Transfer pricing in the financial services sector: Confronting the new reality
Paul Riley, Samuel Gordon and Ralf Heussner preview ITR’s financial services guide, produced in collaboration with global transfer pricing (TP) experts from Deloitte.
A warm welcome to this Deloitte/ITR special focus guide dedicated to the new reality that is confronting the financial services sector. Our Deloitte senior members from the financial services transfer pricing (FSTP) global network bring you the latest thought leadership on the key challenges affecting the financial services sector in 2020 and beyond.
We interviewed Stewart Brant, the head of the TP unit at the OECD Centre for Tax Policy and Administration, for the latest insights into the OECD's tax agenda. The interview covered the status of the work on the taxation of the digital economy and its relevance to the financial services sector, the OECD/Inclusive Framework on TP guidance related to addressing the impact of COVID-19, the tax dispute prevention/resolution framework, and other key areas.
We were also able to discuss the recent developments regarding Treasury Secretary Steven Mnuchin's letter to the finance ministers of France, Italy, Spain and the UK on June 12, stating that the pillar one discussions had reached an "impasse" and that "the US does not believe 2020 is a suitable time to be conducting such negotiations". The letter initially shook up international tax negotiations and multilateral efforts, which were aimed at reaching a global consensus on how to tax the digitalised economy, and prompted certain countries to renew their commitment to introducing unilateral measures on digital services taxes.
Nonetheless, based on our insight, the OECD still sees that the Inclusive Framework members, including the US, are remaining engaged. Technical discussions on the building blocks for pillar one continue, including for the unique features of the financial services industry, with the hope of reaching a deal that would include an agreement by countries to retreat from unilateral measures, including digital services taxes. Our Deloitte news alert provides further insights on this topic.
As if this was not enough, financial services firms face a range of challenges including disruptive technologies and digitalisation, which the COVID-19 pandemic has accelerated. On top of this, financial institutions must deal with changing regulatory landscapes, the economic impact of the COVID-19 pandemic on their own operations, and also the impact on their customers' operations.
One of our articles is dedicated to COVID-19's impact on the banking, investment management, and insurance sectors. It shares insights on how financial services firms are responding to the pandemic. Another article spotlights China and examines how the political and regulatory changes will see the end of minority ownership limits for foreign investors, and assess its influence on existing operating models and TP policies.
In addition, we revisit the implications of the OECD guidance on financial transactions, provide an update on the insurance sector with respect to captives, and examine the status of the global transition from existing interbank rates to the alternative risk-free rates. Recent requests for proposals in the market show that financial firms are now dedicating resources to assess the tax implications of the global interbank offered rate (IBOR) transition and manage the critical transition.
Finally, Deloitte financial services tax professionals have provided an update on the EU's mandatory disclosure rules, DAC 6, and offer practical insights for the financial services sector.
We hope you enjoy reading this special focus guide. As always, the Deloitte FSTP team would be delighted to discuss these topics with you and support you further.
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Paul Riley is the global TP leader and a senior partner in Deloitte Australia's tax and legal practice. He has more than 33 years of experience, including 10 years with the Australian Taxation Office (ATO) and 23 years in public practice. Paul has held many senior positions during his 19-year career at Deloitte, including roles as managing partner of Deloitte Australia Tax & Legal (2012-2015), Victoria Tax & Legal leader (2011), and Deloitte Asia-Pacific TP leader (2009-2012). He was appointed leader of the global TP practice effective January 2017. In his global role, he is responsible for overseeing Deloitte's global TP strategy.
Paul is experienced in all facets of TP, including successfully resolving a number of TP audits and advance pricing agreements (APAs), large-scale global, regional and local documentation studies, and planning for cross-border transactions for many global businesses across in the automotive industry.
Paul has been listed in Euromoney's Expert Guides for his TP work since 2008. He is a leader in shaping the thinking in the changing Australian tax landscape by regularly submitting Deloitte's views on policy matters to government.
T: +81 80 3432 9319
Samuel Gordon is a TP/financial services tax partner with Deloitte Tohmatsu Tax Co in Tokyo, Japan. He is the global TP leader for the financial service industry, and serves as regional or global lead TP advisor for clients across three major financial services hubs – Tokyo, Hong Kong SAR, and Singapore. He is a bilingual (English-Japanese) TP professional with more than 20 years of advisory and in-house experience.
Samuel focuses on TP for financial services industry clients and inter-company treasury issues of all types of clients. He brings to bear his prior in-house experience to help clients enhance their TP and overall tax management.
Samuel speaks regularly at TP and tax conferences in Tokyo, Hong Kong SAR, Singapore, New York, and London. He is active with several financial services industry associations and has contributed articles to publications. He is listed in Euromoney's Expert Guides for his TP work.
T: +352 45145 3313
Ralf Heussner is a partner with Deloitte based in Luxembourg. He specialises in the financial services sector and is part of Deloitte's global financial services leadership team. He has worked for many of the key players in the asset management industry (ranging from the traditional sector to private equity, real estate, and hedge funds), banking, and insurance during his prior tenure in Tokyo, Hong Kong SAR and Frankfurt.
Over the past 18 years, Ralf gained extensive experience advising clients on a range of tax, TP, valuations, and controversy-related engagements. His experience covers TP planning and policy setting, risk reviews, operationalisation, documentation, restructurings, and dispute resolution engagements. He has worked on more than 35 APAs and numerous high-profile controversies on both the local and competent authority levels with authorities in China, the EU, Japan, the US, and other key jurisdictions.
Ralf is a frequent speaker at tax seminars, has participated in consultation projects with various governments about tax reform, and has contributed to thought leadership on TP issues in various publications.