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ADR Alternative Dispute Resolution,APA Advance Pricing Agreement. BEPS Base Erosion and Profit Shifting,BIAC Business Industry Advisory Committee. CIT Corporate Income Tax,CIV Collective Investment Vehicle. COSEFIN Council of Ministers of Finance of Central America Panama and the Dominican. CRS Common Reporting Standard,EAC East African Community. EI Extractive Industries,ETPF European Tax Policy Forum.
FT Financial Times,FTA Forum on Tax Administration. G20 Group of Twenty,GAAR General Anti Avoidance Abuse Rule. GST Goods and Services Tax,IMF International Monetary Fund. MAP Mutual Agreement Procedure,MNE Multinational Enterprise. NACE Nomenclature Statistique des Activit s conomiques dans la Communaut. Europ enne,NPV Net Present Value, OECD Organisation for Economic Co operation and Development.
OUCBT Oxford University Centre for Business Taxation. SAAR Specific Anti Avoidance Rule,TADAT Tax Administration Diagnostic Tool. TRACE Treaty Relief and Compliance Enhancement,UN United Nations. VAT Value Added Tax,Table of Contents,EXECUTIVE SUMMARY 5. Key Messages 6,Practical tools to enhance tax certainty 7. Next steps 8,INTRODUCTION 9,THE NATURE AND IMPACT OF TAX UNCERTAINTY 11.
A Preliminaries 11,B Analytical perspectives 11,C Evidence 14. MAIN SOURCES OF TAX UNCERTAINTY 16,A Policy design and legislative uncertainty 16. B Policy implementation and administrative uncertainty 20. C Uncertainty around dispute resolution mechanisms 22. D Uncertainty arising from changes in business and technology 22. E Taxpayer conduct can contribute significantly to uncertainty 23. F International aspects of uncertainty 23,NEW EVIDENCE ON TAX UNCERTAINTY 25. A Summary of Findings 25,B The business survey 26,C The tax administration survey 34. D Narrative analysis of CIT changes 37, PRACTICAL TOOLS FOR ENHANCING TAX CERTAINTY IN G20 AND OECD COUNTRIES 43.
A Tax policy design and legislation 43, B Tax Administration Avoiding and Resolving Disputes 47. C International Aspects 58,D Other approaches 59,TAKING THE TAX CERTAINTY AGENDA FORWARD 62. Appendix A Tax uncertainty and investment Theory and Evidence 63. Appendix B The Business Survey 70,Appendix C The Tax Administration Survey 103. Appendix D Summary Statistics for Narrative Analysis 110. References 111,EXECUTIVE SUMMARY, This report responds to the request from the G20 Leaders at their Summit in Hangzhou. China in September 2016 for the OECD and the IMF to work on issues of tax certainty 1. The request arises against the backdrop of heightened concern about uncertainty in tax. matters and its impact on cross border trade and investment especially in the context of. international taxation There are many reasons for heightened concerns about tax uncertainty. affecting both taxpayers and tax administrations These include the spread and emergence of. new business models and increased internationalization of business activities heightened. concern with aggressive tax planning some fragmented and unilateral policy decisions certain. court decisions and updates to the international tax rules such as through the G20 OECD Base. Erosion and Profit Shifting BEPS Project which are necessary to ensure that the international tax. rules remain up to date with the changing environment. At a time when good progress has been made in fighting tax evasion and aggressive tax. avoidance through increased transparency and the G20 OECD BEPS Project it is also. important to focus on tax certainty In this context the importance of providing greater tax. certainty to taxpayers to support trade investment and economic growth has become a shared. priority of governments and businesses, This report explores the nature of tax uncertainty its main sources and effects on business.
decisions and outlines a set of concrete and practical approaches to help policymakers and. tax administrations shape a more certain tax environment It draws on the experience of the. IMF and the OECD and on input received by the OECD from businesses tax administrations and. civil society The report provides new information from an extensive global survey by the OECD. of more than 700 businesses representing annual turnover of more than USD 17 trillion and. companies headquartered in 62 different jurisdictions and a survey of 25 predominantly G20. and OECD tax administrations It is recognised that surveys of this kind need to be interpreted. with caution Narrative evidence from a new IMF dataset is also presented on the frequency and. pre announcement of changes in corporate taxation in twelve advanced countries. This report focuses on tax certainty from the perspective of businesses and tax. administrations in G20 and OECD countries and stresses that the issues faced and many of. the responses needed are likely to be different in developing countries While there is. widespread agreement on the need to increase certainty in tax matters the report recognizes. that developing countries can face particular challenges of capacity and in combining the need to. secure sustainable revenues to support domestic revenue mobilization with ensuring the tax. certainty necessary to create an attractive business environment. The report has been prepared by staff from the OECD and IMF under the responsibility of the Secretariats. and Staff of the two mandated organizations The report reflects a broad consensus among these staff but. should not be regarded as the officially endorsed views of those organizations or of their member countries. Key Messages, The report highlights that there is risk of uncertainty discouraging investment The effects. of uncertainty on investment are ambiguous in theory But the empirical evidence while sparse is. more clear cut and does suggest adverse effects on investment and trade The results of the. business and the tax administration surveys presented in this report are instructive with. respondents to both reporting that tax uncertainty is a major concern. Uncertainty in the corporate income tax and the VAT systems is reported by business. as having an important influence on investment and location decisions Over 60. percent of respondents to the OECD business survey indicate that uncertainty in the. corporate income tax and the VAT is very or extremely important to investment and. location decisions, Tax certainty is a high priority for tax administrations with over 80 of respondents to. the tax administration survey identifying it as a very high or extremely high priority of their. tax administration, While the sources of uncertainty are many and varied the key findings from the surveys. According to businesses issues related to tax administration were ranked as among. the major drivers of uncertainty in tax systems with the top two and three out of the. top 10 sources of tax uncertainty deriving from issues related to tax