UK and US Split on BEPS Implementation.


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(UK PM David Cameron and US President Barrack Obama.)

It is increasingly likely that the U.K. and the U.S. governments will adopt different approaches to implementing the OECD’s final package of measures to tackle base erosion and profit shifting.

The UK Position

The U.K. government considers an inclusive, multilateral instrument to upgrade bilateral tax treatments as the “best way” for countries to adopt the BEPS measures, Fergus Harradence, deputy director of corporate tax at HM Treasury, said Oct. 8 at a branch meeting of the International Fiscal Association in London to discuss BEPS and U.K. policy.

A Multilateral Approach

Action 15 of the Organization of Economic Cooperation and Developments’ final BEPS report, released Oct. 5 , is a “mandate for the development of a multilateral instrument on tax treaty measures to tackle BEPS” (193 TMIN, 10/6/15). Moreover, the UK is chairing the group that will be responsible for drafting the instrument.

Work on developing such a multilateral agreement to expedite the lengthy process of amending bilateral tax treaties began at the end of May, but given that it will involve quite a lot of drafting, the process is likely to continue until the end of 2016.

On the Contrary.

The U.S. government has no plans to implement BEPS measures through a multilateral treaty. In the run-up to the release of the OECD’s final BEPS package, “the U.S. agreed to participate in  multilateral instrument discussions in order to be part of the discussion on mandatory binding arbitration,” he said.

Mandatory Binding Arbitration Preferred

Robert Stack, the Treasury Department’s deputy assistant secretary for international tax affairs, told Bloomberg BNA Oct. 2 that the U.S. viewed mandatory binding arbitration “as the optimal method for resolving disputes and improving tax administration” (192 TMIN, 10/5/15).

Stack has been careful to point out that the decision to participate in the multilateral discussions was to advance U.S. interests over mandatory binding arbitration and “by no means foreshadows any decision about whether to eventually join in signing” a multilateral BEPS treaty.

Action 14 of the BEPS package is geared at making dispute resolution mechanisms in the context of cross-border tax treatment more effective. The U.S. is one of 20 countries that are committed to providing mandatory binding arbitration in their bilateral tax treaties under Action 14.

A Multi-Track Approach?

“The U.S. is very interested in the efforts to monitor harmful tax practices and practices related to dispute resolution,” Oosterhuis said.

Regarding Action 14, Harradence said that “we have found that not all countries are as willing to make use of” mandatory binding arbitration, but added there is potential to build on that, most likely using a “multi-track approach.”

More here.



The G-20 Antalya Summit and BEPS.


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US President Obama and Russian President Putin share a coffee.

Amid the revelations by Russian President Vladimir Putin about the financiers of global terror, the Group of Twenty spared some time to agree the way forward in the area of international tax diplomacy.

Here is what they agreed:

1.To reach a globally fair and modern international tax system, we endorse the package of measures developed under the ambitious G20/OECD Base Erosion and Profit Shifting (BEPS) project.

2. Widespread and consistent implementation will be critical in the effectiveness of the project, in particular as regards the exchange of information on cross-border tax rulings. We,  therefore, strongly urge the timely implementation of the project and encourage all countries and jurisdictions, including developing ones, to participate.

3. To monitor the implementation of the BEPS project globally, we call on the OECD to develop an inclusive framework by early 2016 with the involvement of interested non-G20 countries and jurisdictions which commit to implement the BEPS project, including developing economies, on an equal footing.

4. We welcome the efforts by the IMF, OECD, UN and WBG to provide appropriate technical assistance to interested developing economies in tackling the domestic resource mobilization challenges they face, including from BEPS. We acknowledge that interested non-G20 developing countries’ timing of implementation may differ from other countries and expect the OECD and other international organizations to ensure that their circumstances are appropriately addressed in the framework.

5.We are progressing towards enhancing the transparency of our tax systems and we reaffirm our previous commitments to information exchange on-request as well as to automatic exchange of information by 2017 or end-2018. We invite other jurisdictions to join us. We support the efforts for strengthening developing economies’ engagement in the international tax agenda.


For the full text click here:



OECD At Odds Over EU Tax Haven Blacklist


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President of the EU Commission Jose Manuel Barros

You really cannot make this stuff up!

So the EU Commission publishes  its long awaited tax haven blacklist of uncooperative countries.


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New Tax Haven Criteria Proposed by Transparency NGOs for European Investment Bank


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(President of the EIB:Werner Hoyer)

In a new report published on Tuesday this week, transparency NGOs have called on the the Luxembourg-based European Investment Bank (EIB) to set up its own ‘Tax Unit’ to assess how much corporate tax its clients are paying, and produce its own analysis of tax havens rather than rely on the OECD’s ‘black and grey’ list of jurisdictions.


