A Decade of the Indian Advance Pricing Agreement Programme: Achievements and Challenges
By Priyanka Mashelkar and Apoorv Tiwari
India’s Advance Pricing Agreement (APA) programme was introduced in 2012 with the objective of reducing transfer pricing disputes and providing certainty to taxpayers on their international transactions. In the last decade or so, the programme has proven to be a successful dispute mitigation and resolution mechanism. The authors use data and statistics from a recently released report by the Central Board of Direct Taxes (CBDT) in India to highlight the success of the programme, while also acknowledging the challenges ahead, especially as taxpayers’ expectations from the programme continue to rise.
Digital taxation under the OECD Amount A and UN Article 12B mechanisms for market jurisdictions in Africa: a comparative analysis
By Erica Rakotonirina
This Policy Brief examines the need for the evolution and harmonization of international taxation in the face of the digitalization of economic transactions.
Between the OECD proposal for shared taxation of residual profits through the Amount A mechanism and the UN proposal of Article 12B for taxing income from Automated Digital Services on a gross basis through shared but capped taxation, with an optional variant of the taxation of net profits, African States need to make vital political and technical choices.
The strategic negotiations must include regulatory sustainability, the right balance and fiscal fairness between the divergent interests of residence states vs source states (which include almost all African countries), and MNEs in their quest for profit and expansion.
The Policy Brief carries out quantified evaluation of possible revenue estimates using a case study approach. However, such an exercise remains difficult for questions of accessibility and reliability of data relating to the activities of multinational companies.
To be realistic, the scope of the study was restricted to a reference company in the digital sector but targeted economies of different scales. The results of the revenue estimates represent an optimistic case of the impacts on tax revenues of the application of the OECD and UN measures on different types of economies.
The proposed OECD Pillar One and Two reforms mark a significant shift in the way large multinational enterprises are taxed on their global incomes. However, while considering the reform at the proposed scale tax administrators must be able to compare the revenue gains with alternatives. This paper uses open-source data to provide tentative estimates of the impact of Pillars One and Two. The methodology has been detailed so that administrators can replicate it for comparison. Further, the paper provides an assessment from the perspective of developing countries of some of the key design elements of the proposals so as to understand whether they are administrable and to foresee possible challenges.
The BEPS Monitoring Group submitted comments to the OECD on the consultation draft proposals to provide tax certainty for Amount A of Pillar One. Abdul Muheet Chowdhary, Senior Programme Officer of the South Centre Tax Initiative, was a contributor.
The BEPS Monitoring Group submitted comments to the OECD on the draft proposals for tax certainty on issues related to Amount A in Pillar One. Abdul Muheet Chowdhary, Senior Programme Officer of the South Centre Tax Initiative, was a contributor.
South Centre Comments on Tax Certainty Framework for Issues Related to Amount A
The South Centre offers its comments to the OECD Inclusive Framework’s Task Force on Digital Economy (TFDE) on the Tax Certainty Framework for Issues Related to Amount A.
South Centre Comments on Tax Certainty Framework for Amount A
The South Centre offers its comments to the OECD Inclusive Framework’s Task Force on Digital Economy (TFDE) on the Tax Certainty Framework for Amount A.
Mejora la regla del nexo para una distribución justa de derechos fiscales a países en vías de desarrollo
Por Radhakishan Rawal
Uno de los problemas abiertos para Pilar Uno en el debate de la tributación de la economía digital es el umbral del Nexo, que determinaría qué Empresas multinacionales (MNE) tienen una presencia tributable. Las economías muy desarrolladas o las economías más pequeñas en vías de desarrollo pueden verse privadas de derechos fiscales como resultado de umbrales de nexo como son descritos en la propuesta de Pilar Uno. Asimismo, inclusive cuando se adoptan umbrales más pequeños, a algunos países aún se les puede denegar derechos fiscales. El umbral financiero nunca fue un parámetro de distribución de derechos fiscales entre los países. Un ligero ajuste del proceso de certeza impositiva podría abordar el problema.
Este artículo recomienda otorgar el derecho fiscal por Monto A de Pilar Uno, que abarca la porción principal de ganancias tributables de la economía digital, a todas las jurisdicciones del mercado, pero otorgar derechos relacionados con las jurisdicciones impositivas afectadas solo a aquellos países que cumplen con los umbrales de Nexo. Este enfoque resultará en una distribución justa de derechos fiscales y también garantizará que no haya una carga adicional en el proceso de certeza impositiva, que será más sencillo para países en vías de desarrollo.
Améliorer des règles du nexus pour une répartition équitable des droits d’imposition pour les pays en développement
Par Radhakishan Rawal
L’une des questions posées dans le Premier Pilier sur les discussions sur l’imposition de l’économie numérique est le seuil du nexus, c’est-à-dire le lien de rattachement au pays, qui déterminerait quelles entreprises multinationales (EMN) ont une présence imposable. Les grandes économies développées ainsi que les petites économies en développement peuvent être privées de droits d’imposition en raison des seuils des nexus tels que décrits actuellement dans la proposition du Premier Pilier. De plus, même si des seuils plus petits sont adoptés, certains pays peuvent encore se voir refuser des droits d’imposition. Un seuil financier n’a jamais été un paramètre de répartition des droits d’imposition entre les pays. Un ajustement mineur dans le processus de certitude fiscale pourrait résoudre le problème.
Cet article préconise d’accorder le droit d’imposition sur le montant A du Premier Pilier, qui couvre la portion principale des bénéfices imposables de l’économie numérique, à toutes les juridictions du marché, mais d’accorder les droits destinés aux juridictions fiscales concernées uniquement aux pays atteignant les seuils du nexus. Cette approche se traduira par une répartition équitable des droits d’imposition et garantira également qu’il n’y ait pas de charge supplémentaire dans le processus de la certitude fiscale, ce qui sera plus facile pour les pays en développement.
The South Centre welcomes the UN Tax Committee’s invitation of public comments into its draft agenda and four-year work plan. By engaging the public in preparing the work plan, the UN Tax Committee’s work can be more responsive to the needs of developing countries, and of UN Member States as a whole. By stating that “the goal to ensure that the Committee’s agenda is practical and relevant to developing countries and includes the most pressing challenges they face in tax policy and administration” the Committee has shown a laudable intent which is also in line with its mandate, which is to give special attention to developing countries. The South Centre offers its written comments on the three topics on which inputs have been requested. These have been prepared based on consultation with the South Centre’s Member States, which are exclusively developing countries.
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.