administration In this. regard the main sources included bureaucracy to comply with the tax legislation although. this may also reflect concern over compliance costs and inconsistent treatment. Concerns over the inconsistent approaches of different tax authorities towards the. application of international tax standards ranked high in the business survey. Issues associated with dispute resolution mechanisms including timescales were also. identified as an important driver of uncertainty In particular respondents to the. business survey highlighted concerns about lengthy decision making of the courts which. may be an aspect of the wider judicial system and not wholly under the tax authorities. Tax administrations identified taxpayer behaviour as an important source of. uncertainty in particular as a result of aggressive tax planning and a lack of cooperation. They also highlighted complexity in legislation lengthy court procedures unclear drafting. and frequency of legislative changes, A key area of agreement in both surveys was that legislative and tax policy design. issues are a major source of tax uncertainty mainly through complex and poorly drafted. tax legislation and the frequency of legislative changes. The narrative analysis suggests there is considerable variation across advanced countries in. both the frequency of corporate tax changes and the lag before implementation Most. corporate income tax changes however are announced at least ninety days in advance of. implementation There is no obvious trend towards less pre announcement of corporate income. tax changes,Practical tools to enhance tax certainty.
The report outlines a set of concrete and practical approaches and solutions to enhance tax. certainty in G20 and OECD countries While recognising that governments and tax. administrations already take a wide range of measures in pursuit of tax certainty in both the. domestic and international context the report highlights the benefits of reducing or addressing. uncertainty at the earliest stage possible However where issues cannot be avoided or resolved. early on effective dispute resolution mechanisms will be needed. More specifically the report outlines the following practical tools to enhance tax certainty. Reducing complexity and improving the clarity of legislation through improved tax. policy and law design The development of a robust principles based tax law design. and monitoring framework coupled with various other measures to improve clarity and. reduce complexity including avoiding inappropriate retroactivity ensuring appropriate. mechanisms for consultation on proposed or announced legislation and enhanced. Increasing predictability and consistency by tax administrations through timely. issuance of rulings and technical interpretations Proactive taxpayer engagement and. education can also improve understanding of the legislation and its requirements and of. the practices of the administration, Effective dispute resolution mechanisms have a critically important role to play in. establishing certainty Dispute resolution mechanisms should be fair and independent. accessible to taxpayers and effective in resolving disputes in a timely manner. Tackling tax uncertainty in the international context can be particularly important. The report outlines a number of approaches to enhance tax certainty in the international. context for G20 and OECD countries including through. Dispute prevention and early issue resolution programs such as cooperative. compliance programs and advance pricing agreements APAs as well as simultaneous. and joint audits where appropriate The innovative use of these tools in a multilateral. context also received support from the business and tax administration surveys. Robust and effective international dispute resolution procedures such as mutual. agreement procedure MAP including fully implementing the minimum standard. under Action 14 of the G20 OECD BEPS Project and the use of arbitration where. countries elect to do so, Updating of tax treaties through the use of the Multilateral Convention to. Implement Tax Treaty Related Measures to Prevent BEPS The multilateral. instrument will allow for the amendment of treaties to be made rapidly and. consistently thereby enhancing certainty, Making further progress towards simplified and effective withholding tax. collection and treaty relief procedures, Cooperation and coordination on the development of coherent international. standards and guidance and consistent implementation play an important role in. ensuring greater tax certainty,Next steps, This report highlights that tax certainty is an important priority for governments and.
businesses in G20 and OECD countries and outlines a set of concrete and practical tools to. enhance tax certainty In this context this report represents an important opportunity for the. G20 to affirm its commitment which could for instance be included in a declaration to enhanced. tax certainty and its support for practical actions by governments tax administrations and. businesses to provide a more predictable and certain tax environment to support cross border. trade and investment and secure a more stable and predictable revenue stream for governments. While the focus of this report is on the G20 and OECD it also presents an important. opportunity to engage in dialogue with developing countries on areas where enhanced tax. certainty furthers their development goals Developing countries need to mobilize domestic. resources to finance the Agenda 2030 for Sustainable Development while facing many distinct. challenges in balancing the need for sustainable revenues against creating an attractive business. environment The appropriateness for developing countries of the specific tools to enhance tax. certainty suggested in the report for G20 and OECD countries needs to be assessed in terms of. their weaker enforcement capabilities and lower implementation capacity While noting that. many issues relating to tax certainty are already embedded in existing capacity building. programs as a specific practical measure the report proposes a consultative workshop on tax. certainty for African countries to be held in the region in 2017 to take forward the discussion on. the particular challenges that developing countries face. INTRODUCTION, This paper responds to the September 2016 request from the G20. We emphasize the effectiveness of tax policy tools in supply side structural reform for. promoting the benefits of tax certainty to promote investment and trade and ask the OECD. At a time when good progress has been made in fighting tax evasion and aggressive tax avoidance through increased transparency and the G20 OECD BEPS Project it is also important to focus on tax certainty In this context the importance providing of greater tax

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