Nexia ETG Meeting Milan 2 October 2009 Harmful Tax Practices
Kevin Renshaw Slide 2 Harmful Tax Practices Is a preferential tax
regime harmful? In 1998 OECD report identified the following
practices: Ring fencing from the domestic regime Lack of
transparency Lack of effective exchange of information But where
was the level playing field? Is the form of agreement model
appropriate? Slide 3 Harmful Tax Practices What is a harmful tax
practice? Not formally defined OECD and G20 refer to: Illicit use
of financial systems Lack of transparency Are these really tax
practices? Slide 4 History Key dates Harmful Tax Practices Project
launched by OECD in 1996 Subsequent meetings and progress reports
2002 Model Agreement on Exchange of Information Most recent report
issued 2 April 2009 following G20 meeting Issue of White List of
cooperating countries in 2009 Slide 5 Current Position OECD Harmful
Tax Practices project continues with the involvement of 84
countries G20 has identified harmful tax practices as a key
priority UK and US governments promising strong measures to tackle
offshore centres European governments firmly committed to change
Slide 6 Current Position Isle of Man assists Belgium in reaching
OECD standards and being upgraded to the white list! Austria signs
agreements with Andorra and Gibraltar and Switzerland signs
agreement with Qatar to escape grey list! OECD confirm 0% corporate
tax regimes not harmful Has the debate moved to the removal of
banking secrecy? Slide 7 Harmful Tax Practices or Offshore
Financial Centres? OFCs inextricably linked to harmful tax
practices by OECD and G20, but Are OFCs used primarily for tax
evasion? Historically, perhaps Current use of OFCs has many
commercial reasons Lack of transparency/banking secrecy is now
practiced by the small minority What about harmful practices
onshore? Slide 8 Why use OFCs if not to avoid tax? Flexible
corporate law Corporate structuring without paying additional taxes
Access to new markets Allows companies to pay tax where profits
earned Certainty of legislation Slide 9 Is it really a problem?
Hard to quantify financial impact, but: Estimates of assets held
offshore by individuals ranges from $1.7 to $11.7 trillion
Investigation into offshore banks recovered 1.5bn for Ireland UK
disclosure regime recovered 500m US estimates $100bn of tax being
evaded through assets held offshore Slide 10 What does the future
hold? Continued focus from OECD/G20 Harsh US legislation can be
expected White list published in 2009 further sanctions on
blacklisted countries? further restrictions to remain on white
list? Defensive measures or recognition Slide 11 What does the
future hold? Is it enough to have X number of agreements? It is
likely the ability to demonstrate a system to deliver exchange of
information if requested will be crucial! Change in focus from
Offshore Financial Centres to International Financial Centres Slide
12 What about other harmful tax practices? Tax rules which: Distort
the free market Discriminate against certain taxpayers Provide a
lack of certainty (judicial interference) Constantly change Result
in taxation other than where the profits are earned Are poorly
drafted and interpreted for political and emotional reasons Slide
13 Do we need the Harmful Tax Practices project? If profits are
being shifted offshore, why not tackle this through OECD transfer
pricing rules? Do TP rules need strengthening? If TP rules cannot
be used is it really tax abuse? Is it tax avoidance or simply tax
deferral? Could the same result be achieved through changes to
domestic legislation? Necessary or politically expedient? Slide 14
Conclusion Standing still is not an option OFCs will need to change
However, so will traditional jurisdictions Governments must take
global view, not simply view domestic tax situation Pure tax
planning unlikely to have a long term future commercially driven
structuring will be increasingly important We have an obligation as
advisors to act responsibly and preserve planning opportunities
Slide 15 Who to contact Kevin Renshaw Associate Tax Director
Telephone: +44 (0)1624 689616 Mobile: +44 (0)7624 482438 Email:
[email protected] This presentation is for general
guidance only. Action should not be taken without obtaining
independent advice. Abacus Trust Company Limited is licensed by the
Isle of Man Financial Supervision as a Corporate and Trust Service
Provider. Abacus Financial Services Limited is licensed by the Isle
of Man Financial Supervision Commission to conduct Investment
Business.
