of the Global Tax 50 is available.
Many are tax professionals whose job is to develop or
implement tax policy; others, such as the presidents of Chile
and France are above that fray, but have still left their mark
on tax in their jurisdiction or further afield this year.
Some of the organisations on the list are ad hoc
groups, who have come together to campaign for, debate or work
on one narrowly defined issue. They may be around in 12 months
or they may not. It depends if they continue to have
The list contains a number of selections who were not on the
first list a year ago. We did not intend to construct an
entirely new list, but we hope you will see from our choices
that the tax landscape is one that is always changing.
The 50 are in alphabetical order. They are personal choices
of the editorial staff of International Tax Review. There were
no criteria apart from the need for the selection to have had a
recognisable impact. The only exclusion zone we put up was
around private practitioners as we felt it would be impossible
to distinguish whether one accountant, adviser or lawyer was
more important than another.
Please tell us if you agree or disagree with any or all of
the names on the list. And, of course, if you think you should
be on next year's list, make sure you tell us that, too.
View the top 10 list
Carlos Alberto Freitas Barreto
John Christensen & Richard Murphy
World Customs Organisation
Global Tax Advocacy Taskforce, TEI
Sarosh Homi Kapadia
Advocate General Kokott
Sanjay Kumar Mishra
Occupy & Uncut
RATE Coalition, US
Sir Martin Sorrell
Sir Andrew Whitty
Founder, Retailers Against VAT Avoidance
Not many hippies go on to become one of the most influential
people in the world of tax. Richard Allen started out promoting
psychedelic music through his label, Delerium Records, and
became famous among fans for discovering and managing the band
Porcupine Tree. He ran The Freak Emporium, a pioneering
internet mail order businesses selling collectible music
genres, but was forced to shut it down as his business was
being undercut by the pricing strategies of large retailers who
availed of low value consignment relief (LVCR) by fulfilling
sales through the Channel Islands.
This allowed them to avoid the VAT Allen and other onshore
companies were required to pay.
A confrontation with an uninterested HMRC turned Allen into
a tax campaigner. His experience of the complex and "equally
devious" legalities of the music industry were an ideal
schooling and soon he had banded together with companies from a
range of sectors facing similar problems to found Retailers
Against VAT Avoidance Schemes.
"In a single market reliant on fiscal neutrality, VAT
avoidance is not and cannot be a legitimate business
opportunity," says Allen. "It's nothing more than a parasitic
arrangement exploiting a tax system and preying on the
businesses of those traders unable to avoid it. In simple terms
Allen's biggest success came this year when, after
successfully lobbying the European Commission to take action,
the UK was forced to remove LVCR on mail order goods from the
But as Allen uncovered evidence of companies using Spain,
Belgium and Germany to circumvent the UK's removal of LVCR, the
real challenge for him lies ahead as he attempts to level the
playing field for all businesses across the EU.
"The battle that RAVAS fought in the Channel Islands is now
moving into the rest of the EU," Allen says. "We have
identified further abuses and national legislation that is not
compliant with EU law and will be submitting a detailed
complaint to the Commission shortly. We are hopeful it will
result in firstly the clarification of existing LVCR
legislation – which is widely misunderstood –
and secondly a much more aggressive stance on VAT avoidance
from the Commission."
Fun fact: Despite Allen's business acumen and solid grasp of
EU VAT law, he received an E grade in his final economics exam
before he left school. He said to the teacher that the
assumption that all consumers were fully informed of prices in
the market was ridiculous, but was told: "We're here to learn
it, not question it, Allen".
Channel Islands retailers and EU governments will be wishing
he had listened to that advice.
Head of the transfer pricing unit at the OECD
Joe Andrus is the head of the transfer pricing unit at the
OECD. It has been a busy year for the him and his staff, with a
number of draft reports released by them and Working Party No 6
including on the transfer pricing aspects of intangibles,
timing issues and safe harbours.
Andrus will be analysing comments from taxpayers, industry
organisations and tax advisers from across the world on all
three projects; a big job for one man considering the level of
interest in the reports. The working party surprised
professionals in June this year by releasing a draft on
intangibles well-ahead of schedule. "The OECD has been
gratified to receive nearly eighty comment letters related to
the discussion draft on intangibles, totaling more than 900
pages of text," says Andrus. "It has also received many comment
letters on its discussion draft on safe harbours and the
Secretariat's request for comments on timing issues."
"Delegates to OECD Working Party No 6 will consider the
comments in the period before its November 2012 meeting and
look forward to an open and candid discussion with interested
attendees at its November 12 to 14 public consultation on the
matters raised in the comment letters," Andrus adds.
The OECD official joined the OECD in October 2011, after the
departure of Caroline Silberztein who started the intangibles
Andrus said he appreciates the recognition International
Tax Review's Global Tax 50 gives to the work of the OECD
in transfer pricing.
Secretary of the Federal Revenue of Brazil
As the head of Brazil's tax administration, the Federal
Revenue of Brazil (RFB), Carlos Alberto Freitas Barreto is a
man whose actions are closely monitored by multinationals' tax
The RFB plays a key role in the development and
implementation of the country's international tax framework and
is responsible for applying the country's much maligned
controlled foreign company (CFC) and transfer pricing
The biggest reform Barreto has overseen since his
appointment in January 2011, are the severe changes to Brazil's
transfer pricing rules which take effect at the beginning of
The new rules alter the way in which taxpayers may calculate
benchmark transfer prices, particularly affecting the most
commonly used calculation methods for import transactions.
If the RFB is strict in its application of such rules, it
could have a considerable negative impact on multinationals
operating in Brazil.
Barreto is a seasoned revenue official, having first joined
the administration in 1978.
Before becoming RFB secretary, he was president of the
Fiscal Resources Administrative Council of the Ministry of
Finance of Brazil in 2010; deputy secretary of the RFB from
2002 to 2009; and head of the Offices of the Delegation of
Federal Revenues of Brazil and of the Judgment Delegation in
Head of consumption taxes, OECD Centre for Tax
Policy and Administration
For a long time, the OECD's work on VAT has lagged behind
its projects in other areas of tax such as transfer pricing and
exchange of information. But two linked developments in the
last year have catapulted indirect tax to the fore and Piet
Battiau, head of consumption taxes, on to this list.
The OECD is attempting to deal with a number of challenges
thrown up by formulating VAT policy in an increasingly
"The absence of an internationally agreed framework leads to
an increased risk of double or multiple taxation or, in the
inverse case, double or multiple non-taxation," says Battiau.
"The most common reasons for double taxation and unintentional
non-taxation are the use of different rules to determine the
place of taxation and different interpretation of similar
rules, different characterisation of transactions and
difficulties to recover VAT that was incurred abroad."
Battiau has spent the past year leading a project to devise
a new set of guidelines for VAT, following on from the OECD's
work on transfer pricing guidelines, and establishing a Global
Forum on VAT. Progress on both has come on apace with the first
meeting of the Forum taking place this month, bringing together
around 90 countries from the OECD and beyond to share best
Meanwhile, the guidelines are coming together well and the
OECD wants to publish work on the allocation of taxing rights
and neutrality in January.
"We want to assist countries with the design of their
domestic VAT systems," says Battiau. "Many are looking
increasingly to VAT after the crisis, with corporate and
personal income tax revenue down."
There are those who accuse the OECD of being a rich man's
club, increasingly out of touch with the needs of developing
nations, but its ability to wield influence on tax policy
remains strong and as its work on VAT steps up a gear,
Battiau's own influence will continue to grow.
Chairman, Senate Finance Committee
By virtue of his position, Max Baucus has carried
considerable influence on tax this year.
The thrust of the work of the chairman of the US Senate
Finance Committee this year has been to create a consensus
around a plan for an overhaul of the Internal Revenue Code that
taxpayers, law makers, academics and officials say is long
The speculation suggests that the round of committee
hearings and formal and informal communications he has been
having with interested parties is bringing him closer to
forming a common view about what should be done.
Baucus is in his third stint as chairman of the Senate's
tax-writing committee. He first took the post for a little
under three weeks in January 2001 and came back for his second
spell in the post in June of that year, lasting until November
2002. His third period as Senate Finance Committee chairman
began on January 4 2007.
Finance Committee hearings on tax reform got under way in
earnest in June 2011, when Baucus convened one on ideas for
changing the Internal Revenue Code. Since then, sessions have
been held on the effects of tax reform on the treatment of
capital gains, the taxation of business entities, the impact on
US energy policy, incentives for capital investment and
manufacturing, and the tax treatment of financial products.
It is clear Baucus and his committee are taking seriously
the task of producing legislation that has a chance of getting
passed in the Senate and approved by the President.
As long as the Democrats retain control of the Senate after
November's elections, Baucus will get the chance to try to get
any legislation onto the statute book. It will be a crowning
glory for his career.
Head of secretariat, OECD Global Forum on
Transparency and Exchange of Information for Tax
When Pascal Saint-Amans took up the top job at the OECD,
Monica Bhatia stepped into his old shoes at the Global Forum
and stepped onto this list.
Tax justice activists are critical that its standard of tax
information exchange agreements (TIEAs) and peer reviews is too
weak (there are no longer any tax havens on its black list),
but the lobal Forum's work is widely seen as the gold standard
of tax transparency and since 2009, the number of TIEAs has
Bhatia spent the last two decades working for the Indian
Revenue Service. Her appointment shows that the OECD is
committed to reaching out to emerging and developing
"In my 21 years of experience in the Indian Revenue Service,
I have played different roles; that of a tax auditor, of a
departmental representative in the tax tribunals, a policy
maker, a negotiator of tax treaties and an official in the
Exchange of Information (EOI) unit," says Bhatia. "In each of
these roles, I realised the importance of effective exchange of
information in enforcement of my domestic tax laws. In
particular as part of the EOI unit, I saw firsthand the
practical difficulties that we faced in obtaining timely and
correct information from our treaty partners."
Bhatia's new role puts her at the cliff face of efforts to
improve transparency. The Global Forum is approaching the end
of the phase one peer reviews, which examine the legal and
regulatory framework to facilitate information exchange. It is
now launching its phase two peer reviews which evaluate each
jurisdiction's compliance with the standard in practice.
"You cannot administer a tax system effectively, never mind
exchange information with treaty partners, if you don't know
who owns business enterprises in your jurisdiction and how much
they are making or if you cannot access information on bank
accounts," says Bhatia. "You just end up creating onshore tax
havens. Transparency is necessary to exchange information
effectively, but more importantly it's necessary if you expect
to be able to enforce your own laws."
Minister of Foreign Affairs, Mauritius
The India-Mauritius tax treaty has been a controversial
issue for many years. More than one-third of foreign direct
investment into India is routed via Mauritius, and the Indian
authorities have repeatedly tried and failed to enter into a
renegotiation of the terms of the double tax treaty,
particularly in the last five or six years. A key facet of the
treaty's terms is a capital gains tax exemption, which means
the Indian authorities forgo substantial amounts of tax
In July this year, however, Mauritius' Foreign Minister
Boolell showed the first signs of willingness from Mauritius
about possible renegotiation, though he described the capital
gains tax provision as "sacrosanct".
"Our discussions with India on the India-Mauritius double
taxation avoidance treaty are aligned to this objective [of
strengthening the nation's reputation as a trustworthy place to
do business]," says Boolell. "Over the years, Mauritius has
taken several steps to address concerns raised by India and we
will continue to do so in line with international best
If renegotiation were to go ahead, then given the volume of
traffic into India through Mauritius, it would have dramatic
implications for foreign investment and for the economy of the
island. With that in mind, Boolell recognised the position of
influence that he found himself in and set out his stall by
saying that provisions which would harm the Mauritius economy
would be unacceptable.
