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MUKESH BUTANI HANS GEORG RABER
ROMAIN TIFFON PARTHASARATHI
SHOME RICHARD SYRATT
TRANSPARENCY & THE BRAVE NEW WORLD OF INFORMATION EXCHANGE
SESSION OVERVIEW
TRANSPARENCY AND THE BRAVE NEW WORLD OF INFORMATION EXCHANGE
The tax world has seen a dramatic increase in disclosure of tax information in recent years. This
has come in the form of greater formal demands from governments and the public, such as under
FATCA and automatic exchange of information under the activities of the Global Forum, country-by-
country reporting, obligatory reporting of aggressive tax planning, and public reporting of tax
strategies in the UK. It has also come in less formal ways through such developments as the
infamous Lux Leaks, Bahamas Leaks and Panama Papers. Mukesh Butani of BMR Taxand India
led a global panel in discussions of these recent developments and the impacts of BEPS, the
Global Forum and the world of tax transparency.
CONTENTS
1. Background
2. EOI: Informal ways
3. EOI and tax transparency
4. International cooperation
5. Recent developments leading to
enhanced tax transparency
6. Country practices
7. EOI: Shifting paradigm
8. Challenges
9. Taxand’s Take
10. Glossary
BACKGROUND
Financial Crisis
2008
CRS 2014
FATCA 2010 Present 2017 BEPS 2013
G20 Mexico
Meeting 2012
Re-negotiation of tax
treaties and TIEAs
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BACKGROUND
Trigger Points
The UBS Scandal – May 2008
Financial Crisis followed by Lehman Brothers collapse
Exacerbating tax revenue loss and government deficit
Illicit financial flows
Vigilance and crack down on offshore accounts
Profit shifting – trade mispricing
Globalization and complex group structures
Cooperation on information sharing
Common goal – to achieve more transparency.
Tax Revenue Loss on account of
Offshore Tax Non-compliance
USA: ~USD 100 bn annually till introduction of
FATCA*
European Union countries: EUR 927 bn in
2009**
Developing countries: ~USD 98-106 bn
annually over the years 2002-06, i.e. about
4.4% of the developing worlds’ total tax
revenue***.
*A report by Jon M. Weiner | **According to World Bank data | **Findings of the study by Global Financial Integrity (2010)
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EOI: INFORMAL WAYS
TAXAND GLOBAL
SURVEY 2016
91% of respondents
said exposure to the
public of tax planning
activities has a
detrimental impact on a
company’s reputation.
75% said they are
concerned about the
potential exposure of
information.
EOI AND TAX TRANSPARENCY
Countries amending their tax treaties to
enhance EOI and also entering into TIEAs
COMMON
REPORTING
STANDARD
53 jurisdictions to
undertake first
exchange by 2017, 47
more by 2018.
FOREIGN ACCOUNT
TAX COMPLIANCE
ACT
113 jurisdictions have
entered into IGA with
US Government.
COUNTRY BY
COUNTRY
REPORTING
56 jurisdictions have
taken steps for
implementation.
BEPS ACTION 12 –
MANDATORY
DISCLOSURE RULES
3 jurisdictions have
taken steps for
implementation.
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INTERNATIONAL COOPERATION
100 countries sign Multilateral Competent Authority Agreement
for implementation of CRS
113 jurisdictions have entered into IGA with USA for
implementation of FATCA
56 jurisdictions have taken steps for implementation of CbCR
Countries renegotiating tax treaties to incorporate BEPS
recommendations and enhanced scope for EOI (for instance,
renegotiation of Australia – Germany tax treaty).
Jurisdictions used as
offshore financial
centre's like British Virgin
Islands, Cyprus,
Mauritius, Liechtenstein
etc have also committed
to information exchange
under FATCA and CRS
G20 countries commit
support to information
exchange programs
including FATCA, CRS
and CbCR.
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CRS: OVERVIEW
Part of OECD Standard for Automated Exchange of Financial Accounts Information in
Tax Matters. Auto-animation
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basis earlier.
Each country will annually automatically exchange with the other country prescribed
information with respect to each other’s ‘Reportable Account’ and vice-versa.
Multilateral Competent Authority Agreement opened for signature in October 2014.
Status: 53 jurisdictions to undertake first exchange by 2017, 47 more by 2018.
FATCA: OVERVIEW
Objective: combat tax avoidance by US taxpayers by use of offshore accounts and
offshore intermediaries. Auto-animation
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Withholding of 30% for non-compliance.
Options for compliance: Either financial institutions comply with FATCA or the
government enter into an IGA with USA.
113 jurisdictions have entered into IGA with USA.
COUNTRY-BY-COUNTRY REPORTING
Requires listing of all the CEs for which
financial information is reported, including
their tax jurisdiction of incorporation, where
different from the tax jurisdiction of
residence and the nature of the main
business activities carried out by Ces.
Requires aggregate tax jurisdiction-wise
information relating to the global allocation
of the income, the taxes paid, and certain
indicators of the location of economic
activity among tax jurisdictions in which the
MNE group operates.
May also be used by tax administrations in
evaluating other BEPS related risks and
where appropriate for economic and
statistical analysis.
Helpful for high-level transfer pricing risk
assessment purposes.
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BEPS AP 12: MANDATORY DISCLOSURE RULES
Identifies benefit of effective information flow on tax risks for tax administrations and tax policy
makers.
