Tax Good Governance Brussels 15 June 2017 Antonella Caiumi DG TaxudD4 Tax certainty Hot topic in EC agenda discussion at ECOFIN meeting in April The object is to take as a Union a proactive stance to create a more growthfriendly environment in the EU ID: 712787
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Slide1
Tax Certainty
Platform for
Tax
Good
Governance
Brussels, 15
June
2017
Antonella
Caiumi
, DG Taxud.D4Slide2
Tax certainty
Hot topic in EC agenda: discussion at ECOFIN meeting in April
The object is to take as a Union a proactive stance to create a more growth-friendly environment in the EU
This
presentation
Which is the impact of uncertainty in tax matters on business activities and growth?
How recent
policy initiatives at the international
level bring certainty, with a focus on the EU
Way
forward
?
how
to
enhance
tax
certainty
Slide3
Background
Heightened concerns about uncertainty in tax matters
High global economic and political uncertainty
Changes in international tax rules
Emergence
of new business models
Discussion at the G20
High-Level Tax Symposium
,
July 2016
G20 Summit asked OECD and IMF to work on TU, September 2016
IMF-OECD Report delivered to G20 Finance Ministers, March 2017
Discussion will continue at the G20 Leader's Summit in July Slide4
How and Why can Tax
Uncertainty
arise
?
Uncertainty
may
arise
from
overall
taxation
policy
(
Macro
level
)
Overall
level
of
tax
revenues
/
tax
mix
Difficulties
to estimate future
tax
payments
(
Micro
level
)
Announced
tax
reform
may
not
take
place
/timing and
direction
of the
change
Lack
of
precision
of the
tax
code
Conflicting
tax
provisions
and
interpretations
over time
Frequent
tax
changes
–
often
to
change
tax
expenditures
Different
tax
rules
applied
in cross-
border
situations
At the EU
level
,
tax
complexity
due to 28
national
systems
main
obstacle
to complete the Single MarketSlide5
Tax uncertainty and Investment
Theoretical studies
show
tax
uncertainty
is
very likely to have
negative effects
on investment and growth under realistic assumptions
investment
irreversibility
more complete theoretical frameworks
including monetary policy, market power and price stickiness
for
very relevant cases for economic
growth, like
innovative
firms
and
start-upsSlide6
The Economic Impact
T
he empirical evidence suggests
a
sizable
negative
relationship
between
tax uncertainty and
economic
outcomes, although still limited due to measurement issues
How to measure tax uncertainty?
macro dimension
Tax Uncertainty can be measured by counting specific words in the news or by the value of tax provisions set to expire in th
e near future
Micro
dimension
Tax
Uncertainty
can be
modelled
, for
instance
,
based
on
factors
like
presence
of multiple
rates
,
presence
of
ambiguous
language
,
changes
in
tax
parameters
in
opposing
directions
Slide7
Tax uncertainty and tax
avoidance
Some studies also suggest a
positive
association
between
the
uncertainty in firms' tax bill and
corporate tax
avoidance
Implication:
increasing tax uncertainty drives to more complex tax planning structure, and in turn this contributes to more tax uncertainty.Slide8
Policies' effectiveness in enhancing
tax
certainty
Some
studies
show that having in place tax arrangement such as
Bilateral Tax Treaties
and
Mutual Agreement Procedure
help to improve the investment environment
Also t
he
evidence
points towards joint audits, advance pricing arrangements, tax ruling as important tools to reduce or eliminate tax uncertaintySlide9
Main sources of tax uncertainty according to businesses and tax
administrations
IMF-OECD Report on Tax Certainty, 2017
Issues
related to tax administration rank among the major drivers of
uncertainty for
business
Considerable bureaucracy to comply with tax legislation
Unpredictable or inconsistent treatment by the tax authority
As regards
tax administrations
, the most important sources
of uncertainty
tax
policy design and
legislation
dispute resolution
taxpayer
behavior in particular related to aggressive tax
planningSlide10
Policy responses – good practices
Co-operative compliance regime intended to improve the dialogue between taxpayers and tax authority
All
recent Commission initiatives (e.g. ATAD, ATAD2, CCCTB, dispute resolution, and VAT actions) aim
at
creating
a level playing field for all businesses in the
EU
Among latest developments,
Member States
agreed to amend
the current system to resolve
double taxation disputes
within the EUSlide11
Way forward – Domestic level
Improve tax policy design
Reducing complexity / improving the clarity of legislation
Policy
makers should
establish
a structured approach in managing the reform
process
with pre-announcement consultations,
clear communication of
their content and
timingSlide12
Way forward - International level
The
best policy answers are
boosting
the cooperation on tax matters, developing common approaches to fighting aggressive tax
planning
agreeing
on a clear and sustainable distribution of tax revenues for cross-border investment, and more generally on transparent and non-harmful tax competitionSlide13
Questions
How
important is tax certainty from
your
perspective?
How to achieve the right balance between tax certainty and
reforms?
What
are
your
ideas in good practices to address the issues?Slide14
Thank you for your attention