OECD guidelines on transfer pricing and other international tax issues protect the interests of OECD countries only and it is ‘improper’ to suggest that they represent internationally agreed guidance, the Indian government has claimed.
It was ‘extremely important’ that the UN Committee of Experts on International Cooperation in Tax Matters be ‘upgraded’ to an intergovernmental commission, India said in a letter to the UN ahead of a ‘special event’ on international tax cooperation held on 15 March.
The status of the UN committee continues to divide developing and developed countries despite agreement on the importance of the UN’s work, according to a summary of the meeting.
The Economic and Social Council (ECOSOC) considered a report, Role and work of the Committee of Experts on International Cooperation in Tax Matters, in which the Secretary-General said the UN’s tax work should be focused on providing a leadership role ‘in areas where there are gaps’.
‘Are the global tax tectonic plates shifting?’ the ICAEW Tax Faculty asked in an item published before the outcome of the meeting was known, noting that there had been ‘much talk in recent years’ of upgrading the committee. ECOSOC intends to revisit the issue of international cooperation in tax matters in July.
The Secretary-General wrote: ‘The UN, thanks to its universal membership and its legitimacy, can be a catalyst for increased international cooperation in tax matters for the benefit of developed and developing countries alike. Since the great majority of UN Member States are not members of either OECD or the G20, it is the role of the UN to ensure the active participation of developing countries, including the least developed countries, in international tax cooperation activities, which will ultimately be of benefit to them. Only if this level playing field is achieved, can enhanced tax cooperation be truly respected as global.’
The committee comprises 25 members ‘nominated by governments and acting in their expert capacity’. The UN’s Finance for Development website says: ‘The members, who are appointed by the Secretary-General after notification is given to ECOSOC, for a term of four years, are drawn from the fields of tax policy and tax administration and are selected to reflect an adequate equitable geographical distribution, representing different tax systems.'
‘Truly universal and inclusive’
An executive summary of the meeting, published on the UN’s Financing for Development website, said: ‘Developing countries emphasised the need to establish a truly universal and inclusive body for international tax cooperation at the intergovernmental level, which would embody democratic principles on a level playing field by giving developing countries a “full seat” and “equal voice” at the table and thus supported the conversion.
‘Developed countries, on the other hand, opposed the conversion and proposed to focus on improving the effectiveness of the current structure and making sure that existing resources were used most effectively.’
Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration, ‘called for enhanced involvement of the UN Secretariat in the work of OECD, including UN participation as an observer in the OECD Committee on Fiscal Affairs’.
‘Inconceivable’
India’s representative had confirmed ‘India’s position that it was extremely important to bring the UN work on international tax matters into the intergovernmental process by upgrading the Committee of Experts to an intergovernmental commission’.
In a ‘letter from India’, also published on the ECOSOC website, Sanjay Kumar Mishra, Joint Secretary of the Central Board of Direct Taxes – part of the Department of Revenue in India’s Ministry of Finance – said the OECD Model Tax Convention and the OECD Transfer Pricing Guidelines had been developed ‘on the basis of consensus arrived at by the government of 34 countries (all developed countries)’.
It was ‘inconceivable’, he said, ‘as to how standard developed by government of only 34 countries can be accepted by government of other countries as “standard” of sharing of revenue on international transactions between source and resident country, particularly when it only takes care of the interest of developed countries and has seriously restricted the taxing powers of source country’.
A covering note from India’s Ambassador to the UN indicated that the letter conveyed the Indian government’s views on the Secretary-General’s report. The members of the UN tax committee from China and Brazil ‘generally supported’ the Indian government’s position on this issue, said David Spencer, Senior Adviser to the Tax Justice Network.
‘Information deficiency’
The TJN has called for an ‘objective analysis’ of transfer pricing issues in the context of developing countries, arguing that ‘the OECD’s theory of the arm’s-length principle no longer applies to multinational enterprises which are highly integrated’ and that ‘comparables in many if not most cases cannot be found’.
The group said a draft Transfer Pricing Manual being prepared by a subcommittee of the UN tax committee referred to an ‘information deficiency problem’.
This was, the TJN said, ‘the problem faced by developing countries in getting sufficient information, including comparables, about the activities of multinational corporations’.
The TJN reiterated its support for country-by-country reporting, ‘whether countries adopt the OECD’s Transfer Pricing Guidelines, or a modified arm’s-length principle, formulary apportionment, or a mixed system’.