Key objective of mandatory disclosure regime
Should be clear and easy to understand
Should enhance transparency – ensure early information flow regarding aggressive and abusive
tax planning schemes (scheme/s) and identify promoters and users of such schemes
Deterrence – ensure that taxpayers are hesitant to enter into schemes.
Key design features of mandatory disclosure rules
Who is required to report, what information to report, when to report and consequences of non-
reporting.
COUNTRY PRACTICES
UK
Disclosure of tax avoidance schemes
Other disclosure rules.
Germany
Information exchange under FATCA and CRS.
Canada
Information exchange under FATCA and CRS.
India
Renegotiation of tax treaties
Section 94A
Law, rules and guidance note for FATCA/CRS
Amnesty schemes
Political and civil society debate
Disclosure under indirect transfer tax provisions
CbCR.
Luxembourg
Renegotiation of tax treaties
Information exchange under CRS and other EU directives
Information exchange under FATCA.
India and Switzerland agree for AEOI,
India to get Swiss bank account data
from September, 2018 onwards.
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EOI: SHIFTING PARADIGM
ISSUES
Request for exchange
Scope of taxes covered
What information can be
exchanged
Exclusion of vested
interest
Declining information
OLD REGIME FOR EXCHANGE
OF INFORMATION
At the request of competent authority.
Taxes on income and capital covered.
Such information as is necessary for
carrying out the provisions of the treaty.
Absent.
No such provisions present.
NEW REGIME FOR
EXCHANGE OF INFORMATION
Automatic exchange.
All taxes are covered.
Foreseeably relevant
information.
Present.
Conditions for non denial
present.
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CHALLENGES
Interplay US non-participation in CRS
Development of global model for bilateral and multilateral exchange of information.
Privacy issues
Taxpayer’s right to confidentiality of information.
Cost effectiveness
Cost of obtaining information should not outweigh its benefits
Compliance burden for taxpayers.
Role of tax administrations
Change in the role of tax administration
Co-operation between tax authorities of different jurisdictions.
Ramifications Enforcement mechanism and interpretation by judiciary
Unilateral action by jurisdictions.
TAXAND GLOBAL
SURVEY 2016
89% of
respondents
believe that
increasing
global tax
transparency
will increase
the cost of
compliance.
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TAXAND’S TAKE
Taxpayers under
increased and
constant scrutiny for
providing
information
1 Countries
embracing different
methods to enhance
transparency and
facilitate EOI
2 Significant
challenges in
implementation still
remain
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GLOSSARY
ABBREVIATION TERM
BEPS Base Erosion and Profit Shifting
CbCR Country by Country Reporting
CE Constituent Entities
CRS Common Reporting Standard
EOI Exchange of Information
FATCA Foreign Account Tax Compliance Act
FFI Foreign Financial Institution
IGA Inter Governmental Agreement
MNE Multi National Enterprise
NFFE Non-Financial Foreign Entity
Tax treaty Double Taxation Avoidance Agreement
TIEA Tax Information Exchange Agreements
SPEAKER PROFILES
SPEAKER PROFILE
Mukesh Butani
BMR Advisors, Taxand India
T: +91 11 6678 3010 | E: [email protected]
Mukesh Butani is a member of the Taxand Board and Chairman of BMR
Advisors, which is Taxand India. With a specialisation in international tax and
transfer pricing, he has significant experience in advising Fortune 500
multinationals and Indian business houses on a wide range of matters across
multiple sectors.
SPEAKER PROFILE
Hans Georg Raber
Volkswagen Group
Hans Georg Raber studied law and worked in an international Audit and Tax
Advisory company and in a German Industry Federation. Since 2000 he has
been heading a department in Volkswagen Group Taxes and Customs, now
responsible for Tax Policy, Customs and Trade, Excise Taxes and International
Tax and Customs Projects. He is chairman of the ‘Customs and Excise’
Committee of the Federation of German Automotive Industry (VDA), and a
member of the Tax Committees of the Business and Industry Advisory
Committee (BIAC) to the OECD and of the International Chamber of Commerce
(ICC).
SPEAKER PROFILE
Romain Tiffon
ATOZ Tax Advisers, Taxand Luxembourg
T: +352 26 940 245 | E: [email protected]
Romain Tiffon is a Partner at ATOZ Tax Advisers, which is Taxand Luxembourg.
Romain has over a decade of experience in structuring Pan-European
investments and coordinating tax implementation for a wide range of institutional
investors in the Private Equity and Real Estate sectors. He also has extensive
experience in structured finance, corporate restructuring, and family offices.
SPEAKER PROFILE
Parthasarathi Shome
International Tax Research Foundation
Dr. Parthasarathi Shome is Chairman of the International Tax Research
Foundation. He is a former Chief Economist of Her Majesty’s Revenue and
Customs (UK) and a former Chief of Tax Policy of the International Monetary
Fund. He has been an advisor to various governments on tax and fiscal policy
including having been Advisor (Minister of State) to the Indian Finance Minister.
SPEAKER PROFILE
Richard Syratt
Alvarez and Marsal Taxand, UK
T: +44 (0) 2078634722 | E: [email protected]
Richard Syratt is a Managing Director with Alvarez & Marsal Taxand in London.
He has more than 20 years of corporate and international tax and transfer
pricing experience. Prior to joining A&M Richard spent 19 years with Deloitte.
Richard’s clients include a number of the UK’s top listed multinationals, with
projects ranging from ‘boxes and lines’ planning through to substance based
business changes.
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