"We have come up with a panoply of measures to be more
responsive to India's concerns," says Boolell. "But the
objective is not to kill the global business community. We want
certainty to be brought back. Nothing should be done to harm
the financial interests of Mauritius."
Boolell's comments indicate that he is not willing to be
bullied into an agreement by his Indian counterparts. This is a
pragmatic approach, and one that is backed up by the minister's
claims that there has been effective exchange of information
between the two countries on 170 cases over the last three
years – some of which were even outside the framework
of the double taxation avoidance agreement.
However, with taxpayers and their advisers fearing the
uncertainty that a renegotiated treaty would bring, it is still
doubtful as to whether one will materialise. Whatever happens,
though, Boolell will be influential in determining the outcome
of any future discussions, and therefore in determining the
future for many multinational taxpayers investing into
"The Mauritius financial centre remains a preferred
jurisdiction for the international investor community to
structure investments into India and is increasingly being used
by Indian businessmen and others to conduct business with
Africa," says Boolell.
Chairman of the House Committee on Ways and
Camp David is synonymous in the US with hosting
international dignitaries while David (Dave) Camp is a name now
heavily associated with international tax policy.
Camp was appointed chairman of the House Ways and Means
Committee – one of the oldest and most powerful
committees in the US House of Representatives – in
As the head of one of Congress's two tax-writing committees
– Senate Finance is the other – Camp is one
of the most influential policymakers in Washington.
Two of Camp's signature issues have been about making the US
more competitive by lowering and simplifying tax rates for
individuals, families and employers; and promoting the
production and use of alternative energy.
Camp is a strong proponent of the R&D tax credit, and
has worked closely with Sander Levin, the ranking Democrat on
the Committee, to ensure companies have an incentive to invest
in R&D in the US.
He is also a key figure in attempting to move the US away
from its somewhat archaic system, compared to other
jurisdictions, of worldwide taxation.
At the end of 2011, Camp released his draft legislation to
change the US from a worldwide to a territorial system of
taxation as part of comprehensive reform that also envisions
lowering the top tax rate to 25% for corporate and individual
"While overhauling our outdated tax code is an ambitious
goal, it is also necessary to make America a more attractive
place to invest and hire," said Camp.
"Having both the highest corporate tax rate in the
industrialised world and an outdated worldwide system of
taxation makes America less not more competitive in the global
marketplace. The House is serious about creating a climate for
job creation and transitioning to a territorial system is a
critical component of comprehensive tax reform," he added.
University of Cincinnati Tax Professor, Taxprof
Paul Caron started out as a legal academic, which he still
is, but is as well known now as the author of the TaxProf blog,
which he launched on April 15 2004.
The TaxProf blog had 700,000 page views in its first year,
it has between 3.5 million and 4 million now. Everyday Caron
picks news and information for and about tax professors, such
as their latest lectures and articles, notice of pieces about
tax in the specialist and general media; signposts to academic
conferences and events held by think-tanks, as well as
statistics about the best law schools and the most downloaded
Caron traces the origin of the blog back to his interest,
when he first became a professor in the early nineties, in the
effect technology was beginning to have on legal education. He
then went to start an e-mail listserv – "about the
only email list that has worked" – a closed list of
about 400 US and overseas tax academics, before going on to
edit tax journals on the online SSRN (Social Science Research
"I know my obituary will refer to my blog and not to any of
the articles or books I have written," he says.
The success of the blog means Caron is in demand for his
views on the tax topics of the day. He says he gets calls
almost every week from reporters: "I just don't have time to
respond to everything." It has also meant more professional
opportunities in the shape of symposia and seminar invitations.
"The blog gives me some credibility," says Caron. "More and
more students are engaged technologically.
A benefit of doing the blog is the type of people it brings
Caron into contact with. "The job has got easier. One-third of
my contact comes over the blog and people sending me stuff. It
makes me blog much better. People from the Department of
Justice, the Hill and the Tax Court send me content, though not
As for the future of the blog, Caron said he had a plan to
ask others to contribute to ease the burden, but that he has
not done that yet.
"For better or worse, it's my baby and reflects the
editorial decisions I make."
Minister of Finance, India
When Chidambaram took over from Pranab Mukherjee as finance
minister in July, he was no stranger to the position, having
previously served in the role on two separate occasions. That
is not to say, though, that Chidambaram had an easy job on his
hands. In the first few months of his third stint as finance
minister, Chidambaram has taken the lead on a whole host of
pressing issues. He has commissioned
fellow Top 50 member Parthasarathi Shome to lead an expert
committee looking into two issues: the validity and
appropriateness of the retroactive legislative amendment on
indirect transfers and the suitability of an Indian general
anti-avoidance rule (GAAR). And he has also raised the question
as to whether the Direct Taxes Code (DTC) is in need of a
rethink. Most of these issues are yet to be resolved, so
Chidambaram's influence will increase further over the course
of the coming months.
International Tax Review: What do you consider to
be your biggest achievement in, or influence on, taxation?
Palaniappan Chidambaram: Two things come to
mind immediately. The first is the new income tax slabs that I
had implemented in the 1997-1998 budget. The three rates of
10%, 20% and 30% for individuals and the rate of 30% for
corporates have, much to my surprise, survived several
governments and three finance ministers! The other big
achievement was the introduction of VAT in 2004-2005.
ITR: What is your number one priority from a
business taxation point of view at the moment?
PC: My priority in terms of business
taxation is to have a stable tax regime, a non-adversarial tax
administration and a fair and just dispute-settlement
ITR: You have said that the DTC needs a "fresh
look". Can you expand on this? How are things progressing?
PC: The DTC needs a fresh look for no
reason other than that there are several versions of the DTC.
We need to remind ourselves of the original objectives of the
DTC. I had said then – and I would like to say it
again now – that the objective is not to amend the
Income Tax Act, 1961, which has already been amended hundreds
of times. The objective is to write a new Direct Taxes Code.
Things are progressing, a bit slowly for my comfort, but I
intend to quicken the exercise.
ITR: Are you able to give an update on the
possible renegotiation of the India-Mauritius tax treaty?
PC: I am unable to give a date or a
timeline. There are too many factors at play –
taxation, friendly relations, diplomacy and, now, the slowdown
in the world economy. But I would like to make progress on the
matter and trying to find a suitable mechanism or opportunity
for that purpose.
ITR: The GST seems to have hit a roadblock with
opposition from various states. What is the road forward for
PC: I do not think that GST has hit a
roadblock. The finance ministers of the states have visited
several countries and, I am told, have come back with the
impression that wherever it has been implemented, GST has been
a success. I think all are on board on the issue that GST must
be implemented. There are some legal and practical issues that
have to be sorted out and I am confident that we would be able
to do so during the forthcoming discussions between the
Government of India and the chairman of the Empowered
Committee, Shri Sushil K Modi, followed by discussions with the
Empowered Committee as a whole.
ITR: You have been responsible for rationalising
the tax rates in the past and it has resulted in increased
compliance and an increase in collections. Is there any
likelihood of further lowering the rates to the proposed DTC
PC: I cannot comment on proposed tax rates.
Tax rates are determined after taking into account the economic
situation at any given time. While tax rates must indeed be
reasonable, we must keep in mind that a developing country
& Richard Murphy
Tax Justice Network
The Tax Justice Network's influence on efforts to increase
transparency is growing by the year.
Over a decade ago, a concerned activist met with an
accountant and asked him how companies could be made to pay the
tax they owe in each country in which they operate. With
Richard Murphy's answer to John Christensen, the idea of
country-by-country reporting (CBCR) was born.
Back then, it might have been difficult to imagine activists
such as Christensen or Murphy appearing on this list, consigned
as discussions around tax justice and transparency were to
development agencies and non-governmental organisations.
But the financial turmoil since 2008 has changed everything.
Now limited forms of CBCR are finding their way into EU and US
legislation, it has won approval from the World Bank, and its
base elements underpin the work of the Extractive Industries
Transparency Initiative, under which companies should commit to
report what they pay to governments, governments should publish
what they receive and the information should be made available
to the public so they can hold both to account.
Holding corporations and governments to account has been the
core of Christensen and Murphy's decade-long mission to tackle
tax avoidance and the tax havens that facilitate it.
One particular success Christensen points to in the last
year is the OECD's acceptance that automatic, rather than by
request, information exchange processes provide the effective
standard for tackling tax evasion.
While Christensen spearheads the Tax Justice Network's
campaigning, from the deck of his daily blog Murphy's slightly
looser cannon shoots down multinational companies he believes
are paying less than their fair share of tax.
Corporations remain at best sceptical and at worst hostile
to the Tax Justice Network's goals, but the tide appears to be
changing. As long as Christensen and Murphy are swimming ahead
of it, they will remain significant influences in world
Kunio Mikuriya, Secretary General
The time for more effective coordination between transfer
pricing and Customs valuation has arrived.
It has long been accepted that a close relationship exists
between transfer prices and Customs valuation. However, it is
only in the last few years that the pace of cooperation has
quickened between the international organisations responsible
for leading policy development in each area.
Different parts of the same multinational may have agreed on
what one should pay for a product it needs from the other, but
what happens at a border. Will the price be accepted? What
upward or downward adjustment will Customs require? How will
that be reconciled at a later date?
"We are discussing with the OECD consistency in experience
between transfer pricing and customs valuation," says Kunio
Mikuriya, the secretary general of the World Customs
Organisation (WCO), the only intergovernmental customs
organisation, which deals with areas such as the development of
global standards, the simplification and harmonisation of
Customs procedures and the facilitation of international
The WCO has clearly got priorities for cooperation. It
already participates in the work of the African Tax
Administration Forum and works closely with CIAT, the
Inter-American Center of Tax Administrations. It has observer
status in the OECD-run Global Forum on Tax Transparency and
Exchange of Information. The organisation is also holding two
events with the OECD in 2013 looking at the coordination of
transfer pricing and customs valuation policies.
"Revenue collection is the most important thing in customs,"
says Mikuriya, so we try to ensure fair and efficient tax
collection. I hope that is the goal of revenue collectors as
well. We have developed a package of tools and best practices
about how to achieve this."
The secretary general argues that customs and tax both help
the economy: "Customs contributes economic development through
trade facilitation and tax is trying to improve the investment
climate without going into harmful tax competition."
The commitment to working with revenue agencies in developed
and developing countries is clear. The WCO has a number of
capacity building initiatives under way around the world.
"It's important we enhance cooperation, communication,
collaboration and coordination," Mikuriya says. "We (tax and
customs) are different animals but we should try to identify
where we can find common ground, where we can cooperate for
Rudolf Elmer's name hit the international headlines when he
was exposed as the whistleblower on the activities of his
former employer, Swiss bank Julius Bär, in the Cayman
Islands, handing over the names of 2,000 tax evaders to
WikiLeaks – the website set up by Julian Assange to
publish secret information.
His influence remains strong not just for hole he blasted in
Switzerland's sacred banking secrecy, which led the country to
accept a number of withholding tax agreements, but for the
trouble he has been causing Julius Bär since he was
arrested and put on trial.
In the latest twist to a case that has now lasted more than
six years, the High Court of Zurich in June this year opted to
unseal the three CDs at the heart of the matter.
But with the trial being held in public, at Elmer's request,
the contents of the CDs could prove devastating for Julius
Bär when they are revealed. Not least because Elmer only
published 5% of the data on WikiLeaks and he says there is much
worse to come.
