OECD |



MAP

Arbitration


Dis

pute

pre

vent

ion

Dis

pute

re

solu

tion


Binding APA

legal

Audit outcomes

legal

legal

legal



de facto

Unilateral risk assessment Co-ordinated risk assessment Multilateral risk assessment (ICAP) de facto


3

© OECD |

Background to the first ICAP pilot

4

• ICAP is a voluntary programme for the multilateral risk assessment of large MNEs

• There is a focus on common international tax risks that are best looked at by tax administrations working together (initially transfer pricing & PE issues)

• MNEs receive outcome letters detailing areas found to be “low risk” (e.g. where there is no expectation that further enquiries will be needed)

• A first pilot was launched in January 2018, with eight tax administrations participating

© OECD |

From the first pilot to ICAP 2.0

5

• A second pilot, ICAP 2.0, was announced at the FTA Plenary in Santiago, Chile in March 2019

• Based on tax administration and MNE experiences in the first pilot, key changes for ICAP 2.0 include:

• a clearer more flexible process

• a more targeted approach to documentation

• specific option for issue resolution within a risk assessment stage

• participation has increased from 8 to 18 tax administrations (France confirmed its participation in September 2019)

© OECD |

ICAP 2.0 – Participating tax administrations

6

Australia Austria Belgium

Canada Denmark Finland

France Germany Ireland

Italy Japan Luxembourg

Netherlands Norway Poland

Spain United Kingdom United States

© OECD |

ICAP 2.0 – Process and planned timeframe

7

Stage I: Pre-entry

Stage II: Scoping

Stage III: Risk assessment …

Stage IV: Outcomes

… and issue resolution20-36 weeks

4-8 weeks

To commence by June 2019

To commence Autumn 2019

© OECD |

ICAP and other routes to greater tax certainty

8

• Comparing ICAP with other routes to greater tax certainty:

• the level of certainty provided

• the point at which certainty is provided

• the risks and jurisdictions covered

• the level of documentation to be provided

• the time taken

• ICAP is a complement to bilateral/multilateral APAs, joint/simultaneous audits and MAP

© OECD |


9

Jo Wakeman, Director, Large Business Directorate, HMRC

Jennifer Best, Director, Treaty and Transfer Pricing, Internal Revenue Service

Letizia Coviello, Group Tax Director, Prada

Giuseppe Lamberti, Group International Tax Director, Prada

Ronald Russo, Professor, Fiscal Institute, Tilburg University

Graeme Wood, Director, Global Taxes – Transfer Pricing, Procter & Gamble

Marco Zonetti, Large Taxpayer Department, Italian Revenue Agency

Mark Johnson, Head of Unit, OECD

© OECD |

Participation in ICAPPlease go to www.menti.com and enter code: 75 86 02

10

In your view, would your MNE group or tax administration be interested in participating in ICAP in future?

Tax admin:No

MNE: Yes / already participated

MNE:No

MNE: Uncertain

Tax admin:Yes / already participates

Tax admin:Uncertain


© OECD |

How does the level of comfort provided through ICAP compare with that available via

other routes (e.g. APAs)?

11

TAX CERTAINTY DAY

Item 7 – Joint Audit

Nadia Altenburg16 September 2019, OECD Conference Centre

© OECD | 2

2

• two or more tax administrations joining together

• common or complementary interest

• proceeding in a pre-agreed and co-ordinated manner

• high level of integration in the process and including the presence of officials from the other tax administration

• where the tax administrations jointly engage with the taxpayer, enabling the taxpayer to share information with them jointly

• and the teams include Competent Authority representatives from each tax administration for the exchange of information.

Joint Audits: What are we talking about?

TAX CERTAINTY DAY

Item 7 – Joint Audit

Eveline E. Klein Entink16 September 2019, OECD Conference Centre

© OECD |

Joint Audit Project 2019 - Participating jurisdictions

4Presentation Title

BelgiumCanadaDenmarkFinlandFranceGermanyGreeceHungaryIrelandItalyJapanNetherlandsNorwayPortugalRussiaSingaporeSouth AfricaSpainUKUS

© OECD |

Joint Audits in the spectrum of Mutual assistance

5Presentation Title

STE with active presence

presence in administrative offices

Exchange of Information

(EoI)

STE with passive presence

STE (Simultaneous Tax Examinations)

Presence of Foreign Tax Officers

Joint Audits

© OECD | 6

6

• two or more tax administrations joining together

• common or complementary interest

• proceeding in a pre-agreed and co-ordinated manner

• high level of integration in the process and including the presence of officials from the other tax administration

• where the tax administrations jointly engage with the taxpayer, enabling the taxpayer to share information with them jointly

• and the teams include Competent Authority representatives from each tax administration for the exchange of information.

Joint Audits: What are we talking about?

