China. The location of cheaper production and more than 1 billion consumers. The international corporations that have not set up operations there yet are desperate to do so. The multinationals already in the country are eager for advice to protect their interests.
The tax system, however, takes some knowing. As Claire Jones discovers for this month's cover story, tax directors need to be aware of history, local traditions and the need to establish relationships with officials, as well as much else, if they are to manage their company's affairs properly. It's not a question of going to the State Administration for Taxation in Beijing for a ruling and being confident that the verdict will apply throughout the land. Regional and local tax bureaux determine whether your transaction goes through or not.
The challenge for taxpayers in China in 2007 will be the preparation for the unification of the domestic and international corporate tax systems. The law is is almost certain to be passed at the National People's Congress session in March. A little doubt remains about it coming into force on January 1 next year, as planned, but taxpayers will still need to be ready to swing into action as soon as the NPC gives its okay.
This month too, Catherine Snowdon quizzes taxpayers and advisers from around the world about their predictions for tax in 2007. Uncertainty is the buzzword. The Democrats have taken over the US Congress but their Senate majority is small and they may not be able to take action on some of their pet topics, such as closing the tax gap and abolishing corporate tax loopholes.
Tax reform is negotiable in Germany too. The government intends to introduce comprehensive changes to the system at the beginning of 2008, but the Grand Coalition will be under pressure to keep everyone happy. And plans to change Japan's tax deferral rules are controversial.
Maybe arbitration is the answer to clear up the uncertainty. The OECD hopes to encourage taxpayers to take up the option to resolve disputes by inserting provisions in the model double tax treaty convention. Mary Bennett, head of the Organisation's tax treaties, transfer pricing and financial transactions unit, tells Sed Crest about the proposals.
Commissioned articles this month include what effects Section 911 changes in the US will have on expatriates and their employers; how the US, Netherlands and OECD approach services regulations; the opportunities for higher interest deductions from the way the UK tax authorities treat intragroup funding; what the changes to the income trust regime in Canada mean for investors, Spain's anti-avoidance drive and the issues raised by the first two years of transfer pricing audits in India.
Please continue to send me (rcunningham@euromoneyplc.com) feedback about the magazine. What do you like about it? What do you not like about it? What should we do more of?
Ralph Cunningham
Managing editor, International Tax Review