Elmer says the bank tried to pay him for his silence (ironic
considering it rejected his first attempt to settle out of
court in 2003), but since the prosecution is compelled to
investigate the crime of breaching banking secrecy, Elmer
cannot settle even if he wanted to. And he does not.
"I turn down all offers not only as a matter of principle,
but also due to the fact that my daughter and her generation
will suffer from what is going on," says Elmer. "My daughter
needs to learn values and one of the values is integrity and to
stand up if something is not right. That is why Switzerland
will not be able to silence me."
Banking secrecy around the world is under attack and the net
Elmer helped cast is now closing on tax evaders.
Becoming a whistleblower cost Elmer his job and the hounding
he and his family faced afterwards nearly cost him his sanity,
but the best martyrs do not back down if they believe their
cause is just.
General Director, Tax Policy, Department of Finance
Canada's federal budget in March caused a stir among
taxpayers with the inclusion of new rules which significantly
restrict a foreign-owned Canadian subsidiary's freedom to
invest in a foreign affiliate.
As the general director of legislation in the Canadian
Department of Finance's tax policy branch, Brian Ernewein is a
key figure behind the so-called foreign affiliate dumping
And the proposal is proving to be one of the most
controversial Ernewein has overseen during his tenure.
The new rules are targeted at preventing the misuse of
provisions of Canadian tax law which allow resident companies
to deduct interest on funds borrowed to make share investments
in foreign companies, and that dividends received on such
shares might be exempt from Canadian tax.
The Department of Finance felt that these provisions were
being abused in some instances, such as where profitable
Canadian subsidiaries of foreign based groups were borrowing to
invest in fixed value-fixed yield preferred shares of a foreign
member of the group.
Nathan Boidman, of Davies, Ward, Phillips & Vineberg,
said it is understandable the government wishes to discourage
such preferred arrangements since it erodes the Canadian tax
base while giving little or no economic value to the Canadian
"Unfortunately, the proposals will also affect a wide range
of transactions that have no or little tax-driven
characteristics," said Boidman.
"The overreaching scope of the proposals is radical as they
would not apply a new tax rule to the eventual income or
expenses associated with the targeted investments, but instead
apply a tax at the point the investment is made," he added.
The Tax Executives Institute has urged the policymakers to
completely carve growth equity (common share) investments out
of the proposals but Ernewein and the Department of Finance
have held firm, and rejected these recommendations when they
issued the final version of the rules in Bill C-45 last
Exchequer Secretary to the UK Treasury
David Gauke has been a pro-business tax minister since he
became exchequer secretary to the Treasury after the last
election in 2010, and has been an advocate of the Conservative
Party's policy of pursuing a private sector-led recovery.
"When I was in opposition and shadowing this role, I greatly
benefitted from hearing industry views. This has informed my
approach since coming to office and I meet regularly with tax
professionals and representative bodies," he told
International Tax Review. "My familiarity with
industry issues and the concerns of tax professionals and
business have helped shape the government's priorities as we
work towards improving the tax system."
Gauke has been a leading light in promoting the coalition
government's "Open for Business" agenda, which has included
reform of the controlled foreign company and patent box
regimes, as well as a series of cuts in the corporate tax rate.
Since the government came to power, the rate has fallen by four
percentage points, from 28% to 24%. Further reductions have
already been signalled, and the rate will drop to 22% by
"The real challenge for me coming into this job was to show
that Britain has an attractive tax system and is open for
business," said Gauke. "We need to demonstrate that business
from all around the world is welcome in Britain."
Gauke recognises that the "Open for Business" agenda is a
comprehensive reform package, and that each of the measures
included is essential for the UK to achieve the government's
ambition of having the most competitive corporate tax regime in
the G20. While other countries have used singular taxation
measures to try and drive investment (typically cutting the
corporate tax rate), Gauke and Chancellor of the Exchequer
George Osborne have driven through a panoply of measures.
"Lowering the main rate alone is not enough," said Gauke.
"We are supporting this with a raft of measures that will
increase the UK's attractiveness as a place to set up and grow
a business: CFC reform, the patent box and R&D tax
He has also joined Osborne in branding tax evasion and
aggressive tax avoidance as "morally repugnant". The latest UK
tax gap statistics, released by HMRC on October 18, reveal that
the tax gap has moved from 7.1% of tax due in 2009/10 to 6.7%
of tax due in 2010/11, indicating that the government's
policies (and HMRC's efforts) appear to be working.
"We are determined to reduce the tax gap and have made
£917 million available to help HMRC tackle avoidance and
evasion," said Gauke.
Advocacy Taskforce, TEI
Vince Alicandri, Janice Lucchesi, joint-chairs
The TEI (Tax Executives' Institute) is a singular
organisation. Other groups exist to represent the views of tax
officers, often on a sectoral basis, such as the American
Petroleum Institute or national employers' federations, but TEI
is the only global organisation to have representing the views
of tax officers solely as the reason for its existence.
A core function of TEI is to raise the views of its members
with revenue agencies, multilateral organisations and lawmakers
around the world, so when it set up the Global Tax Advocacy
Taskforce this year to review its processes and practices
related to its multijurisdictional activities, it was bound to
have an influence on tax policy development internationally.
Some of that influence may not have been felt yet.
The taskforce's set of nine recommendations, or charter
objectives, included calls for working more closely with
organisations such as the OECD and the UN, for example, on
developments in the BRIC (Brazil, Russia, India and China)
countries; responding more effectively to treaty issues and
ensuring that TEI's advocacy was coordinated efficiently across
Asia, Europe, the Middle East and Africa and North America.
As joint-chairs of the taskforce, Vince Alicandri, vice
president, corporate tax for Hydro One, a Canadian utility
company, and Janice Lucchesi, vice president of tax in North
America for Akzo Nobel, the Dutch multinational paints,
coatings and chemicals company, were responsible for ensuring
the charter objectives were adhered to.
ITR: What need was the taskforce set up to
Janice Lucchesi (JL): A primary goal was to
expand TEI's tax advocacy efforts beyond North America and to
ensure that they reflected the concerns of our growing number
of non-North American members. We also wanted to acknowledge
the growing influence of organisations like the OECD and UN.
Internally, we wanted to recognise the role our Europe/Middle
East & Africa and Asia Chapters could – and should
– play in TEI's advocacy efforts, while ensuring
appropriate coordination among all our committees with interest
in global tax matters.
Vince Alicandri (VA): Because TEI has
developed into the preeminent association of in-house
professionals worldwide, TEI felt it important to review the
processes and practices relating to multi-jurisdictional tax
issues to ensure our members' interests were being properly
ITR: What impact do you believe it has had to
JL: I have seen a dramatic effect, both
internally and externally. Internally, we have seen more
members become involved in our efforts, enriching our efforts
and allowing us to do more. Externally. 2012 has witnessed
significant tax-related activities at both the OECD and UN
level. TEI has sent a representative to a UN tax meeting for
the first time. In addition, TEI has filed several significant
submissions with the OECD, as well as with the European
Commission, which have reflected the coordinated input from
both European and North American international tax-related
VA: I believe the most important effect the
Global Tax Advocacy Task Force has had to date has been the
critical assessment we have undertaken to ensure we as an
organisation are properly positioned to affect the direction of
international tax matters affecting our membership.
ITR: What is the best example of its impact?
JL: In my view, the best example is the
Institute's outstanding submission on the OECD draft on the
transfer pricing aspects of intangibles.
VA: Internally, the best example has been
the refinement of processes to enable TEI's international tax
committees to coordinate effectively in the development of
technical submissions without undue bureaucratic delay. This
has encouraged members to get involved.
ITR: How will the taskforce's work help TEI in the
JL: The implementation of the taskforce's
recommendations on enhancing interaction among TEI members
across the globe (for example, using SharePoint to enhance
sharing, conducting bi-monthly coordinating calls and
increasing Institute staff participation in European and Asian
TEI meetings) will enable the Institute to do more and to do it
VA: The taskforce has made recommendations
that will ensure multijurisdictional international tax issues
affecting Institute members are discussed, evaluated, and acted
upon in a coordinated fashion.
European Commissioner for Climate Action
Connie Hedegaard's remit at the European Commission includes
carbon tax policy and as its importance as a tool for tackling
climate change and greening the economy grows, so too does her
Among Hedegaard's key roles at the Commission is to develop
the Emissions Trading Scheme and to promote links with similar
schemes around the world.
With Australia and California looking to link their carbon
markets to the EU's, and with the possibility of China
following suit, Hedegaard presides over what may turn out to be
a global emissions trading scheme.
It is an ambitious project, but one for which Hedegaard's
past life as Denmark's minister for climate and energy has
prepared her well. Denmark is considered by climate activists
to be a leader in environmental tax reform and it was Hedegaard
who implemented the framework in 2008.
"My ambition is to see, by the end of my mandate, a Europe
that is the most climate-friendly region in the world," says
President of France
Since coming to power in May this year, President Hollande
has undertaken various measures to address the nation's
deficit, subscribing to the view that it is tax policy, rather
than spending cuts, which is a better method of dealing with
France's economic problems.
"I'd say François Hollande puts importance rather on
tax than on cuts in expenses to tackle budgetary issues," says
Nicolas Jacquot, of Arsene – Taxand, adding that the
president is not afraid to "use tax to sanction behaviours
which are considered, from a strictly political point of view,
Hollande's focus on economic growth, and using taxation as a
tool in this regard, has also influenced political thinking in
other jurisdictions, says Nicolas Message, of FTPA.
"President Hollande forces many foreign politicians to take
into account the growing of economy into the definition of a
state level of indebtedness," he says. "As a consequence,
public debates are more related to the level of growth and the
corresponding taxation, than to the need to drastically reduce
governmental or public expenses."
Hollande is also taking the lead on the issue of a financial
transactions tax (FTT) by doubling the rate that was first
levied by his predecessor Nicolas Sarkozy. Though the previous
government got the measure through parliament, implementation
of an FTT has proved to be troublesome, most notably at
EU-level, so Hollande's bold actions have been influential in
reshaping the debate surrounding the tax. In the Portuguese
draft 2013 budget, a proposal was included that authorises the
government to introduce an FTT, and though details are scarce
at this stage, it is thought that implementation in Portugal
would be inspired by the French model.
"My enemy is the world of finance," Hollande declared in
The president has not been in power long, but if his actions
as premier to date are anything to go by, his influence on
international tax and tax policy will only increase during his
time in office.
Sarosh Homi Kapadia
Former Chief Justice of India
To say that Justice Sarosh Homi Kapadia has had a Gargantuan
influence on tax policy in the last 12 months is no
In his ruling in Vodafone in January Justice
Kapadia, now an ex-chief justice – having ended his
tenure in September – disagreed strongly with stance
of the Indian tax authorities on the indirect transfer of
shares and was praised by taxpayers for doing so.
However, even now the effects of that decision have yet to
be fully realised. The Indian government's reaction to
Vodafone was to insert retrospective amendments into
the Income Tax Act, 1961, allowing India to tax the sale of
Indian assets, even if the seller and buyer are both foreign,
in spite of Justice Kapadia's ruling. But the extent and
circumstances under which this will apply are still being
Through Vodafone, Justice Kapadia has set the tone
for the adoption of a more pro-investor stance from the
judiciary. The judgment also introduced lower courts and
authorities in India to a much needed unified approach when
considering tax transactions.
Justice Kapadia's approach will prompt India's tax
authorities to consider a greater number of facts in tax
planning cases, forcing them to consider transactions from the
taxpayer's commercial perspective.