(Preident of the World Bank Group: Jim Yong Kim)

This would be in addition to existing criteria used by the World Bank Group to define tax havens loosely based on the work of the OECD Global Forum on Transparency and Exchange of Information. The practical effect of this criteria is that private investors seeking support financing through the Bank’s International Finance Corporation, would be ineligible if the investment has a connection to a country that is on the OECD ‘black’ or ‘grey’ list; or is a jurisdiction that has been found to be less than compliant under the OECD Phase 2 assessment criteria, which is based on the translation of transparency norms into legal and regulatory practice.


The NGO report titled  ‘Towards a Responsible Taxation Policy for the EIB’ and published on April 21st this year, advocates that the the EIB, which is set to be the driving force behind the European Commission’s flagship €315 billion infrastructure investment fund,  should define a ‘tax haven’ based on whether or not they have a means of identifying and sharing the beneficial ownership  of a company.

The report by Re-Common and Counter Balance argues that this would allow the EIB to ascertain who ultimately owns, controls or benefits from a company or fund that receives its support. They also recommend that the EIB clients should also be required to produce country-by-country-reports.

Counter Balance

This development should not come as a surprise because last year I flagged renewed  efforts in the European Union to revisit the definition of tax havens along the lines suggested in the NGOs Report. As a result the EIB  already has a policy commitment to preventing tax avoidance, money laundering and other damaging activities, including a general prohibition on investments linked to non-compliant jurisdictions (NCJ) or tax havens.Indeed this demand for all companies seeking EIB funds to publish country-by-country-reports (CBCR) also featured in a European Parliament report adopted in March 2014. At present, EU rules require CBCR only from banks and firms in the extractive and logging sectors.


According toAntonio Tricarico, the report’s author, ‘Recent revelations such as Luxleaks and Swissleaks prove that Europe is losing out billions of euros because of tax dodging, and in developing countries the situation is even worse.

Fueling this move by the NGOs is a report by the Illicit Finance Journalism Project last October which found that the EIB had lent money to a number of companies operating in tax havens. One example cited was Qalaa, an African investment fund with $9.5 billion on its books, which has received hundreds of millions of euros from the EIB, and is domiciled in the British Virgin Islands.

It is important to note that the EIB, Qalaa and the jurisdictions in which or through which this investment fund raised money have acted within the legal rules. More here.


Predictably, given the constituency of the EIB,  in response to the report the Bank noted that most of the reforms proposed by the report would require legal changes to be agreed by MEPs and ministers.

Singapore Raises a Timely Caution on the OECD BEPS Agenda.


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(Senior Minister Josephine Teo. Image – Today Online)

In a recent commentary on the OECD Base Erosion and Profits Shifting (BEPS) project, while Singapore’s Senior Minister of State for Finance and Transport, Josephine Teo, did not discount the importance of BEPS, she has rightly advised caution in moving forward on this aggressive agenda in an unilateral and uncoordinated way.

In tackling harmful tax practices she has strongly maintained that it is important not to discard the structures and practices that have facilitated investment and development.

She noted too that, ‘Singapore has kept its tax rates competitive. Even as we expect spending to increase, we will endeavor to keep the tax burden low, and we do so for a very simple reason – we want to continue to encourage enterprise, savings, and investment, which in turn generate positive economic spinoffs.’

Speaking to the changing international tax landscape, particularly the developments related to the Organisation for Economic Cooperation and Development’s (OECD) Action Plan to counter base erosion and profit shifting (BEPS), Minister Teo identified the “increasingly more aggressive actions” being taken by some tax authorities when scrutinizing cross-border transactions and in dealing with transfer pricing issues.

These comments should resonate with the emerging economies of Africa many of who have joined the OECD Global Forum on Transparency and Exchange of Information. While the focus has been on facilitating transparency and increased capture and exchanges of taxpayer information it is useful to remember that for compliance to be sustainable economic growth must also be a priority.

Importantly Minister Teo also cautioned that  while quick action is useful it should not be used as a guise for protectionism. In my own view, this is a critical point given the continued and regular use of ‘blacklists’ by OECD members to compel adherence. In this regard is perhaps useful to note that Mauritius and Guernsey have now been removed from Italy’s blacklist.


(Director Pascal Saint-Amans. Image: zimbio)

Speaking about the ‘substance’ of flows between Australia and Singapore following his testimony to the Australian Senate hearing on corporate tax avoidance and minimization, Director of the OECD Centre for Tax Policy and Administration noted that as far as he was aware Singapore required evidence of ‘real activity’ while other very small economies you only have ‘sham’ entities.

To provide a balanced perspective on the issue of ‘sham’ companies, their location and use, it is worthwhile to note the well documented  study titled, ‘Global Shell Games: Testing Money Launderers’ and Terrorist Financiers’ Access to Shell Companies’ conducted by Michael Findley, University of Texas at Austin, Daniel Nielson, Brigham Young University and Professor Jason Sharman of Australia’s Center for Governance and Public Policy, a recognised expert in this area, Sharman attempted to set up ‘shell’ companies in twenty-two states. These states included some often classified as tax havens and others generally regarded as responsible, internationally compliant members of the OECD and G20.


