Addressing BEPS in Latin American and Caribbean

CIAT member countries

Annual Meeting of the OECD Advisory Group for Co-operation with Partner Economies – Committee on Fiscal Affairs

Session III – BEPS: Perspectives of Developing Countries and Emerging

Economies

The Hague, The Netherlands, November 4 – 5, 2014

Francisco J. Beiner Director, Institutional Management and Operations

CIAT Executive Secretariat

CIAT Tax Administrations members Some institutional logos of our 38 Member Countries

CIAT Strategic Plan – Mission for 2013 - 2017

Promote international cooperation and the exchange of experiences and information and deliver technical assistance services, studies and training, contributing in this manner to the strengthening of the tax administrations of its member countries. Complete document at: CIAT Strategic Plan 2013 - 2017

DOMESTIC RESOURCE MOBILIZATION It is essential to continue to strengthen tax regimes and fiscal policies in developing countries to provide a sustainable revenue base for inclusive growth and social equity, as well as to enhance the transparency and accountability of public finances. ACTION 1: SUPPORT THE DEVELOPMENT OF MORE EFFECTIVE TAX SYSTEMS We ask the expanded OECD Task Force on Tax and Development, UN, IMF, World Bank and regional organizations such as the Inter - American Center of Tax Administrations and other relevant organizations to: • Identify key capacity constraints faced by developing countries in their tax

systems • improve efficiency and transparency of tax administrations • strengthen tax policies to broaden the tax base and combat tax avoidance

and evasion • promote South-South cooperation to support the capacity of developing

countries in tax policy and administration systems

Aspects that Latin American & Caribbean Tax Administrations are

attending related BEPS

• Exchange of information and mutual administrative assistance between TAs • Effective implementation of exchange of information and international taxation units • Double taxation, international tax evasion and double taxation agreements Which involves working on: • Domestic regulations to prevent international tax evasion • Effective application of anti-abuse clauses to avoid double taxation • Control of transfer pricing • Specific methods for the control of transfer pricing • Advance Pricing Agreement – APA • Bi-lateral Advance Pricing Agreement – BAPA • Multi-lateral Advance Pricing Agreement – MAPA

Declarations and Resolutions

of the CIAT General Assembly Representatives

Since 1996 representatives of the CIAT member countries make resolutions after discussing the different topics of the General Assemblies international meetings. It is important to note that although these statements are reflected in a document called "Resolution", that resolutions are not a rule or a mandatory guideline for the CIAT member countries. In any case, we note with satisfaction effective progress on important issues like cooperation between the countries in terms of technical assistance, signing agreements to avoid double taxation, and exchange of information for tax purposes.

2012 Highlights outcomes of the CIAT 46th General Assembly Resolution on “IMPROVING THE PERFORMANCE OF THE TAX ADMINISTRATION: EVASION

CONTROL AND TAXPAYER ASSISTANCE”

To recommend the Tax Administrations of its member countries to work on improving the taxpayer assistance services and in the design, implementation and/or evaluation of effective control strategies that will lead not only to determine the levels of evasion in relation mainly to the income tax and the VAT, but to fight in a determining and specialized form the activities and individuals that undermine collection of States:

Defining and implementing TICs that improve the internal processes and

facilitate the taxpayer’s compliance Implementing software programs for effective information exchange at national

and international level that will facilitate the effective processing of information as a source of investigation and analysis to the control processes.

Complete document at: CIAT Resolution 2012

2013 Highlights of the CIAT 47th General Assembly Technical Resolution

on exchange of information and international taxation

In relation to previous considerations:

As businesses become ever more global, tax administrations should increasingly seek administrative cooperation and work together with their foreign counterparts in order to more effectively and efficiently manage their tax administrations in particular issues dealing with international taxation.

Governments and tax authorities have developed instruments for protecting their tax bases and rely on effective and stable legal systems that can avoid double taxation and evasion, such as unilateral rules and various bilateral and multilateral instruments, including double taxation treaties and information exchange agreements.

While there is consensus on the application of the “arm’s length principle”, there is still much to be done regarding methods for the application of this principle that may be acceptable to commercial entities and fellow tax administrations. Cooperation between tax administrations is currently mainly regulated by double taxation treaties signed by the countries, and specific international instruments such as Tax Information Exchange Agreements and the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, the latter being modified in 2010 to facilitate the adherence of countries other than Members of the Council of Europe and the OECD. Countries need consider asymmetries between tax systems (worldwide vs. territorial), level of development, trends in development and capital flows when adopting measures to address cross-border trade.

2013 Highlights outcomes of the

CIAT 47th General Assembly Technical Resolution In terms of the recommendations to the member countries: FIRST: Double taxation, international tax evasion and agreements to avoid double taxation. Tax Administrations should consider implementing rules addressing tax implications of cross-border trade Tax Administrations should share their experiences and suggestions with their country tax policy makers in order to improve the effectiveness of rules regarding the tax implications of cross-border trade. When adopting measures it is necessary to be aware of the asymmetries between the countries, especially the systems based on world or territorial income, the level of development of the countries and the trends in business and movements of capital.