© OECD |

Key benefits of Joint Audits

• a joint approach to fact finding avoiding misunderstandings/better quality of information achieving a holistic overview a more efficient and faster process reduced burdens for taxpayers and tax administrations no need to undo decisions that have already been taken

• a better understanding of the differences in legislation • common accepted outcome - early tax certainty • timeframe: faster than domestic audit followed by a MAP• …

7Presentation Title

TAX CERTAINTY DAY

Example of a Joint Audit Case NL / DE

Kirsten Rösel16 September 2019, OECD Conference Centre

© OECD | 9

2011 – 2014 audit period

2015 - 2016March – July

2018 audit activities

timing activity

22. January 2018 Initiation of the Joint Audit by the Dutch Tax Authorities

March 2018 Start meeting of the delegations from NL and DE

April 2018 Joint questionnaire sent to the taxpayer

9. – 10. June 2018 Interviews in Germany

20. – 22. June 2018 Interviews in The Netherlands

6. – 7. July 2018 Final meeting

Example Joint Audit – NL / DE

TAX CERTAINTY DAY

Joint Audits: Practical Experiencesof an MNEDr. Sven Bremer, Siemens AG16 September 2019, OECD Conference Centre

Frei verwendbar

© OECD |

Transfer Pricing Disputes – a key challenge

Double taxation arising from TP adjustments is a key challenge Majority of TP adjustments (in volume) relate to routine function profitability

MAP – suitable, but significant time lags

Siemens considers MAPs a suitable instrument to reduce double taxation and uses them whenever possible

However, the duration of such procedures is usually significant MAPs only provide an ex-post solution, with arbitrary results based on negotiations between tax

authorities and often no transparency on the basis for those outcomes Resource-intensive without the benefit of binding results for the future, resulting in continuing

uncertainty

Siemens MAPs

CasesDuration (avg.) in months

Currently open 22 3 - 66 (40)

Closed (last 5 yrs) 16 21-70 (40)Bilateral APA - not considered a favourable option for Siemens

Highly formalized process, no tax certainty for complex issues within a reasonable time frame Siemens has limited APA experience – one major bilateral APA for a routine margin case (only

closed after (!) APA period)

Routine functions

IP

Other

TP adjustments

Transfer Pricing Disputes

© OECD |

Joint Audits within SiemensJoint Audits (JA) – Siemens Siemens has participated in various JAs

Germany-Netherlands: concerning mostly compensation for financing functions Germany-Austria: mostly related to deliveries from Austria to Germany

Other countries were approached by the German tax authorities regarding proposed JAs, but were rejected

Taxpayer

Local tax authorities

Competent authorities

Joint Audit / Multilateral Control Mutual Agreement Procedure/APA

Direct negotiation between local tax authorities MAP still possible

Negotiation only between CAs CA sometimes "bottleneck", MAPs/APA take more time

A Positive Experience – effective collaboration and improved tax certainty Double taxation was resolved and/or avoided within less time than experienced for MAPs Field auditors/tax officers (with detailed knowledge of underlying business facts) from both sides were able to discuss and

align directly Tax and business functions of Siemens were involved to a high degree Issues addressed and outcomes were similar to results achieved under MAPs, however much more transparency regarding

results for Siemens Although no formalized certainty, a high degree of practical certainty for taxpayer in consecutive tax years

12

© OECD |

Joint Audits – ConsiderationsPositive aspects of JA experience could be considered as potential development platforms for dispute resolution process improvements:

Scope of JA: Bottom up (joint) audits are not necessarily possible for large MNEs – a JA has to focus on specific topics which have

significant tax impact on both sides. Most likely within MNEs this results in income allocation disputes JA can be used as an instrument to achieve a common understanding and focus on rare, complex corporate tax issues

and purely abusive structures Flexibility:

Determination and alignment on the facts and circumstances automatically triggers tax consequences. Participating tax authorities need to be willing to compromise.

Leverage on the existing knowledge of the Taxpayer’s business: Local tax authorities and audit teams usually have existing in-depth factual knowledge of resp. MNEs. Involving local field audit teams in the process, instead of centralized teams with no understanding of the industry and

business model of the taxpayer, increases efficiency by cutting duplicative discussion and fact gathering efforts. Key Takeaways

Preferred approach: Use JA as substitute for future MAPs to achieve more transparent and/or timely solutions Potential alternative approach: To resolve double taxation in majority of simple cases, MAP/APA procedures could be

improved

13

© OECD |

Joint Audits: TWO audit teams – ONE common solution – ZERO double taxation

14

14

Better quality of

information

Different audit

approaches and

dynamics

Under-standing of

foreign legal

frameworks

~100% Success Rate

Common understanding between tax

administrations and taxpayersJo

int F

act F

ind

ing

Pro

cess

• Unilateral audits of bi- and multilateral tax issues simply do not make sense!

• Tax administrations increasingly realise that Joint Audits are an effective tool to achieve common understanding on TP and PE questions.

• The joint fact finding process can be used to enhance the outcome of other tax certainty approaches.

© OECD |

Further work

• Practical guidance for the conduct of a Joint Audit

• Training programmes

• Guidance on case selection and evaluation

• Just get started!

15Presentation Title

Download - Presentations: Tax Certainty Day 2019 - search.oecd.org · 16/09/2019 · TAX CERTAINTY DAY Item 2 –Tax certainty and the bigger picture Achim Pross 16 September 2019, OECD Conference

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