Conference: International Taxation from Global South Perspectives
In Partnership with The Policy Center for the New South
Wednesday 13 October 2021 15h00 – 16h30 GMT+1 Live-Stream (YouTube, Facebook, Live Tweet)
The key questions that will be discussed in this event will be:
- What reforms are needed to international standards that can strengthen the capacity of governments to raise revenue from MNEs without discouraging economic activity?
- What is the cost of tax havens for developing countries and what role can international cooperation play in dealing with this issue?
- What might the future of tax reform look like in the post-COVID-19 era, given the growing digitalization of the economy?
Developing Country Demands for an Equitable Digital Tax Solution
By Abdul Muheet Chowdhary
The taxation of the digitalized economy is the foremost challenge in international taxation today. Countries around the world, especially developing countries, are struggling with taxing the rising profits of major tech giants which operate on entirely new business models that have made traditional international tax rules obsolete. A “Two Pillar solution” is being negotiated in the OECD/G20 Inclusive Framework on BEPS that seeks to update these rules, re-allocate taxing rights and establish a global minimum tax. However, as it stands, the solution has very limited tax revenue benefits for developing countries and is administratively complex. For the solution to be durable, it must be equitable, and accordingly must incorporate the concerns of developing countries going forward.
Ending Extreme Poverty by Ending Global Tax Avoidance
by Abdul Muheet Chowdhary
The world is estimated to lose around USD 500-600 billion in revenues from corporate tax avoidance each year. Ensuring that governments can collect this revenue through ending global tax avoidance will play a major role in ending extreme poverty. Overseas aid provided to developing countries focused on eliminating extreme poverty must therefore incorporate addressing tax avoidance, especially by Multinational Enterprises, as a core component of their efforts.
Combatting Tax Treaty Abuse: Tools available under the BEPS Multilateral Instrument
By Kuldeep Sharma, ADIT (CIOT,UK)
The anxiety of taxpayers, consultants and advisors over the consistent application of Principal Purpose Test (PPT) provisions in tax treaties can now be put to rest as tax authorities are expected to consistently read the PPT provisions in conjunction with the preamble, i.e. the key to application of PPT provisions lies in the preamble of the treaty itself. This follows on taking a leaf out of the Preamble to the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion & Profit Shifting (MLI), Vienna Convention, Commentaries on PPT in the respective Organisation for Economic Co-operation and Development (OECD) and United Nations (UN) Model Tax Convention (MTC), 2017 and Australian Taxation Office’s (ATO) instructions on PPT which abundantly highlight on conjoint application of the preamble in the course of invocation of PPT provisions. Now, the entire focus of extending treaty benefits has shifted to undertaking bonafide transactions and preventing double taxation as against a tendency of securing tax savings through tax avoidance. Therefore, PPT as read with the preamble can clearly be invoked to combat treaty-shopping arrangements, abusive tax planning and abusive tax avoidance arrangements or transactions. At the same time, tax authorities in any part of the world may not be inclined to invoke PPT as read with the preamble in respect of any arrangement or transaction when taxpayers are able to discharge their onus establishing that (below mentioned conditions to be satisfied in tandem):
– genuine business and commercial reasons for a transaction exist;
– a purpose for the transaction cannot be ascribed to non-taxation or reduced taxation through tax evasion or tax avoidance;
– despite no tax advantages, the transaction would be carried out exactly in the same way; and
– it cannot reasonably be considered that one of the principal purposes of the arrangement or transaction is to obtain treaty benefits and that the object and purpose of the treaty is getting defeated.
Financial integrity for sustainable development: Importance of developing country joint action on tax, corruption and money-laundering
By Dr. Ibrahim Mayaki
Countries are beginning to realize that the landmark agreement on the Sustainable Development Goals will be unrealized if financing is not found for the agenda. Much of that financing can be found if illicit financial flows are stopped. In March 2020, the Presidents of the United Nations General Assembly and Economic and Social Council convened a High-Level Panel on International Financial Accountability, Transparency and Integrity for Achieving the 2030 Agenda (FACTI Panel) to review global cooperation and recommend further actions by the international community as a contribution. Dr. Ibrahim Mayaki, the Co-Chair of the FACTI Panel, outlines the measures that the FACTI Panel recommended to combat tax abuse, corruption and money-laundering. He emphasizes the importance of developing countries taking a leading role in proposing solutions, and the value of inclusive international institutions. The text below is based on remarks that were made at a briefing to the Group of 77 and China in Geneva in April 2021, jointly organized by the FACTI Panel Secretariat and the South Centre. The Panel’s full report can be read at: http://www.factipanel.org/report.