In recent years, the international tax planning strategies of multinationals have become a source of – often heated – debate. This course provides learners with the tools to become fully informed participants in the debate by explaining the foundations and practice of international tax law as well as addressing current developments and the ethical aspects of tax planning.
Interview Pascal Saint-Amans
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En provenance du cours de Universiteit Leiden
Rethinking International Tax Law
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Tax planning & ethical dimensions
This sixth and last module will be about the ethical aspects of tax planning. Prof. Douma will be interviewing a number of key stakeholders in the current debate to reflect on what we have learned in the previous modules. In addition, you will find the final exam which will enable you to complete the course.
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Prof. Dr. Sjoerd DoumaFaculty of Law
International Tax Center
Pascal, welcome.
Thank you very much for taking the time for this interview and
could you perhaps start by briefly introducing yourself?
>> So I'm Pascal Saint-Amans.
I'm the head of the Centre for Tax Policy and Administration at the OECD.
This is the tax directorate, which serves the committee on
fiscal efforts where international tax standards are developed.
>> International taxation of multinational companies has
been on the political agenda now for
a number of years, leading to debate in various countries across the world.
What would your view be on this debate?
>> So clearly international tax has become a political item on the agenda,
the political agenda, and that's very significant.
This has taken place for the past six years or so since the crisis hit.
We saw it through the fight against bank secrecy, to start with the fight,
that some individuals could hide money in bank secrecy states or jurisdictions.
And that has now come to an end or it's beginning of the end with automatic
exchange of information which is becoming a standard, and why is it the case?
It is because governments,
politicians Leaders of the G20, leaders of countries, cared about that.
And they have made sure that changes would occur in this international tax area.
But now it has shifted to multinational companies tax planning,
as a political element of the debate which is extremely interesting, why is it so?
Because you have governments which have increased taxes on
the local factors of production.
Labor mainly, through deity, through personal income tax and
at the some time you have stories in mainstream medias.
Stories which say, well, a large multinationals can reduce their tax burden
very significantly, because of loopholes in the international tax framework.
You're a politician,
you just can not face this situation whether you're right wing or left wing.
And what is extremely interesting is that this is
a bipartisan type of debate including in the United States where there
is an agreement that the level of corporate income tax is too high.
But that the base is much too narrow, that there is effective BAPS base erosion and
profit shifting.
So in all the countries across the world, you have this bilateral debate,
or this bipartisan debate, saying we need to fix international tax rules.
We need to fix our domestic rules, so
that we don't facilitate tax spending, massive tax spending for campaigns.
So it's a highly politically sensitive issue
that we have used at handling through the project, which is called BEPS.
Fighting base erosion and profit shifting to make sure that we realign
the location of the activities with the location of the profits.
>> Would you say that your work is focusing more on the countries rather
than the companies involved?
>> We have developed a BEPS action plan,
15 measures, which has been endorsed by the G20 leaders.
And we will be reporting to the G20 leaders at the end of 15,
of 2015 on the 15 measures.
Now there are three pillars.
One is about providing the governments with the instruments that the needs to
broaden the tax base.
To put an end to hybrid mismatches, to limit interested tech ability,
to have CRCFC legislation for in-company control, for in-company legislations.
To put an end to harmful tax practices, but also to
fix the international tax instruments such as tax treaties or transfer pricing rules.
That's for the governors, we also have developed a set of best practices,
or we are developing a set of best practices.
Or obligations for the companies to be more transparent through
government requirements such as a country-by-country reporting.
Or mandatory disclosure regimes, which will
oblige the companies to disclose their aggressive tax schemes to governments.
And also the work we're doing on harmful tax practices
is a way to put an end to the opacity of the delivery of tax routing.
So, you see it's on both end of the spectrum.
On the one hand helping government to fix the rules,
on the other hand obliging international's to be more transparent.
So that we'll restore the confidence of all the players,
governments and businesses in the relevance of the international tax rules.
>> But at the same time the BEPS project is not about
raising corporate income tax revenue.
>> No the goal of the best project is very simple.
It's to realign the location of the profits with the location of
the activities.
In today's environment, you have too much profit located
in what we call tax havens, in location in jurisdictions where nothing is happening.
Through pure contractual arrangements, the profit has been shifted to these places
where there is absolutely no reason, this doesn't pass the smell test.
And when you have rules, international standards,
that countries adhere to only if they are relevant.
Because countries are sovereign, they can decide not to be bound by these
rules which are morally binding but not legally binding.
So if these rules don't make sense because they don't pass the smell test,
what happens at the time of budget restraint?
Well, countries will take unilateral measures, and
if they take unilateral measures, you lose the international standard.
Which is extremely necessary to eliminate double taxation because we
need to eliminate double taxation to favor investment.
And we need cross-border investments for growth and for
employment, so we're on the razor's edge.
On the one hand, we don't want to facilitate double non-taxation, and
the current rules facilitate double non-taxation.
Especially as businesses have been very aggressive, but
the rules were deficient and what the businesses were doing was illegal.
So if its legal,
you don't like the outcome, you change the law, that's what we're trying to do.
And on the other hand, we're trying to provide for
an environment which will be more transparent.
So that tax administrations will be better equipped and
businesses will see what we call the level of the playing
field to make sure that some are not at the competitive disadvantage.
>> Pascal, I think these are really some great views and
insights on the current debate.
May I perhaps ask you a more personal question at the end of this interview?
A few years ago you succeeded Jeffrey Owens as the director of the center.
What drives you personally in your job?
>> Well, trying to do the right thing.
We are in charge of international standards to eliminate double taxation.
That's a task which I believe in, which is important and which is a truce.
The world is changing, we have emerging economies,
which are emerging by definition, and which ones do we see the members.
Therefore, there are not bound by our standard.
And you face the risk, because of the crisis,
because of this chance of the change in economies of the world.
That we may lose standards, which may harm the growth, the employment,
the public good, and that's why we need to fix this.
And by the way, it's also for
better environment where taxes will be properly implemented.
So the idea is not to increases taxes, but make sure that all
their fair share and the fair share is to be defined by parliament.
It's at the core of democracies in all the member states.
So we're just trying to help get these right
with a good international cooperation.
Cooperation is much better than unilateralism, that's what I believe in.
>> Thanks a lot sir, I think the work you're doing is really great at the OECD.
I think a few years ago nobody could have thought that we would be here now in 2015.
So thank you very much for the interview.
>> Thank you.
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