"The Vodafone case was always destined to be a
watershed moment in Indian tax law," said Ravishankar Raghavan,
of Majmudar & Partners.
"Although the relief given to Vodafone was short-lived due
to the subsequent retrospective amendments inserted in the
Income Tax Act, its rationale and approach have endured and are
echoed in many judicial decisions of the Authority for Advance
Ruling (AAR) and the Income Tax Appellate Tribunals, showing
clearly that the judgment has had an effect – and will
continue to do so – on tax litigation in India," he
Justice Kapadia was also part of the bench that ruled in the
Columbia Sportswear vs DIT case in August. In
Columbia the judges ruled that a tax payer can appeal
any decision rendered by an AAR in its case to a high court.
The decision reiterated that under the powers provided by the
Indian Constitution, a high court could exercise judicial
superintendence over the decisions of all courts and tribunals
within its jurisdictions including the AAR.
Director of Direct Taxation, Tax Coordination,
Economic Analysis & Evaluation at the European
Philip Kermode is a longstanding member of the European
Commission's tax team.
Kermode started his career there in 1987, working on
indirect taxation aspects of the internal market proposals
dealing with the abolition of fiscal frontiers and now has
responsibility for some of the Commission's most important tax
In January, Kermode launched a public consultation to assess
situations where double non-taxation of cross-border companies
was occurring in the EU and between third states, with the hope
of finding new ways to resolve them.
The consultation's findings were released in June and
Kermode now aims to develop a policy response before the end of
Kermode is also heavily involved in the Commission's plans
for a common consolidated corporate tax base (CCCTB), and
despite criticism from a number of member states stalling its
progress, he still hopes to see this reform introduced,
believing it would help to solve a myriad of tax issues in the
"I believe the most comprehensive way to tackle double
non-taxation would be for the member states to adopt the
Commission's proposal for the CCCTB," Kermode told
International Tax Review.
"Many of the problems with double non-taxation and double
taxation stem from divergent national tax rules in member
states. A lot would therefore be solved by having the CCCTB,"
European Court of Justice
Only the third woman to be appointed as an advocate general
of the European Court of Justice (ECJ), and one of only a
handful of women to make International Tax Review's
Top 50, Juliane Kokott wields considerable influence on EU tax
rulings through opinions delivered to the court. Though it is
not unprecedented for the judges to disregard an advocate
general's view of a case entirely, it happens infrequently. All
27 EU member states are bound by decisions of the ECJ and
despite retaining their individual sovereignty and the ability
to enforce their own tax laws and regulations, each state must
ensure its tax legislation and revenue authorities do not act
to restrict the fundamental freedoms of the EU: the freedom of
movement of goods, services, capital and people.
As the UK discovered recently when the European Commission
hauled it back to the ECJ over its cross-border loss relief
rules – an issue HMRC thought was resolved after
Marks & Spencer – these freedoms will be
defended vigilantly by the Commission and by the court, and tax
legislation of all EU states must fall in line.
There has been no shortage of tax cases before the ECJ in
the last 12 months. Advocate General Kokott delivered opinions
in perhaps two of the most significant – National
Grid Indus and Philips Electronics UK.
Both National Grid Indus – which said
taxpayers may opt for deferred payment of corporate exit taxes
– and Philips Electronics UK – which
held that the UK's loss relief rules for branches infringe EU
law – closely followed Advocate General Kokott's
opinions, underlining the court's reliance on her breadth of
experience in tax cases.
Group Strategic Adviser – Tax Policy, Rio
As outgoing chairman of the Tax Committee of the Business
and Industry Advisory (BIAC) to the OECD, Chris Lenon has
represented a strong business voice at the tax policy
But BIAC is not the only place where his input into the
development of tax policy can be seen. His membership of
Business Europe's tax policy group, and his responsibility for
environmental tax on the International Chamber of Commerce's
tax committee, means Lenon is an excellent example of the
strong and positive influence that business can, and must,
exert on decision makers.
"I think there is recognition from the OECD that responsible
business input into tax policy decisions leads to better tax
policy decisions. Our challenge is to provide that responsible
business input," said Lenon, on the importance of BIAC.
He highlights the three key areas of BIAC's work in the past
12 months as:
- participation in the OECD's tax and
development task force, working particularly on how to build
capacity in tax administrations in developing countries;
- working on the OECD project on
- establishing relationships with key
economies outside the OECD. BIAC has already engaged with
China's State Administration for Taxation and the Indian tax
authorities, and has plans to meet with senior Brazilian tax
officials in 2013.
"An important theme of BIAC's current work is engaging with
the BASIC [Brazil, South Africa, India and China] countries and
considering how we can try to maintain one set of standards for
international tax and trade," said Lenon.
While historically the OECD has focused on tax treaties and
transfer pricing, Lenon said it is increasingly involved in
more political elements of tax.
"I lead the tax and development taskforce for business which
supports the OECD and IMF in building the capacity of
developing countries' tax administrations," said Lenon.
"Initial work with Colombia and Mongolia has been successful,
though capacity also needs to be supported by a better exchange
of information process and information for tax authorities,
such as including common transfer pricing information in tax
As Rio Tinto's global head of tax from 1993 to 2010, and
through his current position as the group's strategic adviser
for tax policy, Lenon was involved in the mining
multinational's decision to disclose tax payments to
governments in all countries in which it operates.
"Through my time at Rio Tinto and BIAC I have been a strong
advocate of transparency and believe that reports such as Rio's
can do much to address concerns about the level of tax payments
by corporates – transparency will not go away as an
issue," Lenon said.
And Lenon also hopes his hard work in the area of
environmental tax will make an impression on tax policy.
"Tax and the environment is becoming a more significant
issue, particularly as emission trading systems form linkages
across borders, so it is crucial that a robust tax policy
framework underpins the policy initiatives to foster green
growth, and I hope that I have helped elevate the profile of
this key issue," he added.
Chairman, US Senate Subcommittee on Permanent
While the rest of Congress are fighting election campaigns,
either on their own behalf or supporting their colleagues, Carl
Levin, the senior senator for Michigan, has still found the
time to maintain his long-term opposition to offshore tax
On October 5, he wrote to other senators and Congressmen and
members of the Obama Administration, seeking a post-election
bipartisan agreement to close what he saw as 10 abusive
offshore tax loopholes used by US multinationals, including
using transfer pricing to move profits to low-tax
jurisdictions; returning money tax free to the US from abroad
using serial loans; and deducting from taxable income the costs
of moving jobs and operations overseas.
In the letter, Levin said the Permanent Subcommittee on
Investigations, which he chairs, had examined the loopholes
over the last decade. He said their abolition should be part of
a balanced, deficit-reduction package, which would require
extra revenues and cuts in spending.
"Legislation to close abusive offshore tax loopholes is
readily available and would raise hundreds of billions of
dollars in additional tax revenues over ten years," he
Levin has a long history of opposition to tax havens and has
used his role effectively as chairman of the Permanent
Subcommittee on Investigations to bring his concerns about
offshore tax evasion to wider public attention.
He has succeeded. Articles about the use of low-tax
jurisdictions are now common in the US media, as well as in
trade publications. This increase in interest is not just down
to one man, but Levin has used his position with skill to
ensure the topic caught the media's attention.
On the floor of the Senate in July, Levin spoke of the
Permanent Subcommittee's history of scrutinising offshore tax
havens since at least 2001. His doggedness has ensured the
topic has stayed in the headlines this year.
Chairman of the African Tax Administration
Oupa Magashula is still leading the way in enhancing tax
administration across sub-Saharan Africa.
Magashula is the chairman of the African Tax Administration
Forum (ATAF), which brings together 34 tax administrations from
across the African continent to provide skills training and to
create a platform for African tax and customs administration to
develop and share expertise and experience.
"The biggest problems tax administrations face is the lack
of capacity. We are trying to improve this through ATAF but a
lot of our members need more capability. The result of this is
that they are unable to investigate complicated structures and
undertake complex audits," said Magashula.
Since Magashula appeared in this list last year, 21 ATAF
member countries have reached consensus on the text of an
African Agreement on Mutual Assistance on Tax Matters in South
The agreement was in reaction to an estimated $500 billion
to $800 billion of illicit capital flight from the
The most recent ATAF meeting was held in Dakar, Senegal, in
September, where Magashula spoke to member countries about
research into country experiences with tax incentives and
efforts to harmonise tax policy in the region.
The tax world sat up and took notice when the Internal
Revenue Service (IRS) in the US appointed Sam Maruca as the
transfer pricing director in the Large Business &
International (LB&I) division in May 2011.
Since then, Maruca has been involved in the reshuffling of
the corporate tax department, in particular the advance pricing
agreement (APA) and mutual agreement (MAP) programmes, which
have been combined into the APMA unit.
The effects of the reshuffle, and Maruca's focus on
enforcement, are beginning to show. The IRS is now looking to
make up for recent defeats in transfer pricing litigation by
focusing on the operations of high-tech companies, particularly
those in Silicon Valley. But practitioners are seeing a more
general move away from litigation as companies and the
government try to avoid costly court cases. The IRS is taking a
more targeted approach to litigation, cutting the number of
cases but ensuring they pick the right ones to litigate.
Maruca is also building up the staff in his transfer pricing
team, with a number of advisers telling International Tax
Review over the course of the year that they have lost
mid-to-high level practitioners to Maruca's reshuffle.
Traditionally, a role at the IRS was not as well paid as one
in private practice so this shows the Service's commitment to
boosting its expertise in handling transfer pricing cases.
Sanjay Kumar Mishra
Joint secretary, Ministry of Finance, India
India has finally introduced an advance pricing agreement
(APA) programme. After much deliberation and anticipation, the
initiative allows for bilateral APAs, which will be processed
through the competent authority and, consequently, the
influence of Sanjay Mishra joint secretary and competent
authority in the Central Board of Direct Taxes (CBDT), will be
The APA team has been formed by the CBDT transferring nine
Five members of the team will be based in Delhi with two
each in Mumbai and Bangalore, with immediate effect.
Most of the officers are deputy/joint directors of income
tax. They will continue to retain their present postings as an
additional charge, reminiscent of the situation for the members
of the dispute resolution panel, who also have dual posts.
The development of an APA programme was the most significant
for transfer pricing in the 2012 budget. It has since received
the Presidential assent and has been included in the Finance
Kamlesh Varshney, the Commissioner of Income Tax (APA),
said: "It is heartening to note that the Indian APA regime is
received well by the tax experts overseas. On behalf of the APA
teams in India, I can confirm that all the members are
motivated to make this scheme of Government of India a major
Vice president for tax – Eaton
Eaton Corporation's VP for tax has a long road ahead of him.
The company is embroiled in a dispute with the US IRS over the
terms of an advance pricing agreement. The outcome could mean
that the agreement is reneged by the IRS, which would clearly
have a big impact on the way corporate entities view APAs with
the IRS in future.
With responsibility for Eaton's worldwide tax liabilities,
Mitchell will need to draw on his wealth of experience, across
advisory and in-house roles over the past 34 years, to argue
the company's case with the IRS.
Mitchell also has a large tax deal under his belt in his
time at Eaton. The company moved its headquarters from the US
to Dublin earlier this year. Transactions such as this are
increasing the support for reform of the US tax system to halt
the migration of US technology firms to low-tax
Eaton completed its acquisition of electrical equipment
supplier, Cooper Industries, already resident in Ireland, in
May 2012 for a transaction equity value of $11.8 billion. By
deciding to locate the new, combined, company's headquarters in
Ireland rather than in Cleveland, Ohio, Eaton says it will save
$160 million in taxes by 2016.