(Professor Jason Sharman Imaged: Griffiths University)

The first step in Professor Sharman’s exercise was to conduct an online search of ‘offers’ to set up this type of company. He attracted bids from forty-five service providers. In seventeen cases, the requested ‘shell’ company was set up without applying the customary KYC (Know Your Customer) protocols to determine the actual identity of the client. Moreover, the set-up price was not prohibitive, as the service cost ranged between USD 800 and USD 3000. Interestingly, only four of these providers were located in tax havens, while thirteen were located in OECD countries claiming to observe the rules of verification: seven in Great Britain, four in the United States, one in Spain, and one in Canada.

To ensure that the BEPS project is not dismissed as another attempt to undermine the competitiveness of non-OECD countries it will be important that when discussing and describing the location of ‘sham’ companies that reference is not made only to small economies but also to those developed ones who continue to escape proper characterization.

This attention to detail will guard against the unilateral and uncoordinated action about which Singapore has raised concerns.




IFC Economic Report Reviews My New Book: Tax Diplomacy: An Introduction to Tax Treaties.


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‘Tax Diplomacy’ is distributed world-wide in print and in all ebook platforms by www.chattel
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Now That The ‘Koala Kuddles’ Are Over, Here’s What The G20 Agreed On Beneficial Ownership


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(Aussie PM Tom Abbott and US President Obama)

Don’t expect much by way of surprises because the October 22-24 Financial Action Task Force (FATF) meeting and the OECD Global Forum on Transparency and Exchange of Tax Information Berlin plenary, also held this past October, provided some useful sign-posts to what G20Brisbane would be minded to agree to.

Importantly, now that one of its members, the United Kingdom, has finally gotten rid of ‘bearer shares’- almost twenty years after the OECD called on tax havens to do so – the G20 High Level Principles on Beneficial Ownership Transparency inludes  the expected ‘beefed up’ language in this regard.

A conspicuous though not unexpected absence is agreement on public registries of beneficial ownership with consensus reached only on such registries being made accessible to law enforcement, tax authourities, finanical intelligence units and their international counterparts.

The requirement to provide ultimate beneficial owner information has also been extended, if somewhat more tentatively, to trusts and foundations. See my earlier predictions on this here.

Here now are the ten (10) principles G20Brisbane have agreed:

  • Countries should have a definition of ‘beneficial owner’ that captures the natural person(s) who ultimately owns or controls the legal person or legal arrangement.
  • Countries should assess the existing and emerging risks associated with different types of legal persons and arrangements, which should be addressed from a domestic and international perspective.Appropriate information on the results of the risk assessments should be shared with competent authorities financial institutions and designated non financial businesses and professions (DNFBPs) and, as appropriate,other jurisdictions. Effective and proportionate measures should be taken to mitigate the risks identified.
  • Countries should identify high risk sectors and enhanced due diligence could be appropriately considered for such sectors. Countries should ensure that legal persons maintain beneficial ownership information onshore and that information is adequate, accurate, and current.
  • Countries should ensure that competent authorities (including law enforcement and prosecutorial authorities, supervisory authorities, tax authorities and financial intelligence units) have timely access to adequate, accurate and current information regarding the beneficial ownership of legal persons. Countries could implement this, for example, through central registries of beneficial ownership of legal persons or other appropriate mechanisms.
  • Countries should ensure that trustees of express trusts maintainadequate, accurate and current beneficial ownership information, including information of settlors, the protector (if any) trustees and beneficiaries. These measures should also apply to other legal arrangements with a structure or function similar to express trusts.
  • Countries should ensure that competent authorities (including law enforcement and prosecutorial authorities, supervisory authorities, tax authorities and financial intelligence units) have timely access to adequate, accurate and current information regarding the beneficial ownership of legal arrangements.
  • Countries should require financial institutions and DNFBPs, including trust and company service providers, to identify and take reasonable measures, including taking into account country risks, to verify the beneficial ownership of their customers. Countries should consider facilitating access to beneficial ownership information by financial institutions and DNFBPs. Countries should ensure effective supervision of these obligations, including the establishment and enforcement of effective, proportionate and dissuasive sanctions for non-compliance.
  • Countries should ensure that their national authorities cooperate effectively domestically and internationally. Countries should also ensure that their competent authorities participate in information exchange on beneficial ownership with international counterparts in a timely and effective manner.
  • Countries should support G20 efforts to combat tax evasion by ensuring that beneficial ownership information is accessible to their tax authorities and can be exchanged with relevant international counterparts in a timely and effective manner.
  • Countries should address the misuse of legal persons and legal arrangements which may obstruct transparency, including: a.prohibiting the ongoing use of bearer shares and the creation of new bearer shares, or taking other effective measures to ensure that bearer shares and bearer share warrants are not misused; and b.taking effective measures to ensure that legal persons which allow nominee shareholders or nominee directors are not misused.

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