Speaking positively of their experiences with the OECD’s International Compliance Assurance Programme (ICAP), the regional head of tax at a major oil company said: “Our approach was what I call the ‘open kimono’. It was full transparency. We didn’t want to hide anything.”
The head of tax’s words were echoed by two representatives of national tax authorities, who pointed out that transparency can benefit taxpayers as well as authorities.
“Proactive transparency is very much linked to tax certainty,” said one, while suggesting that tax authorities had their own role to play in laying the ground for open communication.
“Proactive transparency is also very much linked to trust,” they said. “Trust, as we all know, is very much a two-way street. It doesn’t happen on its own – it has to be built.
“I think that we in the tax authorities can and maybe even should take the first step in building that trust.”
One way of signalling a willingness to trust and be trusted, the tax-authority representative said, is to shift focus away from going after back taxes. “The tax authorities cannot expect MNEs to want to be proactively transparent if all focus still lies very heavily on retrospective control.
“There is a need for retrospective control, of course, where there is aggressive tax planning,” they clarified. “But the problem is that with control it’s easy to lose the whole hand, and then it becomes very difficult to do the proactive part of the work, which I think should be the focus for us and the focus for MNEs.”
The panellists were speaking before an audience in London’s Pullman St Pancras Hotel at ITR’s Managing Global Tax Disputes Summit on April 30.
‘The times are what they are’
The tax head cautioned the largely in-house audience members that the profession must understand a change in attitudes over the last two decades.
“We are not in the happy ’90s,” they said. “We are not in the time of really fancy ideas about doing really good tax planning and structure.
“We are in a situation in which the media – and everybody – is looking at us. What we do has consequences.”
This, they suggested, ought to prompt tax heads to rethink how to engage with the authorities. One example of a more positive engagement was speaking at public events such as this one.
“Fifteen years ago I would never been here,” the tax head laughed. “And if I was here, I would be really scared. Now, my feelings are changed.”
That went for both sides, they said. “Ten or 15 years ago we would never be here talking about cooperation. The authorities would be thinking that the multinationals want to fool them; the multinationals would be really scared about what is going to be understood by the administrations and what is going to be attacked by the administrations.”
It is no good ignoring the changes that have taken place in recent decades, the tax head insisted. “We as an industry should take into account that the times are what they are.”
‘Come and speak’
A second tax authority representative urged those in the room to consider that disputes can be headed off by good lines of communication. “If in doubt,” they said, “come and speak to the tax authority.”
“From experience of disputes – and I have intervened in disputes that have gone on for over a decade – a lack of communication has been at the heart of almost all of those.”
“Come and speak,” they urged. “Have a face-to-face, and all of a sudden you’re not dealing with an organisation but you’ve got a human being who will listen and give you a bit of respect.”
“Speaking is the first point,” the tax head agreed, suggesting that new and closer relationships between taxpayers and tax authorities was helping to make this possible.
“I love it when the tax administrations call you ‘customer’,” they continued. “Or, even better, when they call you ‘client’. I think this is good, because if they don’t see us as a taxpayer, as a big cash cow to obtain everything you can obtain from, then I think we are improving.”
The first tax-authority representative agreed. “It is possible,” they said, “in the post-BEPS world, to do things in a different way.”
