Tuesday, May 22, 2012

Updated: Tax Inspectors Without Borders: A Seriously Good Idea

A seriously useful article from Mick Moore, from the UK's Institute of Development Studies, and the founding Chief Executive Officer of the International Centre for Tax and Development.

Its preamble goes:
In the struggle between developing countries’ tax systems and multinational companies, there are calls for an elite task force of international tax experts to assist the side of national tax agencies. Here is why I believe a new proposal by the OECD to create ‘Tax Collectors Without Borders’ is a good idea.
We have given our cautious endorsement to the idea, too. Now read the rest of his article. It is short, and to the point.

Update, May 23: We received an email from an international tax expert, whose permission we don't (yet) have to publicise, which injects a serious note of caution:
"Perhaps the plan for an oecd SWAT team could be useful, perhaps not.

The country needs to have laws in place that make foreign companies actually liable for tax --- or else nothing works. The SWAT team can do nothing if taxes are not legally due. In one of the fictional cases, we have transfer-price abuses. The OECD is going to solve such abuses? How, when it cannot solve them in Germany or the U.S.? What we might get is an oecd style transfer-price audit, with a negotiated settlement at 25 cents on the dollar. Something, but not a lot.

The country needs to have an anti-interest stripping law in place. If it does, does it really need an outside SWAT team? If not, what can the SWAT team do --- appeal to transfer pricing constraint? It needs an anti-royalty-stripping rule in place. And, of course, it needs to have avoided an oecd-based tax treaty that protects against domestic anti-stripping laws. Is oecd going to be helpful in this regard?"
Given our deep mistrust on the OECD, based on its jealous guarding of its woefully inadequate and even harmful standards on a range of issues in the international arena, which we have commented on interminably (see here, here and here, for example), it is wise to take this note of caution extremely seriously.

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