IFA Annual Congress: Practical Protection of Tax Payers’ Rights and BEPS in Focus

There are often a few major issues on everyone’s lips in the international community of tax lawyers. This was the case also at The International Fiscal Association’s (IFA) 69th Congress in Basel, Switzerland. One of the main subjects in the congress was how tax payers’ rights can be most efficiently protected in practice.

A general report prepared for the IFA drew conclusions from data provided by the branch reports from each jurisdiction. The idea was to identify minimal standards and best practices for the timely and effective protection of fundamental tax payers’ rights.

Twelve separate aspects were identified, which were then discussed in the panel. An interesting observation was that Finland was mentioned only three times among the best practices rated in the charts presented. It seems the protection of tax payers’ rights deserves to be in focus in the Finnish tax field, as well.

Seeking Greater Transparency in Taxation

As expected, hardly any seminars at the IFA congress were held without mentioning BEPS (base erosion and profit shifting). BEPS is a project of the OECD and the G-20 aimed at getting rid of tax planning strategies that exploit gaps and mismatches in tax rules to shift profits to locations where they are lightly taxed so that little or no overall corporate tax is paid.

Within that project, the OECD has created an action plan that sets out fifteen key areas of international tax rules. These should be addressed by 2015.

The panelists representing tax advisors and business life at the IFA/OECD seminar took a somewhat cautious viewpoint when they evaluated what aspect of BEPS would have the biggest impact. For example, Krister Andersson, Chairman of the Tax Policy Group BUSINESSEUROPE, noted that there is a risk that countries may have different views or interpretations of the steps presented by the OECD in the action plan.

The panelists felt that it is crucial that all countries implement the BEPS actions consistently. Double taxation disputes could arise if countries unilaterally attempt to address these issues without consensus-based principles. It was underlined in the seminar that the OECD must take a strong role in the finalisation and implementation procedure, as BEPS may cause some uncertainty between the countries.

Ron Durand, Partner at Stikeman Elliott, took the view that governments have to make the system work, and national tax administrations need to be well educated. In addition, most of the panelists noted that effective dispute resolution mechanisms are an essential part of the BEPS project.

In sum, it seems to be up to countries how BEPS is implemented in their jurisdictions.

A Step in the Right Direction

Marlies De Ruiter from the OECD agreed that BEPS may not be ideal, but it is a good first step. A package related to the action plan will be delivered to the G20 Finance Ministers in October 2015, together with a plan for follow-up work and a timetable for its implementation.

During the next stage, implementation measures will be stated at the level of domestic legislation and international coordination.

Adapting to a New Environment without Forgetting Tax Payers’ Rights

The practical protection of tax payers’ rights will continue to be a topic for some time to come. This is due to the focus of current international discussions and projects, such as BEPS, being on increasing tax payers’ liability to deliver information to the tax administrations. This will cause extra compliance and administrative costs and increase of reporting requirements.

More disputes between businesses and tax authorities are expected to arise as the rules are amended, especially where they lead to arrangements or structures previously accepted by tax authorities becoming forbidden. Tax payers may not have a well-protected position in this situation, and tax assessments result in lengthy appeal procedures.

Taking into account the increasing exchange of information between the countries, it will be worth paying attention to confidentiality and the proper use of tax payers’ commercially sensitive or tax-related information.