Global Tax Policy and Controversy Briefing Hub
EY Global Tax Controversy Leader, Ernst & Young LLP
+1 202 327 5696
EY Global Tax Policy Leader Ernst & Young LLP
+44 20 7951 0150
The BEPS project, for example, has deliberately made the arm’s-length standard less precise and even more subjective than it already was. This was an objective of the project, designed to increase the risk profile of structures that sought to allocate profits to tax havens or create stateless income.
This makes the role of tax administration and its link to tax policy even more important. “The focus of the OECD’s Forum on Tax Administration, like that of most national tax administrations, is on implementation rather than policy, although it will provide important feedback and input to the policymaking process, too,” says FTA Chair Hans Christian Holte, Director General of the Norwegian Tax Administration, in our feature interview.
“We are now entering the implementation period for BEPS …” he says. “So the spotlight is falling onto tax administrations, questioning how they can simultaneously enhance compliance, tackle tax crime, reduce the administrative burden on taxpayers and support economic growth through effective implementation, internal change and engagement with taxpayers.”
With those words, Holte effectively explains how the tax world has moved into a different phase — one of implementation and policing — and that the work of the subsidiary body of the OECD that he chairs must now follow through and deliver the three C’s (certainty, consistency and currency) that taxpayers want (and hopefully avoid the complexity and confusion that they don’t!).
Digital tax: If you are asking what the product is, it’s probably you …
2018 may come to pass as the first year of concrete action and new laws around the taxation of digital activity. While it was included in the BEPS project in 2015, the digital debate of today takes a very different form. Instead of focusing on anti-avoidance and stateless income, as our article on page 14 explains, the debate is now focused on what digital activities drive currently untaxed value, and how the division of taxing rights among countries should work in the future.
How (and indeed, if) the European Commission’s pair of digital proposals play out is still uncertain, and recent events seem to indicate that the focus — for a long-term solution, at least – is returning to the OECD. As Klaus von Brocke and Steve Bill write in their page 20 article discussing the EU’s unique policy formation process, the European proposals are now being picked apart and reassembled by Working Party on Tax Questions within the Commission.
The objective of that exercise is to find a compromise solution. But can such a compromise be secured, or will there instead be global tax disagreement? Many countries are now counseling others to wait for the OECD to take a more consensual approach. But that doesn’t mean inactivity: countries both within and outside the EU (Australia, for example) are looking closely at new digital taxes.
Simultaneously, as professionals from our State and Local Tax group outline on page 42, the Supreme Court in the South Dakota v. Wayfair case has overturned Quill, eliminating the physical presence nexus standard for sales and use tax collection. The most pressing issue for multistate taxpayers, they explain, is whether the states will attempt to assert liability for uncollected taxes on a retroactive basis. But no less importantly, all taxpayers must immediately consider the impact of this decision on their operations.
No. 1 tax risk
EY’s 2017-18 Tax Risk and Controversy Survey identifies transfer pricing as the issue representing the highest tax risk for companies. Page 25 sees the publication of the first article in a new EY series titled “Eight for 2018 and beyond.” This series identifies and discusses key transfer pricing risks, providing readers with actionable insights and practical takeaways. This first article in the series focuses on the transfer pricing aspects of the sale or transfer of intellectual property assets.
Finding your path forward
Today, company tax leaders are being tasked with doing more to inform strategic tax and business decisions and to drive a new wave of increased productivity. Globalization’s volatile environment means a higher degree of risk and more challenging mobility issues, but it also brings opportunities. Being able to effectively respond to global trends will help keep you ahead of the curve, grow your market share and revenue, and can improve efficiencies. We hope this publication helps you find your path forward.