OECD guidelines on transfer pricing and other international tax issues protect the interests of OECD countries only and it is ‘improper’ to suggest that they represent internationally agreed guidance, the Indian government has claimed.
It was ‘extremely important’ that the UN Committee of Experts on International Cooperation in Tax Matters be ‘upgraded’ to an intergovernmental commission, India said in a letter to the UN ahead of a ‘special event’ on international tax cooperation held on 15 March.
The status of the UN committee continues to divide developing and developed countries despite agreement on the importance of the UN’s work, according to a summary of the meeting.
The Economic and Social Council (ECOSOC) considered a report, Role and work of the Committee of Experts on International Cooperation in Tax Matters, in which the Secretary-General said the UN’s tax work should be focused on providing a leadership role ‘in areas where there are gaps’.
‘Are the global tax tectonic plates shifting?’ the ICAEW Tax Faculty asked in an item published before the outcome of the meeting was known, noting that there had been ‘much talk in recent years’ of upgrading the committee. ECOSOC intends to revisit the issue of international cooperation in tax matters in July.
The Secretary-General wrote: ‘The UN, thanks to its universal membership and its legitimacy, can be a catalyst for increased international cooperation in tax matters for the benefit of developed and developing countries alike. Since the great majority of UN Member States are not members of either OECD or the G20, it is the role of the UN to ensure the active participation of developing countries, including the least developed countries, in international tax cooperation activities, which will ultimately be of benefit to them. Only if this level playing field is achieved, can enhanced tax cooperation be truly respected as global.’
The committee comprises 25 members ‘nominated by governments and acting in their expert capacity’. The UN’s Finance for Development website says: ‘The members, who are appointed by the Secretary-General after notification is given to ECOSOC, for a term of four years, are drawn from the fields of tax policy and tax administration and are selected to reflect an adequate equitable geographical distribution, representing different tax systems.'
‘Truly universal and inclusive’
An executive summary of the meeting, published on the UN’s Financing for Development website, said: ‘Developing countries emphasised the need to establish a truly universal and inclusive body for international tax cooperation at the intergovernmental level, which would embody democratic principles on a level playing field by giving developing countries a “full seat” and “equal voice” at the table and thus supported the conversion.
‘Developed countries, on the other hand, opposed the conversion and proposed to focus on improving the effectiveness of the current structure and making sure that existing resources were used most effectively.’
Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration, ‘called for enhanced involvement of the UN Secretariat in the work of OECD, including UN participation as an observer in the OECD Committee on Fiscal Affairs’.
‘Inconceivable’
India’s representative had confirmed ‘India’s position that it was extremely important to bring the UN work on international tax matters into the intergovernmental process by upgrading the Committee of Experts to an intergovernmental commission’.
In a ‘letter from India’, also published on the ECOSOC website, Sanjay Kumar Mishra, Joint Secretary of the Central Board of Direct Taxes – part of the Department of Revenue in India’s Ministry of Finance – said the OECD Model Tax Convention and the OECD Transfer Pricing Guidelines had been developed ‘on the basis of consensus arrived at by the government of 34 countries (all developed countries)’.
It was ‘inconceivable’, he said, ‘as to how standard developed by government of only 34 countries can be accepted by government of other countries as “standard” of sharing of revenue on international transactions between source and resident country, particularly when it only takes care of the interest of developed countries and has seriously restricted the taxing powers of source country’.
A covering note from India’s Ambassador to the UN indicated that the letter conveyed the Indian government’s views on the Secretary-General’s report. The members of the UN tax committee from China and Brazil ‘generally supported’ the Indian government’s position on this issue, said David Spencer, Senior Adviser to the Tax Justice Network.
‘Information deficiency’
The TJN has called for an ‘objective analysis’ of transfer pricing issues in the context of developing countries, arguing that ‘the OECD’s theory of the arm’s-length principle no longer applies to multinational enterprises which are highly integrated’ and that ‘comparables in many if not most cases cannot be found’.
The group said a draft Transfer Pricing Manual being prepared by a subcommittee of the UN tax committee referred to an ‘information deficiency problem’.
This was, the TJN said, ‘the problem faced by developing countries in getting sufficient information, including comparables, about the activities of multinational corporations’.
The TJN reiterated its support for country-by-country reporting, ‘whether countries adopt the OECD’s Transfer Pricing Guidelines, or a modified arm’s-length principle, formulary apportionment, or a mixed system’.
