Despite earlier OECD measures against harmful tax practices and bank secrecy as well as the implementation of the cooperative compliance (“enhanced relationship”) model, international tax planning and regulatory arbitrage by multi-national corporations (MNCs) remains a significant global problem. The 2008 Global Financial Crisis (GFC) starkly exposed the dysfunctional nature of the international tax architecture (largely unchanged since the 1920’s) and saw the G20 /OECD develop the 2013 Base Erosion and Profit Shifting (BEPS) Project. The purported aim is to rein in aggressive tax planning and to restore public trust in international taxation. BEPS has three pillars, namely, 1) the coherence of the international tax rules; 2) realigning taxation with the substance of economic activities; and 3) improving transparency.
This mid-term review seminar focuses on the role of transparency since access to taxpayer information is a linchpin of effective tax administration. Transparency of the aggressive tax planning by MNCs seeks to engender behavioural change in MNCs so that they tone down their tax-aggressive behaviour. The politicisation of the international tax environment and the power of MNCs appears, however, to have resulted in a dilution from within of certain BEPS measures with the retention of the ‘arm’s length’ principle and ‘independent entity’ concept, both of which facilitate aggressive tax planning.
Yet, what about transparency as a regulatory tool to make MNCs accountable regarding their tax planning and profit-making? Tax transparency levels the playing field and offsets informational asymmetry between MNCs, advisers and national tax authorities. This constitutes a new paradigm and could potentially be rather impactful. Some warn, however, that greater tax transparency cannot, on a stand-alone basis at least, be the panacea to curb aggressive tax planning by MNCs.
About the speaker
Johan Van Der Walt is a qualified tax lawyer (South Africa) with extensive experience in tax dispute resolution and tax litigation. In 2014 Johan started the KPMG South Africa’s Dispute Resolution and Tax Controversy practice. Prior to that, he was a partner at a South African corporate law firm, which he had joined from the South African Revenue Service (SARS). At SARS he participated in devising the Voluntary Disclosure Program (VDP) allowing non-compliant taxpayers to regularize tax defaults and Exchange Control contraventions (similar to the ATO’s recent “project DO-IT”). Johan has a keen interest in the global shift from ‘tax secrecy’ to ‘tax transparency’ and the impact this is having on the tax compliance behaviour of multinational corporations.