The tax industry will have high hopes for Mitchell and his
disputes team. If the IRS succeeds in revoking the APA, it
could have a knock-on effect on general APA application in the
US, prompting questions such as: Is it worth it? How can we
trust the IRS to keep their word when the cost of APA can be
Will Morris has a lot on his plate. The global tax policy
director for GE also chairs the CBI (Confederation of British
Industry) tax committee, the AmCham EU Tax Task Force, the
European Tax Policy Forum and has just accepted the role of
chairman of BIAC's (Business and Industry Advisory Committee to
the OECD) tax and fiscal policy committee, taking over from
Chris Lenon. On top of that, he is a priest at the Anglican
church of St Martin-in-the-Fields, in London.
"As a part-time priest at St Martin-in-the-Fields,
I try on a regular basis to bring together NGOs, government,
business tax directors, academics, big 4, etcetera, together at
St Martin's to talk about tax and development issues in a
Most people who work in tax policy understand the time
commitments can be significant. But as Morris does more than
most, how does he manage his time?
Morris says the answer is to this is practical and
"On the practical side, I view my role as chair of each of
these groups as one of coordinator, facilitator and team
builder – not micromanager or one-man-band. In terms
of getting things done, none of these groups has particularly
large secretariats, and I am not in a position to draft
everything – even if I wanted to – so we work
on a project/team basis. Specialists on the various committees
take the lead on different subjects. I provide coordination,
and ideas on direction, but the heavy lifting on each major
project is done by a team. This has worked well at CBI and BIAC
is also moving in that direction.
"The more philosophical answer is that I believe there is a
real strategic synergy between these jobs because there are
perhaps four or five relatively new, but very pressing, issues
in international tax that apply at both national and
These revolve around how to deal with these generally
interrelated, tax issues:
- Pressure to raise more revenue, especially
in developed countries;
- The growing shift in economic power in the
world to non-OECD countries;
- The tax issues arising from globalisation,
such as the taxation of intellectual property;
- New stakeholders in the tax system, such
as non-governmental organisations (NGOs); and
- the increasingly negative public
perception of the tax affairs of multinational business;
Morris is now faced with how to push BIAC's agenda forward.
He wants to improve the organisation's communication about the
positive and negative impacts of international tax policy
decisions on global businesses and their ability to create
economic growth and jobs. He also mirrors Pascal Saint-Amans's
aim to improve relations with non-OECD member countries "to
strengthen the case for the OECD as a single global
standard-setter that can promote consensus rules".
VAT director, GE
There are some who say that when a tax director is doing his
or her job properly, they should keep quiet about it. Not
everyone feels the same. Some tax directors are vocal about tax
policy, considering this to be a vital part of their work, and
when it comes to indirect tax, there are few more outspoken
than Chris Needham.
Perhaps this stems from his rare CV, a tax director who has
worked for both a tax authority and one of the Big 4 accounting
Needham has been a leading business figure in the push for
European VAT reform.
He likes aspects of the European Commission's proposals to
change VAT rules, such as:
Moving to a destination-based system under the precondition
that business gets easy access to information and that an easy
to apply broad One Stop Shop (OSS) will be put in place.
More information; an EU web portal on information; more
transparency in the legislative process through a tripartite EU
VAT Forum; publishing of VAT Committee guidelines and
explanatory notes; and standardisation of VAT obligations and
But dislikes others such as anti-fraud measures that
increase the compliance burden on legitimate taxpayers and
multiple VAT rates and exemptions.
"Business is the unpaid tax collector for the government and
must bear the administration burden," says Needham. "Legitimate
businesses are partners with the authorities, not
Occupy & Uncut
For months, it was impossible to leave ITR Towers without
wading through a sea of tents filled with hippies, socialists,
anarchists in Guy Fawkes masks, punks, students and, yes,
ordinary concerned citizens camped outside St Paul's Cathedral.
For some they were an eyesore littering the pavement outside
one of London's most iconic buildings. For others they were
heroes, braving the harsh winter to take a stand. Either way,
they sent a message and the media heard it.
The new ad hoc, bottom-up social movements,
exemplified by Occupy and Uncut, that have sprung up around the
world to try to take over stores and Wall Street alike have tax
at the heart of their agenda. Far from the unfocused layabouts
their enemies might like to see them as, their core objective
has always been holding banks and big companies to account for
their role in the financial downturn and their encouragement of
government austerity measures to fix it. Crucial to this is
ensuring these organisations pay their fair share of tax.
The original campers in Zuccotti Park in New York and
outside St Paul's have long since been sent on their way, but
the issues they brought to public attention cannot be swept
aside so easily.
Detailed information about the tax corporations do or do not
pay, is being splashed across daily newspapers and websites
like never before.
These stories are moving corporate tax matters from the
business sections to the front pages. They are not simply an
interest for shareholders, but have become one for society at
Occupy and Uncut's methods may divide opinion, but they
arguably did more than anyone else to focus media and public
attention on these issues.
In time, these flames that burned brightest may prove to
burn shortest. But as long as people feel the pain of public
service cuts, as long as they perceive corporations to be
avoiding the taxes they are morally obliged to pay and as long
as they consider both to be unfair, these social movements
which claim to represent 99% of the population will continue to
Deputy director general for transfer pricing at the
Russian Federal Tax Service
Russia's Parliament finally approved transfer pricing
legislation in December 2011, replacing the existing, primitive
rules with a more sophisticated regime, which includes advance
pricing agreements (APA).
Alexey Overchuk, the deputy director general for transfer
pricing at the Russian Federal Tax Service said in an
implementation note to the OECD:
"Combating transfer pricing deals between related parties
that shift the tax base between jurisdictions for tax avoidance
purposes is not entirely new for us. In an economy like
Russia's, relying on the export of mineral resources for
revenue, the absence of effective tax administration of
transfer pricing presented a visible problem."
Under the new transfer pricing rules taxpayers could be
facing two audits: one from the specialised transfer pricing
team, and a regular audit from the regular federal tax
inspector. Moreover new rules create additional controversy
between regular tax audits and transfer pricing audits in case
their results contradict or affect one another. The Russian
Ministry of Finance has clarified that, while the local tax
authorities cannot audit the transfer pricing matters of a
taxpayer they may nevertheless request the provision of all
documents as part of their regular tax audits, including those
relating to the transfer pricing posture of the company being
audited. This interpretation of the rules therefore makes it
highly important to ensure the appropriate compliance and that
document disclosure procedures are maintained at Russian
companies. This should be done to avoid tax issues that may
arise from the accessed transfer pricing documentation as a
result of the local authorities challenging the operations
under general legal grounds as different from those set by new
transfer pricing rules.
Additionally, to increase tax collection under the transfer
pricing rules, a special transfer pricing department at the
Federal Tax Service has been created.
"The approval of our new transfer pricing law by the
Parliament was preceded by discussions between the business
community, legislators, tax policymakers and tax administration
officials, thus reflecting a wide spectrum," Overchuk said in
the note. "There was debate about the complexity of the
transfer pricing methods and the feasibility of their
application, the availability of comparable data and taxpayers'
concern about increased administrative tax burden. Others were
concerned about the lack of capacity among taxpayers and tax
officials to effectively apply the provisions concerning APAs
and mutual agreement procedures as well as corresponding
"Despite all these drawbacks it was evident that the
introduction of internationally recognised transfer pricing
rules and procedures would outweigh the difficulties. The new
legislation is based on the arm's length principle, a new
concept in the Russian tax law."
Since Russia's new transfer pricing rules were released,
there has been much debate over how they should be applied. The
Ministry has clarified how taxpayers should calculate the
threshold for controlled transactions, but its interpretation
leaves companies with a choice of non-compliance or dedicating
more resources to transfer pricing.
"Companies will need to assess the risk of not documenting
some transactions against the cost of being completely
compliant," says Evgenia Veter of Ernst & Young. "To be
fully compliant taxpayers will need to spend a lot of time and
money on people and management services to prepare transfer
pricing documentation for even very small transactions.
"Taxpayers will still want to prepare documentation for more
sensitive transactions but may be willing to accept some risk
to avoid the cost of documenting every transaction."
Overchuk will have to tackle all these issues and more if he
wants to improve the overall efficiency of Russia's transfer
pricing regime. His influence at this time could be critical to
the way Russia's regime interacts with the global standard.
The rest of the world is looking on with fascination, and
not a little interest, as the US tries to reach a consensus on
tax reform. One decision has already been made: law makers, tax
officials and taxpayers agree that an overhaul of the Internal
Revenue Code is overdue. The last one took place 26 years ago
Where the US leads on tax policy, other jurisdictions often
follow, so the influence of any group or individual on the
process of reform in America will be felt in other parts of the
One such group which has caused politicians to think hard
about the policy choices is the PACE [Promote America's
Competitive Edge] Coalition. The group aims to protect what it
says are the 63 million American jobs that depend on the
international competitiveness of US companies worldwide.
"To ensure American competitiveness, PACE advocates that the
US maintain a level playing field for taxation of international
operations, and not act unilaterally to disadvantage US
companies," the group says.
The PACE Coalition is made up of a number of different
taxpayer organisations: the Business Roundtable; the National
Association of Manufacturers; the National Foreign Trade
Council; the Technology CEO Council and the US Chamber of
"The coalition's real impact is in education," says Matt
Miller (pictured), vice president, Business Roundtable.
"International tax rules are extremely complex and easily
misunderstood. In our communications with Capitol Hill and the
administration we have been able to ensure a greater
understanding of the significance of these rules."
PACE's key policy issues include the need to move to a
territorial system, where income is taxed where it is earned,
not where the taxpayer is resident. Miller accepts this would
be a big change
"But it's important," he says. "We're dealing with a
century-old system. It's completely outdated."
Miller believes politicians will have more interest in tax
reform after the presidential election.
"We are optimistic that when we get beyond the campaigning
and back to policy making, we will get a competitive
territorial system," he says. "We have to get the economy
growing and tax reform is a big part of that."
President of Chile
Sebastián Piñera has made great strides since
being elected president at the start of 2010.
His vast business experience, and success before becoming
president, with stakes in various companies including
television channel Chilevision, LAN Airlines and Colo-Colo
football club, meant he was the first billionaire to have been
elected as Chilean president.
But it is his achievements since he became president, and
particularly those of the last 12 months, that mark him out as
influential in taxation. He has succeeded in developing tax
policy where his predecessors have failed.
"President Piñera has been able to bring about a tax
reform that is more aggressive and far-reaching than previous
administrations," says Marcelo Muñoz, of Salcedo &
Cia. "While maintaining the basic principles of our tax system
– for example the two-level taxation on corporate
incomes – the reform covers several topics and taxes,
from the stamp tax to the income tax."
The reform also provides for the creation of a fund for the
improvement of education in Chile, which Muñoz says was
a "main cause of the political consensus for approval of the
new law and which gave momentum to the president's
Pushing through tax reform is often extremely difficult, as
winners and losers are inevitably created, leading to lobbying
from all sides. Piñera's pragmatism in tying the reform
to an initiative aimed at improving education standards in the
country was therefore an innovative ploy.
Piñera has also played an important role in
strengthening Chile's ties with the OECD since it became the
first South American country to join the organisation in
"The fact Chile has become a full member of the OECD has had
a direct effect on many issues, especially in transfer
pricing," says Muñoz. "This new law represents a major
step forward in this topic, putting us on a similar level with
the other members of the international organisation."
