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  • 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

    3Tax certainty and the bigger picture

    Around 50% of

    net revenue …

    0%

    50%

    100

    %

    N e

    t re

    v e

    n u

    e c

    o lle

    c te

    d

    b y t

    a x a

    d m

    in is

    tr a ti o

    n s

    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

    4Tax certainty and the bigger picture

  • © OECD |

    Unilateral audit Co-ordinated / Joint audit

    MAP

    Arbitration

    T o

    w a

    rd s ta

    x c

    e rta

    in ty

    D is

    p u

    te p

    re v e

    n ti o

    n D

    is p

    u te

    re s o

    lu ti o

    n Unilateral 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…

    5Tax certainty and the bigger picture

  • © OECD |

    Tax certainty tools in FTA jurisdictions (53)

    6Tax certainty and the bigger picture

    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

    7Tax certainty and the bigger picture

    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)

    9Tax certainty and the bigger picture

  • © OECD |

    2018 MAP statistics – overview

    0

    1000

    2000

    3000

    4000

    5000

    6000

    7000

    8000

    Start inventory 01.01.2018

    Cases started Cases closed End inventory 31.12.2018

    Total MAP Caseload actual numbers

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

    10 Tax certainty and the bigger picture

  • © 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 closed approximation

    Transfer pricing cases

    Other cases

    11 Tax certainty and the bigger picture

  • © 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 Outcomes no 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 accordance with tax treaty agreement fully eliminating double taxation / fully resolving taxation not in accordance with tax treaty

    12Tax certainty and the bigger picture

  • MAP AWARDS

    13

  • © OECD |

    Co-operation Caseload

    management Inventory reduction

    Speed

    MAP AWARDS – What is measured?

    14 Tax certainty and the bigger picture

  • © OECD |

    Average time to close MAP cases

    15Tax certainty and the bigger picture

  • © OECD |

    Average time

    16 Tax certainty and the bigger picture

    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

    17 Tax certainty and the bigger picture

    -16% -16%

    -7%

    -5% -5% -3%

    -3%

    -1%

    0% 1%

    -25%

    -20%

    -15%

    -10%

    -5%

    0%

    5%

    Canada China (People's

    Republic of)

    Belgium United Kingdom

    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

    18 Tax certainty and the bigger picture

  • © 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

    20 Tax certainty and the bigger picture

  • © OECD |

    United Kingdom +

    France

    41%

    France + United States

    50%

    United States + Canada

    54%

    Co-operation

    21 Tax certainty and the bigger picture

    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

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