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IFA 2022: Tax compliance is “responsible business conduct”

Close-up of handshake of businesswoman and businessman

Tax leaders at the IFA Congress stressed corporations’ responsibility to comply with the law when carrying out tax planning.

Yesterday, panellists at the IFA Congress in Berlin, including OECD deputy director Grace Perez-Navarro, said that multinationals should consider tax morality and compliance as responsible business conduct.

“When we think about the willingness of paying tax, it’s not a question as to whether they will pay tax. The question is how they will comply with the law. This is a question of responsible business conduct,” said the soon-to-be OECD director.

The OECD’s due diligence guidance for multinational enterprises (MNEs) established a code of conduct for businesses, and aims to promote tax compliance in line with the spirit of the law in the countries they operate.

On September 5, the OECD also published a report on tax morality that focused on building trust between tax administrations and businesses – one of the big issues that can jeopardise the process, according to Perez-Navarro.

“Tax authorities don’t trust the information given to them and MNEs don’t trust administrations to use the information in an appropriate way to comply with the law,” she said.

“Business behaviour is seen more positively in OECD countries and areas of routine compliance [than in areas where] there is more subjectivity. This [requires] increasing transparency and information” added Perez-Navarro.

Increasing collaborative programmes between taxpayers and authorities could strengthen communication between both, as well as raise capacity for tax auditors.

“We also need to help multinationals for tax administrations to better understand businesses’ structure and value chain,” explained Perez-Navarro.

This could be key to increasing trust and compliance.

But Gustavo Scravaglieri, partner at big four firm EY in Argentina, says that though tax morality is an “ingredient” of tax planning, it is not the whole recipe.

Tax planning is a business responsibility, according to Scravaglieri, in which multiple stakeholders have different understandings of morality.

“It is good to gain certainty when we say morality. Tax law spirit and interpretation are dynamic,” he said at the panel.

“There morality is something that comes afterwards. It is not morality and then tax. Otherwise, we wouldn’t need a law to pay for something. We need to start thinking about whether it is fair or not. We need to follow the law and spirit. It is not a voluntary payment,” added Scravaglieri.

Boundaries are essential for tax morality. Understanding limits means corporations will not be able to break trust with tax authorities.

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