2013 Highlights outcomes of the

CIAT 47th General Assembly Technical Resolution

SECOND: Transfer pricing control To adopt the “arm’s length principle” as the core principle of the methodologies for assessing transfer pricing. Continue efforts for developing methodologies and procedures for applying the “arm’s length principle” in managing transfer pricing, with special attention to the asymmetries between the different countries, the availability of information for making analysis and calculations of comparable and the complexity of application of the methodologies. Establish special units for transfer pricing analysis, with specially trained staff and access to adequate information bases for such purpose.

In terms of the recommendations to the member countries:

2013 Highlights outcomes of the CIAT 47th General Assembly Technical Resolution

In terms of the recommendations to the member countries:

THIRD: Information exchange and mutual assistance between the tax administrations To analyze the suitability of signing information exchange agreements, including the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, with the countries representing the most significant interests for the tax administration. Institute the necessary internal rules and capability to enable the successful implementation of tax convention articles, and similar conventions related to information exchange and the collection of taxes entered into with other countries. Actively participate in international forums dealing with information exchange, tax base erosion and evasion. Complete document at: CIAT Resolution 2013

2014 Highlights outcomes of the CIAT 48th General Assembly Resolution on “THE USE OF INFORMATION AND COMMUNICATION TECHNOLOGIES

IN THE TAX ADMINISTRATION” There is the need for tax administrations to continue cooperating, coordinating and

exchanging information to fight against harmful tax planning and not all tax administrations have the same resources to cooperate at the same level.

Encouraging the development of an international standard applicable to electronic

invoicing and other documents that may be exchanged in transactions between taxpayers with tax residence in different CIAT member countries.

Supporting the definition of international standards for the exchange of information

between tax administrations through electronic means, to be used by countries in bilateral or multilateral conventions framework so that they can efficiently implement the exchange of information, including the automatic exchange.

Complete document at: CIAT Resolution 2014

First Regional Consultation for Latin America and the Caribbean on the fight against Tax Base Erosion and Profit Shifting (BEPS)

Date: February 27 and 28, 2014

Venue: Bogotá, Colombia Sponsor: Tax and Customs Directorate of Colombia (DIAN), Organized by: CIAT and OECD The main purpose was to inform developing countries about the general and specific aspects of the BEPS action plan and involve the countries of the region in the respective tasks. Also was presented and discussed the standard on Automatic Exchange of Financial Information. Participants: 15 CIAT member countries of Latin America and the Caribbean; as well as several regional and international organizations including: OECD, OECD Korea Office, the OECD Global Forum on Transparency and Exchange of Tax Information, IMF, CIAT, G20, USAID, ITC , IDB, COSEFIN , GIZ and the Commonwealth of Nations . The meeting was co - chaired by DIAN and CIAT

Panel discussion on collaborative approaches for the implementation of the BEPS Action Plan in CIAT Caribbean member countries

Date: June 11th 2014

Venue: Port Spain, Trinidad and Tobago

A panel on BEPS was held within the framework of the eighth CIAT - GIZ German Cooperation Regional Seminar on “Large Businesses and Transfer Pricing”

Discussions were mainly focused on the experience of the CIAT member countries of the Caribbean and Belize.

Officials from Latin American tax administrations and ministries of finance (Argentina, Mexico, Dominican Republic and Uruguay) and from the International Bureau of Fiscal Documentation (IBFD) actively participated as experts in the topics of transfer pricing, tax treaties and tax information exchange.

WORKSHOP: Benefits and challenges on implementation OECD BEPS Action Plan in LAC Countries

Date: October 10, 2014

Venue: Santiago de Compostela, Spain

The aim of this workshop is to build on the discussions held in Bogotá and Trinidad and Tobago and to focus on subsequent developments in the BEPS initiative.

ATAF and some selected non-LAC countries, including CIAT members that are also members of the OECD, and some Euro-Asian countries were also invited as Speakers and participants in order to obtain perspectives from developing countries of other regions.

OECD BEPS Action Plan Importance of each of these actions as indicated by countries delegations attending CIAT October Workshop From 0 (not important) to 5 (most important)

CIAT Latin American Countries:

Major constraints of implementation of the EoI agreements

Even with the progress made so far with the signing of new agreements by an important number of countries in the region, one must warn on the constraints they face regarding the effective implementation of international standards. Mainly due to: Lack of databases or the collection of information to be exchanged; Lack of reliability or timeliness of the information, in the event that it is produced; Limited operational capacity of the offices involved in this function in the tax

administrations;

Limited operational capability to systematically generate spontaneous information to other countries; and

Asymmetries between domestic and international tax rules.

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