Speaking to taxpayers in Latin America, it is clear that discontent is one emotion that dominates their feeling towards a region that is not afraid to diverge from standard practices, and where distrust between taxpayers and tax authorities often abounds.
Brazil has long been an example of a country where international taxation norms do not apply. This continues to be the case, with transfer pricing rules and R&D provisions, among others, governed by unique sets of principles not seen elsewhere.
This, of course, means that innovative solutions are required to successfully navigate the tax landscape. And Brazil is by no means alone in this regard.
Brazil is also not alone in seeing rising rates of investment. According to UN statistics, foreign direct investment to South America increased by 12% in the past year.
But while this clearly shows that many countries in the region have successfully attracted increased levels of investment and trade, which has in turn positively impacted economic growth, this is often achieved in spite of the tax system rather than because of it.
Jeffrey Owens, former OECD tax chief, acknowledged this recently when he said that while tax is never the main driver of an investment decision, it can sometimes be a barrier. He referenced Brazil (along with India) as an example of where this can be seen.
However, with Brazil set to host the two biggest global events on the sporting calendar – the FIFA World Cup in 2014 and the Summer Olympics in 2016 – it would not be surprising if tax policy is used to attract the necessary levels of investment to ensure the success of these showpiece events. The Minister of Finance has already said increasing investment rates, particularly in infrastructure, is a government priority. We know the Brazilian authorities are not shy when it comes to changing tax laws and provisions (in the past 24 years there have been around 4 million new tax rules), but perhaps they would be better served in focusing on consistent policies and providing certainty for taxpayers.
It is against this backdrop that International Tax Review publishes the 10th edition of its Latin America Guide in association with leading tax advisers: Deloitte, EY and Munoz, Manzo y Ocampo.
The supplement also contains exclusive interviews with a number of taxpayers, in which they outline the tax challenges faced by companies operating in Brazil, including insights regarding what the biggest taxpayer concerns are at present, what their relationships with the tax authorities are like, and why they want a greater focus on simplicity and certainty.
Corporate Tax editor
International Tax Review