At least 24 countries have now implemented, or are moving to, a model of cooperative compliance, which is a collaborative way of working between large taxpayers and revenue authorities.
Collaborative working can save revenue authorities time, resources and money, while incentivising multinationals to be more transparent about their tax affairs and providing a more certain tax environment for companies.
The Netherlands is a world leader in the area of cooperative compliance, having introduced its formal cooperative compliance model, horizontal monitoring, in 2005.
Theo Poolen has been at the heart of the Dutch revenue authority’s implementation of cooperative compliance and is taking a lead role in helping the OECD promote the practice to its member countries.
Poolen became deputy director general of the Netherlands Tax and Customs Administration in 2004 and since 2005 has headed the development of the horizontal monitoring programme. He led the OECD and Forum on Tax Administration’s (FTA) report Co-operative Compliance: A framework, which he presented at the FTA’s meeting in Moscow in May.
As the number of countries implementing cooperative compliance grows, the next step, advocated by Poolen, is bilateral and multilateral cooperative compliance.
The Netherlands and the UK are piloting a bilateral arrangement with one large multinational that has substantial operations in both countries. It has been reported that the first results of that pilot were positive.
Cross-border arrangements on top of domestic arrangements, involving tax authorities in countries where a multinational has substantial operations, would seem to be ideal from an overall tax risk management perspective for the taxpayer, if they worked as well as local arrangements.
International double taxation would be avoided if there was agreement between the relevant tax authorities and the multinationals on tax risks and allocation of profit issues. From a cost perspective, in an ideal world, the taxpayer's compliance costs should be drastically reduced as information would have to be made available only once, and lengthy and costly procedures to resolve double tax and interpretation disputes would be avoided.
This instrument would also help tax authorities in their efforts in the context of the OECD base erosion and profit shifting (BEPS) project and would clearly fit in well with the public demand for more international cooperation between tax authorities to combat multinationals that are not paying their fair share of local tax.
|The Global Tax 50 2013|
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