Attorney Advisor, US Department of the
The rise of the Foreign Account Tax Compliance Act (FATCA)
is one of the biggest stories in international tax from the
past 12 months.
Michael Plowgian, Attorney Advisor in the Office of the
International Tax Counsel at the US Department of the Treasury,
is the legislation's principal draftsman.
An experienced tax compliance specialist, Plowgian is also
the co-chairman of the Treaty Relief and Compliance Enhancement
(TRACE) project at the OECD and represents the US on the OECD's
Working Party 10 on Exchange of Information and Tax
Under FATCA, foreign financial institutions (FFIs) will be
required to automatically report the identity of account
holders, the beneficial owners of accounts, the balance of
accounts and any withdrawals or payments from accounts held by
US tax residents, or pay a withholding tax of 30%.
A series of intergovernmental agreements on the
implementation of FATCA is set to commit the US to reciprocal
exchange of information on partner country account holders with
US financial institutions. . The UK-US agreement has already
been released and other countries in negotiation with the US
include France, Germany, Italy, Spain, Japan and
If other countries follow suit – as is likely
– FATCA could shape the way in which bank account
information is exchanged for tax purposes the world over.
Jorge Morley-Smith, head of tax for the Investment
Management Association, said financial institutions are
contemplating the prospect of the expansion of FATCA and
automatic information exchange (AIE) to many countries around
the world and its impact cannot be overstated.
"The additional information required on account holders
under FATCA could change the dynamics of how the fund
distribution market works," he said.
RATE Coalition, US
Elaine Kamarck and James Pinkerton
As co-chairs of the RATE (Reforming America's Taxes
Equitably) Coalition, Elaine Kamarck and James Pinkerton, who
hail from both sides of the political aisle, have made it their
mission to see the US undertake comprehensive reform of the tax
RATE describes itself a coalition of businesses,
associations and other like-minded groups that are joining
together to advocate for sound and equitable reforms to the tax
code that will restore the competitiveness of the US as a place
to invest and grow, and boost job creation and economic
One of the coalition's key objectives within that overall
remit is to reduce the corporate tax rate to ensure it is
competitive with America's major trading partners. As part of
this effort, the group has said that though a lower rate would
justify itself via increased economic growth, budgetary
implications must be taken into account, and therefore "if
necessary to facilitate a meaningful reduction in the corporate
tax rate, corporate tax base-broadeners should be on the
table". This is something that both President Obama and his
Republican challenger, Mitt Romney, have acknowledged.
However, in making such decisions, RATE has been vocal in
opposing the view that negotiations over which tax breaks to
keep (or, conversely, which to remove) should be done in
public. That view is based on the fact that doing so would
create specific winners and losers, and thus make reform more
"This is something that should not be engaged in public,"
said Kamarck. "Because once it's engaged in public, you cannot
get a deal. Engaging in a discussion about this expenditure
versus that one is politically really counterproductive."
Kamarck is no stranger to dealing with political roadblocks,
having served in the White House from 1993-1997, and having
worked as senior policy adviser to the Al Gore presidential
campaign in 2000.
Pinkerton, Kamarck's co-chair at RATE, also has extensive
experience of life in Washington, working in the White House
domestic policy offices of Presidents Ronald Reagan and George
HW Bush, as well as serving in various presidential campaigns,
most recently as senior adviser to Mike Huckabee in his 2008
bid for the presidency.
The influence of the RATE Coalition is set to increase
following the outcome of the upcoming presidential election,
after which the issue of tax reform will become more
Supreme Court of Canada
While not a tax lawyer by training, Justice Marshall
Rothstein has been the clear advocate on most landmark tax
cases brought to the Supreme Court of Canada (SCC) since his
appointment as a Supreme Court Justice in March 2006.
Even before this, tax professionals felt his impact on the
interpretation of the law. When he served on the Federal Court
of Appeal, he penned the OSFC Holdings decision that
has served as the template for GAAR analysis in Canada.
Mark Meredith, of KPMG in Vancouver, praises him for his
"careful, thoughtful and influential" decisions.
The last 12 months have seen him deliver further influential
Justice Rothstein was responsible for delivering the SCC's
first ever transfer pricing ruling last month, which looked at
whether the price paid by pharmaceutical company
GlaxoSmithKline for an active ingredient from a Swiss
associated enterprise was calculated in a reasonable
The court held that the determination of an arm's-length
price must be informed by relevant surrounding economic
circumstances, including other transactions that may be related
to the purchasing transaction.
"With great perception, Justice Rothstein, writing for the
Supreme Court, rejected the OECD transfer pricing guidelines as
a mechanical, baked-in, part of Canadian law," said Nathan
Boidman and Olivier Fournier, of Davies, Ward, Phillips &
Brad Rolph, of Charles River Associates, said the ruling
will mean taxpayers can no longer rely on simply taking apart
tax authority analysis. "They [taxpayers] have to put forward
analysis that supports their price," he said.
St Michael Trust Corp
The SCC, led by Justice Rothstein, dismissed the taxpayer's
argument that the residence of a trust, with its beneficial
owners resident in Canada, should be determined by the
residence of the trustee for tax purposes.
In a case where the Canada Revenue Agency (CRA) invoked the
general anti-avoidance rule (GAAR), Justice Rothstein penned
the ruling which held that a return of capital payment to a
shareholder was an abusive tax transaction.
Justice Rothstein warned the CRA that in GAAR analysis
"moral opprobrium of creative tax planning is not
"In all of these difficult cases, Canadian taxpayers and tax
practitioners have benefited from Justice Rothstein's informed,
inquisitive and thoughtful mind," said Boidman and
"Justice Rothstein's bold foray into the most controversial
of Canadian tax issues – whether writing for a
unanimous court or bravely voicing a strong dissent –
conveys a clear message Justice Rothstein is at the helm of the
ever evolving voyage of discovery that is the world of Canadian
taxation," they added.
Chairman of the US House of
Representatives’ Budget Committee
Nothing seems to have proved more difficult to achieve in
the US than reform of the tax system, which has not been done
since 1986. But Paul Ryan has been one of the few people to
have had a significant impact on attempts to update the code,
and is viewed by many as the Republican party's main man when
it comes to economic policy.
His 2012 Path to Prosperity: A Blueprint for American
Renewal – the Committee's response to President
Obama's budget request – calls for a reduction in the
corporate tax rate to 25%, funded by the elimination of
corporate tax breaks, as well as a move to a territorial system
Ryan says shifting from a worldwide system of taxation to a
territorial system would "put American companies and their
workers on a level playing field with foreign competitors and
encourage investment and hiring in the US".
The aim of his alternative budget is to "reform the broken
tax code to spur job creation and economic opportunity by
lowering rates, closing loopholes, and putting hardworking
taxpayers ahead of special interests".
"Lowering corporate rates is a reform that is long overdue,"
Unveiling his plan in March, Ryan said he was confident that
the then-unknown Republican presidential nominee would adopt
the measures the plan contained.
"I'm not expecting everybody to enact every little piece of
this," he said. "But, yes, he [Mitt Romney] and the other
candidates running for President have embraced these kinds of
Since then, of course, Romney has been confirmed as the
Republicans' presidential candidate against Obama, and his
selection of Ryan as his running mate in the election was as
strong an indication as any of the Congressman's influence and
standing within the party and the House.
Should Romney oust the president in the election, Ryan's
influence is only going to increase, as he would relinquish his
position in the House and move up to the role of vice
Director, OECD Centre for Tax Policy and
As head of tax at the OECD, Pascal Saint-Amans is arguably
the most important person in the tax world today.
Since stepping into Jeffrey Owens' sizeable shoes in
February, he has been keen to build upon his outspoken
predecessor's work, while making his own mark.
"The first few months in office have been very exciting and
challenging," says Saint-Amans. "Good progress has been made to
implement my priorities. With regard to getting closer to non
OECD countries, I have signed cooperation agreements with South
Africa and the African Tax Administration Forum and will
shortly sign similar agreements with China and Brazil."
Saint-Amans has been working on fixing deficiencies in the
transfer pricing rules and is pleased that the Committee on
Fiscal Affairs works on the holistic approach of base erosion
and profit shifting.
"Delivering on this, which includes work on transfer pricing
– intangibles, safe harbours, and simplification
– as well as really and finally improving the Mutual
Agreement Procedure will clearly be a big challenge for the
year to come. Finally, the fast changing environment in the
area of exchange of information will be a great opportunity to
offer a multilateral platform which can be both efficient to
governments and cost saving for the financial industry."
Speaking at conferences the world over, including
International Tax Review's own Tax & Transparency
Forum, Saint-Amans has proven he is just as happy as Owens in
giving his opinion on what needs to be done to create
guidelines that work equally well for tax authorities and
taxpayers around the world.
The three pillars of the OECD's work under his leadership,
he says, are tax treaties, transfer pricing and the elimination
of double taxation.
The OECD has faced increasing criticism in recent years from
development agencies who argue that its work on transfer
pricing and information exchange is failing poorer
But Saint-Amans is keen to reach out to non-OECD countries
and has shown himself to be flexible in embracing new ideas
such as automatic information exchange. And while emerging
economies outside the OECD, particularly Brazil, Russia, India,
China and South Africa, are increasingly flexing their muscles,
Saint-Amans and the CTPA remain at the forefront of global tax
Former President of France
It seems slightly odd to highlight the ex-French president
– he left office in May – as a leading tax
influence in the past 12 months. But there is one good reason
– the financial transactions tax (FTT).
Whether it was his desperation to curry favour with the
electorate in his drive for re-election or a genuine desire to
see the banking sector pay for its part in the financial crisis
In one of his final moves in office, Sarkozy forced the FTT
through parliament and into law in France.
Whatever his motivation, it proved stern enough for him to
act decisively in effecting a hugely controversial tax. Sarkozy
rejected criticism from countries such as the Netherlands and
the UK, set aside fears the FTT would see French banks
relocating their transactions and their dealmakers, and jumped
the gun on the European Commission's waning efforts to achieve
an EU-wide FTT.
"What we want to do is provoke a shock, to set an example,"
Sarkozy said, after giving the FTT the green light.
The knock-on effect of France taking the lead on the FTT is
Hungary was first to follow, announcing plans for its own
unilateral FTT shortly afterwards. And, last month, at the
ECOFIN council, the Commission's plans for the levy finally
received sufficient member state backing to allow it to go
ahead under the doctrine of enhanced cooperation.
As well as France, Germany, Austria, Belgium, Portugal,
Slovenia, Greece, Italy, Spain, Estonia and Slovakia are all
supporting the introduction of the tax in their jurisdictions,
probably on January 1 2014.
Sarkozy's version came into force in France on August 1 this
European Commissioner for Taxation and Customs
Union, Audit and Anti-Fraud
Algirdas Semeta, Lithuania's former finance minister,
retains his place in the Global Tax 50 and not just for the
number of words in his title. After almost three years as the
Commission's top tax man, Semeta has gained a reputation as an
ambitious and successful reformer.
While his biggest project, the common consolidated corporate
tax base, has gone rather quiet in the last year, progress on
two major indirect tax reforms are occupying the time of Semeta
and his staff. The financial transactions tax (FTT) is an idea
that's been kicking around for decades among socialists and
radical economists, but it has rarely been kicked further than
the long grass by those in power. But since Semeta came forward
with a proposal to introduce an EU-wide tax on financial
transactions at the end of last year, the idea has gained
considerable traction. With 11 member states now looking to
adopt the Commission's FTT, this once fringe idea has entered
the mainstream and Semeta has found a way to make the financial
sector pay for the cost of the recession, while reining in some
of its most risky and reckless behaviour.
