Latest news from international tax and transfer pricing

ATO Review of pharmaceutical companies

The Australian Taxation Office (ATO) is conducting a broad review of the transfer pricing practices of Australian-based multinational subsidiaries in the pharmaceutical industry. This review seeks to ensure the pharmaceuticals sector is meeting its tax obligations under Australian law. The ATO plans to assess a range of domestic and international tax risks associated with related party financing, thin capitalisation, intellectual property migration, consolidation, business restructures and research and development.

New Zealand’s BEPS journey

The New Zealand Government recently announced a number of significant Base Erosion and Profit Shifting (BEPS)-related policy decisions. The Government plans to strengthen New Zealand’s transfer pricing rules, tighten rules around interest deductibility, counteract permanent establishment avoidance and hybrid mismatches, and introduce new administrative measures focused on large multinationals. Refer to PwC Global’s Tax Insights which provides an overview of these policy decisions.

UK’s yield from DPT

The United Kingdom’s (UK) Her Majesty’s Revenue and Customs (HMRC) has released areportwhich sets out how it measures the yield from its Diverted Profits Tax (DPT). According to the report, the UK’s DPT raised £31 million in 2015/16 and £281 million in 2016/17. The yield amount includes amounts received as a result of DPT charging notices issued by HMRC, and additional amounts of corporation tax collected from businesses which have changed their behaviour because of the introduction of DPT. The DPT was introduced in the UK on 1 April 2015 to address tax avoidance by multinational enterprises.

OECD BEPS developments

The Organisation of Economic Co-operation and Development (OECD) has released guidance to give greater certainty to tax administrations and multinational groups on the implementation and operation of Country-by-Country (CbC) reporting (BEPS Action item 13).

Specifically, it has updated the existing guidance on the implementation of CbC Reporting to address the definition of revenues, the treatment of groups with a short accounting period, and the treatment of the amount of income tax accrued and income tax paid. Guidance has also been released on the appropriate use of the information contained in CbC Reports, including the consequences of non-compliance with the appropriate use condition and approaches that may be used by tax administrations.

Further to our commentary in the September edition of TaxTalk Monthly about the release of the OECD’s final report on branch mismatch structures (BEPS Action item 2), PwC Global’s Tax Insights provides further information.

In other OECD developments:

·       The OECD has released updated and new IT-tools and guidance to support the technical implementation of the exchange of tax information under the Common Reporting Standard (CRS), CbC Reporting, and in relation to tax rulings.

·       The OECD has announced that exchanges between 49 jurisdictions took place under the CRS Multilateral Competent Authority Agreement. In total, there are now more than 2,000 bilateral relationships for the automatic exchange of CRS information in place across the globe. Find the full list of automatic exchange relationships currently in place under the CRS agreement online.

·       Brunei has signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters.

OECD reports on global tax trends

The OECD has releasedthe Tax Policy Reforms 2017 – OECD and Selected Partner Economies Report, which provides comparative information on the tax reforms that were implemented, legislated or announced in 2016 in the 35 OECD countries, and in Argentina and South Africa. The report tracks reforms to personal income tax, social security contributions, corporate income tax, value-added/general sales tax, excise duties, environmental taxes and property taxes across countries, as well as key tax policy trends in these areas over time.

OECD working paper on role of business in tax system

An OECD working paper examines the role of businesses in the tax system. The paper develops two measures of the contribution of businesses to the tax system and applies both these measures to 24 OECD countries. The paper also highlights that the economic incidence, or burden, of a tax is not necessarily borne by the person on whom the tax is imposed under legal statute, but may be passed on to others in the economy, whether it be owners of capital, workers or consumers.

Ireland publishes independent review of corporation tax code

In an independent report on Ireland’s corporation tax code, the overarching message is that the current Irish corporate tax system is transparent and appropriate for enterprises in Ireland. However, the report includes a number of recommendations for the Irish Department of Finance to consider. For further information, refer to PwC US’ Tax Insights.

EU proposes mandatory tax information disclosure

The European Commission (EC) has published a draft Directive Proposal for a Council Directive amending Directive 2011/16/EU, which further amends the European Union’s (EU’s) Directive on administrative cooperation in the field of taxation. The draft Directive seeks to impose mandatory reporting by taxpayers and intermediaries to the tax administrations of EU Member States for various cross-border transactions and arrangements. It also addresses the consequent automatic exchange of information on those transactions and arrangements across the EU. For further information, refer to PwC Global’s Tax Insights.

France’s tax action plan

The French Prime Minister has announced a new action plan to support investment in France and boost business growth. The plan’s five fundamental actions include two items related to corporate taxation that may interest multinational enterprise with operations in France: a gradual decrease of the French corporate income tax rate and the transformation of the competitiveness and employment (CICE) tax credit (an existing payroll tax credit) into a permanent decrease in employers’ charges. The plan also provides for the elimination of the 3 per cent tax on dividend distributions. Refer to PwC US’ Tax Insights