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BRICS's tax authorities promise to share information


The BRICS countries' (Brazil, Russia, India, China and South Africa) tax authorities have agreed to share information to strengthen their tax systems, including India helping South Africa to implement an advance pricing (APA) regime.

In a communiqué released last week, by Indian Finance Minister P Chidambaram, the BRICS committed to sharing their experience of best practice, capacity building, anti-avoidance and non-compliance practices and effective exchange of information.

The countries promised to share resources and knowledge and to also extend cooperation in tax administration in a way that will benefit people living in BRICS countries.

The five heads of revenue met in Delhi on January 17 and 18.

Information sharing with treaty partners

Chidambaram’s announcement of greater BRICS convergence on tax matters comes in the same week as India’s Central Board of Direct Taxes (CBDT) released an instruction which contains guidelines on the sharing of information among treaty partners (covering inbound and outbound requests).

Highlights of the new guidelines include a provision that requests for exchange of information should not be generic.

“The information should be sought in elaborative and specific manner,” says the manual, which also has a provision allowing two or more countries to conduct a joint audit if related persons are engaged in cross-border activities.

And Rafael Santiago Lima, from the Division of International Affairs of the Undersecretariat of Examination at the Brazilian Receita Federal, also this week confirmed that Brazil is altering the way it handles data received through information exchange agreements. He said such information should be constantly looked at and examined.

“Brazil is changing its system of dealing with the information and how it is used. Reforms are on the way,” he said.

South Africa and India

Among those in the meeting was South African Revenue Service’s (SARS) Commissioner, Oupa Magashula (pictured below).

Oupa Magashula

“BRICS cooperation must not be viewed in isolation,” said a spokesman for SARS. “It should be noted that South Africa has long established relations with Brazil and India bilaterally, through the IBSA (India, Brazil, South Africa) Heads of Revenue Administration Working Group and multilateral fora such as the UN, World Customs Organisation, [and the OECD] Global Forum on Transparency and Exchange of Information for Tax Purposes, the Task Force on Tax and Development and the Task Force on Tax Crimes and other Crimes.”

The revenue authority said though BRICS cooperation will not duplicate IBSA, the lessons learnt through IBSA cooperation will no doubt serve as a good foundation for taking forward BRICS cooperation.

SARS said it intends to send its officials for training with other BRICS partners and will receive their officials in return.

Explaining what SARS will bring to the table, the spokesman said: “SARS distinguishes between technical (negotiating) skills, functional (implementation) skills and social skills (intra-organisational and wider cross-government and international cooperation) and South Africa has much experience in technical skills in the form of negotiating the Tax Information Exchange Agreement (TIEA) as a bridge into Africa.”

“South Africa is particularly interested in the APA regimes of fellow BRICS countries and there is consensus to focus efforts on addressing the practices resulting in the erosion of the tax base,” the spokesman added.

Bucking the trend

However, there are – in some aspects – vast differences between the BRICS’ tax systems. Brazil does not adhere to the OECD transfer pricing guidelines and has a stand-out regime when it comes to the rest of the world. Russia is gearing-up to join the OECD in the foreseeable future, though its decision is not at all definite. South Africa is also aligning itself far more closely with the OECD.

Because of this, TP Ostwal of TP Ostwal & Associates in India, who also drafted the India chapter in the UN’s practical manual for transfer pricing in developing countries, said: “I do not know the future of this alliance but I can certainly say India, China and Brazil will come closer in their cooperation.”

He added, however, that alliances like the BRICS are important if developed countries are to get their fair share of taxable profits.

“I don't see any problem in such a move. This is inevitable if developing countries have to fight the developed countries’ forces and as such all these [BRICS] countries are not likely to join the OECD. And, if they do join the OECD they will have to change the rules of the game – those of source-based taxation principles.”

Thought leader

India is emerging as a benchmark for many aspects of the other countries’ tax systems. Not only is it helping South Africa implement its APA regime, it is also a thought leader for China.

“In practice, Chinese tax authorities may have followed the Indian practices in some areas, for example, to increase their expectation on returns of contract R&D services,” said Annie Han , tax manager at Siemens in China.

This commitment to work together could be good news for people living in the BRICS. Improved, more efficient, tax systems will mean more revenue and an improved society but it is important the countries remain attractive investment locations.

“It is good for BRICS countries to find the best ways to deal with the unique issues they face but not addressed by OECD guidelines by sharing experiences. But taxpayers will not want to see that the tax authorities become more aggressive in their tax positions through alliance,” Han added.

India will also hope to gain from the alliance, especially while it is introducing its general anti-avoidance rule (GAAR).

“India is on the brink of adopting or implementing a GAAR, controlled foreign company (CFC) rules, branch profits tax and so on,” said Amit Singhania, of Amarchand & Mangaldas. “This forum provides scope for greater deliberation, consensus building, cooperation and exchange of ideas and experiences between the developing countries on key aspects of international taxation.”

Singhania believes the establishment of a formal, coordinated group for the BRICS to discuss tax policy and administration signals a levelling of the playing field between developed and developing countries.

“Traditionally, developed and developing countries have had different perspectives on issues relating to international tax policy. Most authoritative texts on international taxation have emanated from the developed world. This initiative provides developing nations the opportunity to build consensus for their positions on pertinent issues of international tax policy, such as source-based taxation, transfer pricing and so on,” said Singhania.

Trouble ahead?

However, some advisers have voiced concerns about the BRICS nations pushing ahead with policies independently of the rest of the world.

Guillermo Teijeiro, of Teijeiro & Ballone Abogados, said he fears the BRICS being “too proactive” by themselves.

Elina Castro, tax director at Alstom in Argentina, commented, via LinkedIn, that if the rest of the BRICS follow Brazil’s transfer pricing policy and interpretation of double tax treaties, “we will have a lot of problems trying to harmonise international taxation with their view”.

Teijeiro agreed, adding that Brazilian CFC rules, the retrospective application of tax law in India and the taxability of indirect share transfers in China, could also be added to Castro’s list.

The impact of the initiative, said Singhania, “will largely depend on the seriousness with which it is pursued”.

“It will be interesting to see whether the BRICS countries release a model convention or policy papers for proposing a united front on behalf of the developing world on international tax issues. In any case, the initiative should have a positive bearing on the countries’ concerns relating to effective exchange of information and enforcement of taxation laws,” said Singhania.

Among BRICS countries, some of the highlights of cooperation in both customs and tax include:


Brazil hosted an IBSA risk management seminar in October 2008.

India hosted IBSA seminars on customs valuation as well as transfer pricing in November 2008.


South Africa hosted an IBSA tax evasion and avoidance seminar in August 2011.

South Africa hosted an IBSA meeting of customs technical experts on exchange of information in September 2011.

SARS hosted two five-day training programmes for cadets from the India National Academy of Direct Taxes (NADT) in March and September 2011.


India hosted South Africa for a two-week study visit focussing on transfer pricing in January 2012.

China hosted South Africa for a training seminar on border management and security in November 2012.


SARS and South Africa will host a further NADT training group in 2013 and SARS plans to visit India to benchmark their advanced pricing agreement (APAs) regime.

Return to the BRICS tax cooperation special focus

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