"It will bring balance and justice to our fiscal systems, by
ensuring that the financial sector contributes fairly to public
finances and to society," Semeta said about the FTT.The other
indirect tax matter the commissioner is tackling is VAT reform.
He has spearheaded the project to secure the future of the EU's
VAT system by making it simpler, more robust and more
efficient. After extensive consultation, strong progress has
been made on implementing a one-stop shop, moving to the
destination principle and setting up a quick reaction mechanism
for member states to combat fraud.
"Our strategy for the reform of the VAT system takes a
measured approach, to avoid any risk to national revenues or
sudden upheavals for businesses," Semeta said. "The changes
which will lead to a better functioning, better protected VAT
system will therefore be done in a steady and gradual way, in
full consultation with all interested parties."
New York University professor; Start Making Sense
Dan Shaviro is Wayne Perry Professor of Taxation at New York
University School of Law. His areas of research are budget
policy, entitlements, tax law and policy, and transfers, but
one of his other interests is his closely-followed Start Making
Sense blog, which has given him the chance to bring his views
to a wider audience than his students.
"It's a good way to be able to comment more casually and
informally than to my academic readership," he says.
"Unfair but balanced commentary on tax and budget policy,
contemporary US politics and culture, and whatever else happens
to come up," is how Shaviro describes his blog.
"Sometimes it can be a curse to live in interesting times,
but sometimes it can be a blessing," he says. "You couldn't ask
for a better US presidential candidate than Mr Romney, with
things in the Caymans and so on."
While Start Making Sense has extended his readers beyond
NYU, he believes the blog would not be as popular if US
politics were different.
"One of my wishes is that the US political system returns to
sanity. If it did, then I would have fewer readers."
He believes Republicans are to blame for the present
situation. "Around 1994, the Republicans went crazy. I probably
first noticed in about 2002. They need to return to sanity.
That's not to say I'm laudatory about everything President
Obama says. I go through the pluses and the minuses."
The popularity of the blog means he gets more and more calls
from reporters, particularly fact-checkers. "Sometimes I don't
want to be quoted because I don't want to come off as too
harsh. I'm not running for office. I don't need to be
On the burning tax question of the day in the US –
when and how reform will take place - unlike many commentators,
Shaviro does not believe an overhaul is imminent. In a post on
Start Making Sense on October 18, he comments on a talk he gave
the previous week in New York:
"The basic topic is why I don't expect major corporate and
international tax reform to happen – or, if it
happens, to be very stable – not just for obvious
political reasons but also due to the fundamental dilemmas we
face once we are forced, by the existence of the individual
income tax, to sign on to entity-level corporate income
Contributing editor to Tax Analysts
Lee Sheppard is a qualified tax lawyer, though she has not
practised since the 1970s, and a contributing editor to Tax
Analysts. Professionals are avid readers of her often
controversial views on corporate tax, particularly in the US.
Her arguments stand out for their wit and inventiveness.
"Like a designer handbag, a target company is likely to be
overpriced and perhaps promise more than it delivers," Sheppard
wrote on her blog on Tax Analysts website.
Sheppard is firmly in the camp that believes international
corporate tax rules are out of date and need to be brought in
line with the way business is conducted now, especially in
light of new technologies, which allow companies to conduct
She writes about all areas of tax law, including
international taxation, transfer pricing, partnership taxation,
bankruptcy questions, pensions and accounting.
In recent months, she has come out against the use of the
arm's-length principle, the dominant international standard in
"The members of large multinational groups of corporations
are not separate economic actors. The point of vertical
integration is not to have to pay arm's-length prices for some
goods and services. It is a fool's errand to try to divine
arm's-length prices for intra-group transactions, particularly
for valuable intellectual property (IP) that is never licensed
to outsiders," Sheppard wrote in an article in Forbes
"Financial accounting ignores affiliates and treats the
corporate group as a single entity. But the federal income tax
law treats affiliates as separate economic actors, giving
multinationals free rein to determine where their profits
should be taxed, or more likely, not taxed."
Author, Treasure Islands
Journalist Nicholas Shaxson is the author of Treasure
Islands, a book exploring the role of tax havens in the
global economy. His biggest impact came this year, however,
with an article in Vanity Fair investigating Mitt
Romney's tax affairs, which have since dogged the Republican US
presidential candidate's campaign.
If Shaxson's report helps cost Romney the election, some on
the left of politics might say he has saved the world from a
great evil, while the right would claim he has doomed it to
Obama's socialist nightmare. Either way, he's earned his place
as one of the most influential people in tax.
International Tax Review: What inspired you to
investigate Mitt Romney's offshore millions?
Nicholas Shaxson: Vanity Fair read
Treasure Islands and invited me to submit some article
ideas. I sent them a few, and they liked the Romney one best.
Hardly a surprise!
ITR: What were the most damning things your report
NS: My article said a couple of things that
really needed saying, which the US media had hitherto found
itself unable to spell out.
Article after article had explored Romney's tax strategies,
often getting lost in some quite serious detail, then with a
disclaimer along the lines 'but he hasn't broken any laws:'
then often going on to conclude that it was all
What my article pointed out in plain language was that this
was nonsense. For one thing, there is typically no clear
dividing line between the legal and the illegal: particularly
with international corporate tax, and there exists a large grey
zone between the two.
I asserted explicitly – with plenty of evidence to
back it up – that Romney seems extremely comfortable
wading deep into these murky grey waters between the legal and
the illegal. I also made it clear that what is 'legal' is not
the same as what is 'legitimate' – not at all. Think
apartheid, or slavery, in their day, for a couple of extreme
examples to make that point.
ITR: Do you think it will have an influence on the
NS: Well, that was never my intention.
Personally, my aim was to point out how rotten the whole system
is, using Romney as a vivid and current example. For what it's
worth, I'm pretty disappointed in Barack Obama, particularly
for his closeness to Wall Street. But the reaction I got to the
article was astonishing.
Trivially, I got a few vitriolic emails calling me a "Euro
commie slut" and such like.
More importantly, it seemed to open some floodgates: my
article was mentioned in New York Times editorials
three days in a row, was being discussed all over the TV, and
really got a lot of people talking. His love for secrecy, his
tax gymnastics, his willingness to go beyond – and
often way beyond – what is clearly legal: it all adds
up to a big ugly package, which when put it together in a
particular way seemed to reach a critical mass.
I'm very proud of what I achieved, not least to get
Americans asking some serious questions about tax havens.
ITR: Has your book, Treasure Islands,
done much to increase public awareness of tax havens and change
NS: I think Treasure Islands has
played a part. It's hard to know who's reading it, but one way
to get a sense of this is to watch who is following you on
Twitter. A remarkably high proportion of my followers are
journalists, and quite a few people in the political
Most of my sales and Twitter followers are in the UK and I
do feel that while many others also deserve credit for bringing
these huge issues to attention at last, Treasure
Islands has undoubtedly packed a punch and put the issues
out there: a kind of elaborate starter's pack for anyone
wanting to get to grips with these gigantic, hugely complex
ITR: What's in store for you and your tax justice
work next year?
NS: Once you start looking at tax havens,
your attention is inevitably drawn towards the issues of
financial centres, which compete against each other in a race
to the bottom to offer the world's hot money various public
bads – secrecy, low taxes on capital meaning higher
taxes or worse services for the poorer sections of society and
an escape from financial regulation and more.
All financial centres are tax havens, to a degree. So
although Treasure Islands has a huge focus on the City
of London, I am paying even more attention to it now: the
centre of what I call the "spider's web" of British tax havens
around the world, and the epicentre of global financial
One issue I'll also be looking at is whether or not the City
has been good for the people of the UK as a whole. Most people
think that it's self-evident that all that money must be good
for the UK. It certainly is for some.
But before I worked on tax havens I spent many years
researching and writing about oil-producing countries in
Africa, which seem to have been unable to harness their
mega-billions into real national development. I was amazed to
find many of the same causes and symptoms striking countries
that depend on financial centres. So that will be a big focus
for me. Watch this space.
Chairman, Indian Expert Committee
Parthasarathi Shome is chairman of the Indian Government's
Expert Committee on General Anti-Avoidance Rules (GAAR) and
indirect transfers of assets and professor, Indian Council for
Research on International Economic Relations. In the past,
Shome has held roles as chief economist at HM Revenue &
Customs in the UK and as chief of the IMF's tax policy
division, and has written various publications on tax and other
economic issues. Between 2004 and 2008 he was an adviser to the
Indian finance minister. Shome is clearly a man who has had an
impact on the development of tax policy in India and
International Tax Review: What do you consider to
have been your biggest influence on tax?
Parthasarathi Shome: My greatest visible
influences on tax have been the two reports of the Expert
Committee I chaired for the Indian Government, on GAAR and on
the taxation of indirect transfers of underlying assets in
India. It was nice to be conveyed from abroad, as well as from
within India, that GAAR was a "thrilling" report and, when the
indirect transfer report was out, that I was considered a "rock
star" of taxation, if such oxymorons could be imagined.
I have had the opportunity to provide technical assistance
in taxation to 35 or so countries, including my own, and in
Africa, Asia, Europe and Latin America, a recent example being
to lead the first international tax mission to Myanmar.
To me, influence begins with first listening and then
understanding the central issue and proceeding on to solve it
by slowly yet steadily breaking down barriers with some courage
Brazil, another complex economy, recognised the efforts I
made there for over a decade and formally recognised my
contribution [by awarding the Brazilian Government's highest
civilian honour for a non-Brazilian, Commander of the Order of
the Southern Cross]. I feel that I also had deep influence on
tax matters in Brazil.
ITR: Do you think your Expert Committee report
will have an impact on foreign direct investment (FDI) into
PS: The committee was a technical group and
we focused on the details of tax so we might emerge with the
right combination of taxation aspects.
That included reducing suboptimal business decisions
generated by taxation and instead creating a level playing
field for stakeholders. That should, in turn, enable the tax
administration to narrow down and take up real problem cases of
abusive tax avoidance.
The reviews have focused on the clarity the reports have
been able to generate. If government accepts the Committee's
recommendations, it should enable foreign investment.
The immediate reaction has been noticeable not only in print
and visual media and analysis, but has also been reflected in
the stock exchange and the rupee exchange rate which have
resulted from the totality of a reform package initiated by the
ITR: One of the concerns in the minds of investors
is the tax administration. What can be done to reform it ?
PS: The tax administration should benchmark
itself internationally against other tax administrations and
participate in ongoing processes elsewhere. There are three
pillars of reform that comprise a tripod.
First, the organisational structure has to move from
regional to sectoral and functional. Thus departments should be
structured on sectors such as banking, insurance, oil and gas,
telephone and telegraph, and others and business taxes
– corporate income tax and VAT or GST –
should be included under each sector. A similar structure
should be devised for individual income tax and capital gains
The sectoral departments should be buttressed by functional
departments such as assessment, audit and scrutiny, risk and
intelligence, analysis, tax debt, legal, ICT [information and
communications technology], and others from which each sectoral
department should be able to "buy" services. Importantly, the
structure should be able to assign accountability to officers
at different levels that are clearly defined and evaluable.
The second pillar is the use of ICT in not only processing
tax returns but, in particular, in developing data mining
ability that would facilitate tax administration policy
analysis and decision making.
