The 4th Meeting of the OECD Forum of Tax Administration, held in Cape Town, concluded today.
A release from the OECD Secretariat reports that the main discussion topic has been the role of tax intermediaries in aggressive tax planning, and a wider review of the tripartite relationship between revenue bodies, taxpayers and tax intermediaries.
The report from the Forum focuses on large corporate taxpayers and those providing them with tax advice.
The broad conclusions are:
• Tax intermediaries play a vital role in tax systems by helping taxpayers understand and comply with their tax obligations in an increasingly complex world. However, some are also designers and promoters of aggressive tax planning.
• Revenue bodies are using various approaches (e.g. registration and regulation of tax intermediaries and advance disclosure of aggressive tax schemes) to respond to the involvement of tax intermediaries in aggressive tax planning and they are continually reviewing their strategies to ensure they are robust and appropriately targeted.
• Tax intermediaries may supply aggressive tax planning options to their clients but taxpayers set their own strategies for tax-risk management and determine their own appetites for tax risk. It is taxpayers who decide whether to adopt particular planning opportunities and there is significant scope to influence the demand by taxpayers for aggressive tax planning – at least in relation to large corporate taxpayers which is the main focus of the report.
• Risk management is an essential tool for revenue bodies to be able to respond quickly to changing circumstances, to ensure that risk treatment strategies are applied to the highest priority areas and overall, to ensure there is an optimal use of a revenue body’s resources.
• Current, relevant and reliable information is necessary to achieve effective risk management and clearly the most comprehensive source for this information is the taxpayer. Consequently, the report explored how a relationship between revenue bodies and taxpayers could be developed which would be based upon early disclosure of potential tax issues and transparency.
• Revenue bodies can achieve a more effective and efficient relationship in their dealings with taxpayers and tax intermediaries if their actions are based upon the following attributes:
– Understanding based on commercial awareness
These attributes are fundamental for any revenue body and should underpin all their dealings with taxpayers.
• If revenue bodies demonstrate these five attributes and have effective risk-management processes in place, large corporate taxpayers would be more likely to engage in a relationship with revenue bodies based on co-operation and trust, what is described in the report as an “enhanced relationship”.
• An “enhanced relationship” offers benefits for revenue bodies as well as taxpayers. Taxpayers who behave transparently can expect earlier certainty to tax issues with less extensive audits and lower compliance costs. Revenue bodies will benefit from the more openness and transparency on the part of taxpayers, which will enable them to direct their scare resources to areas/sectors of high risk.