The third pillar is the treatment of enterprises as
stakeholders and of individuals as customers. Viable and
functioning customer care centres, and the willingness and
ability to solve problems through a continuing series of
stakeholder dialogues, or incorporating schemes such as Time to
Pay when a compliant taxpayer is in distress, are a few
ITR: Taxpayers are concerned with the amount of
frivolous tax notices leading to protracted litigation. How can
this be improved?
PS: This is a good example of the need for
international benchmarking and to take cognisance of the
difference in approaches being taken in the use of several tax
administration instruments through measurable and comparable
indicators such as the number of litigation –
including on transfer pricing adjustments – cases
initiated, won, lost, the length of time spent on each, and
departmental financial and staff resources being spent in ratio
of the departmental budget.
ITR: What, in your view, is a practical timeline
for implementation of GST and DTC?
PS: The more important concern is the
nature or quality of the legislation that is introduced with,
of course, speed in mind.
Bringing in a goods and services tax (GST) or Direct Taxes
Code (DTC) that is not internationally comparable would not
solve the challenges in prevailing tax policy design.
The gap or distance from international norms should be
bridged before a meaningful GST or DTC is introduced. Otherwise
a rudimentary tax mix could be introduced quickly but that
might turn out to be to the detriment of improved allocation of
productive economic resources and commensurate growth.
Coordinator, Subcommittee on Transfer Pricing
Manual – Practical Issues
There were few more experienced officials available than
Stig Sollund in 2009 when the UN Committee of Experts on
International Cooperation in Tax Matters went looking for
someone to lead its work on a transfer pricing manual for
"Countries were asked to nominate members and I was picked
as one of 25," Sollund says. "I already had a central role in
work on the UN model convention, leading the subcommittee on
PEs [permanent establishments] and I had been a longstanding
member of the OECD's Working Party No 6 on transfer pricing. I
was asked by other subcommittee members to be the chairman. It
is not something I sought."
The mandate of the subcommittee was to produce a practical
manual on transfer pricing that would be useful to developing
"There was a demand from developing countries to have a
practical manual on how the arm's-length principle should
operate," Sollund says. "The purpose was not to set up a
competing set of guidelines to the OECD."
The results of the work of the Subcommittee on Transfer
Pricing Manual – Practical Issues was seen this
October when the document was published and discussed during
the UN committee of experts' annual meeting.
"It was a diligent and inclusive process, with the key
transfer pricing people involved on the committee, and included
also in the subcommittee representatives from the BRICS,
business, the OECD, academia and experts from developing and
developed countries from outside the Committee itself," says
Sollund, director general of the tax treaty and international
section of the tax law department of Norway's Ministry of
Developing countries are becoming more influential in
international tax policy development, particularly in transfer
pricing, as they try to build capacity to deal with the number
of related-party transactions taking place through their
jurisdictions because of globalisation.
The importance of the UN's transfer pricing subcommittee has
increased at the same time. The Sollund-led work, though only
designed to be instructive rather than prescriptive, is likely
to have long-lasting effects.
Sir Martin Sorrell
Chief executive officer, WPP
Sir Martin Sorrell is the chief executive officer of WPP,
the marketing and advertising multinational. Sorrell's decision
to move the WPP's tax residence to Ireland in 2008 because of
the UK tax system, and his subsequent decision to return the
company headquarters back to the UK again, is a major example
of the effect of tax policy on decisions companies make and of
its impact on the British coalition government's 'Open for
Business' agenda. The government has committed to ensuring that
Britain has the most tax-competitive economy in the G20. WPP's
return has, and is likely to, influence other companies that
have moved their tax residence out of the UK in recent
International Tax Review: What specific tax issues
prompted your decision to move WPP's tax residence to Ireland?
And what prompted the planned return?
Sir Martin Sorrell: We moved our tax
residence to Ireland in 2008, as a result of the then Labour
government's proposals to reform the taxation of foreign
profits, which we thought would have a detrimental impact. The
coalition government set out very early on that it wanted the
UK to be 'Open for Business' and one of their main initiatives
was a promise to reform the UK's controlled foreign company
(CFC) rules. The government has delivered on their promise and
introduced new rules that apply from next year. With the threat
of punitive CFC rules being replaced by the certainty of the
new regime, we decided that the parent company should return to
ITR: Do you think the Government's 'Open for
Business' agenda and its ambition to have the "most competitive
tax regime in the G20" is beginning to succeed? Is WPP's
decision to move back to the UK a sign that UK tax policy is
MS: Recently there has certainly been a
steady influx of foreign based groups moving their headquarters
to the UK, which we think shows that the measures, which extend
beyond just corporate tax measures, are beginning to work. All
of the factors you mention [CFC and patent box reform, and
corporate income tax rate cuts] improve the tax competitiveness
of the UK. Time will tell whether the changes make it the most
competitive regime, but it is certainly very encouraging and in
our view is a positive thing for the UK.
ITR: What change to the corporate tax system would
you like to see implemented, if you could do so overnight? Will
you be lobbying for further changes in the year ahead?
MS: We believe that probably there has been
enough done to modify corporate tax rates, at least for the
meantime. On income we do not think the reduction in income tax
rates was necessary at the time the decision was taken to
reduce the rate from 50% to 45%. A general promise that rates
on income taxes would be reduced would have been sufficient,
for example in the life of the parliament.
The more important initiative may have been to reduce the
rate of capital gains tax, which would have a much more
significant impact on SMEs and on entrepreneurial
The creative industries in the UK, which contribute about 8%
of GDP, would be much more positively impacted by such a move
than reducing income tax rates. Politically, it has proven to
be a difficult decision too.
Deputy Prime Minister and Treasurer, Australia
International Tax Review: You have said your name
is tied to tax reform. And this is undeniable – you
have overseen implementation of the carbon pricing mechanism
and MRRT, the strengthening of Part IVA (GAAR) and moves to try
and reduce the corporate tax rate. What do you consider to be
your biggest achievement or influence in business
Wayne Swan: Our mining tax reform is a
truly landmark achievement that has been accomplished in the
face of intense and entrenched opposition, and will deliver
lasting benefits for generations of Australians.
We are determined to leave a legacy from the mining boom in
every corner of the country, and by spreading the benefits of
our mineral wealth we are going to do exactly that.
By delivering a profits-based resource rent tax we ensure
that miners pay more in boom times, and then less when profits
are lower – a logical and sensible set of reforms.
With the additional revenue from the boom we are able to
boost tax incentives for small business investment and help
small business cash flow, deliver nation building
infrastructure and help build the retirement savings accounts
of 8.4 million hard-working Australians.
ITR: What are the top corporate tax issues you are
facing right now? What is your number one priority for the year
WS: It is very important that we get our
loss carry-back reforms through the parliament to help
businesses take sensible risks to prosper from new
opportunities in our region during this Asian century.
I'm determined to see tax reform focused on reducing the
burden on viable investment for small businesses, especially in
our patchwork economy where some sectors are finding it tough
with a higher Australian dollar.
By providing incentives for small businesses to invest and
innovate, we help them take steps to adjust to the challenges
in our patchwork economy, such as the higher terms of
ITR: When can we expect further developments on
the proposed business tax cut?
WS: Just to put this into context, we did
propose a company tax cut, but incredibly it was blocked by the
Liberal Party. I remain supportive of lowering the company tax
rate if the business community can agree on a way to fund it
from the business tax system.
ITR: Would you say your experiences of playing
rugby league have stood you in good stead for some of the tough
negotiations that occur with business leaders (and particularly
mining entrepreneurs) when trying to implement new tax
WS: To follow your analogy, I've always
been someone that is focused on the scoreboard, and for me that
means delivering what we can in our tax system for hard-working
Australians and businesses.
Tax reform is never easy, certainly not in Australia, but
when you do the hard yards and get it done it is something a
government can be proud when it delivers for the generations
Some of the most innovative reforms of the 1980s and 1990s,
such as the Petroleum Resource Rent Tax, reducing the company
tax rate from 46% to 30% by broadening the tax base and
compulsory superannuation were met with enormous resistance
from vested interests, but are accepted today as important
blocks of our ongoing economic strength.
Richard Stern has been guiding the tax simplification
programme at the World Bank since its inception 18 months ago.
Demand is increasing among developing countries for the
The Global Tax Simplification Team of the Bank's Investment
Climate Department (CIC) aims to:
- Introduce a complete transfer pricing
- Implement detection mechanisms (risk-based
auditing indicators) to identify possible TP abuse.
- Promote capacity building and training
which is critical to successful implementation and audits,
especially given the complexity of this topic.
The programme is providing transfer pricing assistance in
Georgia, Armenia, Bosnia, Serbia, Albania, and Thailand, in
partnership with the OECD and EU. The CIC is working with the
local International Finance Corporation offices on these
projects, with the exception of Thailand, where CIC is working
with the Bank's office.
Stern said that in recent months his team have been working
on more complex issues such as advance pricing agreements and
"Low capacity is the biggest issue in the all countries we
work in," said Stern, about the level of staff and monetary
resources of the countries on CIC's books.
Stern said he was honoured, on behalf of his team, to be
included in International Tax Review's Global Tax 50.
"The World Bank's tax programme is unique among tax
technical assistance programmes in that it takes a growth and
investment climate lens in looking at tax issues. That is, our
interventions are focused on improving the tax system to
improve transparency and levelling the playing field for growth
Social media network
More and more people and groups interested in tax use
Twitter to relay their views around the world. It is surprising
what you can learn #brevity
Sir Andrew Whitty
Chief Executive Officer, GSK
The head of GSK, the pharmaceuticals company, has been one
of the few corporate leaders to address publicly issues about
how multinationals manage their tax affairs.
In an interview in the Observer newspaper in March
2011, Sir Andrew (plain Andrew back then) stated that his
company was committed to being a tax resident in the UK and
that he had no truck with companies that move about so they can
pay the smallest amount of tax.
"Call me old-fashioned," he said, "but I think you have to
be something. I don't buy that you can be this mid-Atlantic
floating entity with no allegiance to anybody except the lowest
tax rate. You're British, you're Swiss, you're American or
you're Japanese. Whatever you are, you're something. And this
company is a British company."
Whitty acknowledged that while GSK had contributed much to
the UK, Britain had done the same for GSK through the support
of its people, government and universities.
He was scathing of news at the time that different companies
were threatening to move their tax residence from the UK.
"I really believe one of the reasons we've seen an erosion
of trust, broadly, in big companies is they've allowed
themselves to be seen as being detached from society and they
will float in and out of societies according to what the tax
regime is," said Witty. "I think that's completely wrong."
"Of course we could go, in theory, anywhere for a low tax
rate. But first of all, how do you know that country isn't
going to change its tax rate in 10 minutes? Secondly, isn't it
better to be in a country and say 'let's try and work through
the difficult times and get to the good times'? If every
company runs away every time there's a difficult time, how is a
country ever going to emerge?
The pressure on UK company boards to consider their tax
residence has lessened considerably since Whitty's remarks as
the tax system has undergone substantial reform. For example,
controlled foreign company rules have been changed and a patent
box offering a tax exemption is being introduced. However, the
impact of a CEO's views was important.
Tax has proved toxic for multinational companies in recent
For perhaps the first time ever, the public, as well as tax
administrators have been challenging companies to explain why
they manage their tax affairs the way they do.
Concepts used to reduce taxable income, such as transfer
pricing, foreign tax credits and loss carryforwards, have come
in for intense scrutiny from the general media and different
interest groups. This has piqued the interest of the public as
they try to understand the rules in place to raise money from
Company managers have generally declined to confront these
issues in public because of concern that their message will not
be understood or will be twisted in some way.
Whitty has shown that coming forward to be open about such
issues does not always carry the danger that many peers may