Transcript Title (Arial bold 30 point) second line title

Global trends in taxation
Chris Sanger
Global Director of Tax Policy
Welcome
Chris Sanger, Ernst & Young LLP (UK)
Global Director of Tax Policy
Agenda
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Global trends
Tax approaches
Corporate taxes
Other taxes
Tax administration challenges and approaches
The future “modern” regime
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24 March
Page
Budget
2011
Global trends in taxation
Trends in tax policy: global developments
1
2
Accelerating pace
of globalization
Shifting economy
Rapid succession
of legislative and
regulatory changes
Changing model
for tax administration
3
4
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Global trends in taxation
Trends in tax policy: range of taxes
Tax structures in the OECD area**
120
100
2
2
2
3
3
3
18
16
13
12
10
19
19
20
6
1
6
1
5
1
24
Other taxes *
80
13
16
6
1
5
1
General consumption taxes
12
60
8
1
Specific consumption taxes
Property taxes
Payroll taxes
22
22
25
18
24
25
Social security contributions
Personal income tax
40
Corporate income tax
20
26
30
30
27
25
25
9
8
8
8
10
10
1965
1975
1985
1995
2000
2008
0
** Percentage share of major tax categories in total tax revenue
* Including certain taxes on goods and services and stamp taxes
Source: OECD
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24 March
Page
Budget
2011
Global trends in taxation
Corporate taxes: global trends
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Most industrialized countries have reduced
corporate tax rates in order to be more
competitive
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More than 90% of OECD countries have
reduced their top corporate tax rate since
2000; with Japan recently reducing rate to
35.7%, only the US and Brazil remain
exceptions
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Two-thirds of the top 50 countries have
reduced their corporate tax rate in the last
eight years
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Average corporate income tax rate for the
top 50 countries has fallen from 37.5% in
2000 to 31.9% in 2010, ( drop of 5.6%)
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Most major countries are moving toward a
territorial approach to taxation
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2009: UK and Japan replaced worldwide
tax systems with territorial tax systems.
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Recent US international tax proposals go
against this trend.
Research incentives to the fore: reform,
improvement and introduction for the first time
“Canada will have the lowest overall tax rate on new business investments in the
G7 by 2010. And by 2012, it will offer the G7’s lowest statutory tax rate.”
“Invest in Canada” - Canadian Government
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Global trends in taxation
Corporate taxes: rate reductions
Country
2000 statutory
corporate tax rate
2011 statutory
corporate tax rate
Percent change
G-7
Canada
43.6
28.5
(34.6)
France
37.8
34.4
(9.0)
Germany
52.0
33.0
(36.5)
Italy
39.5
31.4
(20.5)
Japan
43.3
35.7
(17.6)
United Kingdom
30.0
26.0
(13.3)
United States
39.2
39.1
(0.3)
Brazil
34.0
34.0
–
Russia
35.0
20.0
(42.9)
India
42.0
China
33.0
25.0
(24.2)
30
23*
(23.3)
BRIC
UKRAINE
34.0
Foreign cos. 42.2
(19.0)
Note : Includes both national and sub-national revenues. The 26% statutory corporate tax rate in the United Kingdom is effective April 1, 2011 and will drop to 23% in 2015. Japan’s
tax rate change from 40.7% to 35.7%, which is proposed, but not yet enacted, would become effective July 2011. France and Italy have discussed lowering their rates.
*Drop in CPT rate will gradually increase in Ukraine. Starting 1 January 2014, the CPT rate will become16%.
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Global trends in taxation
Other taxes: shifting away from corporate
tax
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Increase in the rate of Minimum Alternate Tax
from 10% in 2008 to 15% in 2009 to 18% in 2010
Indirect tax reform
Focus on anti-abuse, indirect capital gains
New direct tax code expected to be implemented
by April 2012
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Circular (2010) 35: imposition of 3% City
Construction Tax and Education Surcharge on all
foreign enterprises
Circular 98 introduces Local Education
Surcharge of 2% of total turnover taxes on all
foreign enterprises
Looking to reform GST
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Super-profits tax on mining industry
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2% VAT increase introduce from July 2010 as
part of its “austerity budget”
Announced that the tax burden would have to
rise by as much as 1.5% of GDP
Announced increased capital gains tax
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Obama Administration proposes $338 billion in
corporate tax increases.
Second VAT increase in 6 months, from 21%
to 23%
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India
China
Australia
Spain
United States
Portugal
Some moves to reduce budget deficits
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Hungary
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After a raft of early 2010 changes, a four year
austerity plan was unveiled which included an
increase in VAT from 21 to 23% by 2014, as well
as a number of additional measures which
increase the tax burden on individuals .
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50% top rate of tax on highest earners
(>£150,000)
Phase out of the tax-free allowance for higher
earners (>£100,000)
VAT increased to 20% on 4 January 2011
Bank levy and oil tax increase
Ireland
United Kingdom
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Mexico
Increased VAT from 20% to 25%
Reducing some personal income tax rates
Increase in corporate tax rate from 16% to 19%
but abolished 4% solidarity surtax
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New general consumption tax at 2%, on top of
the 15% VAT
Temporary increase for 2010 in corporate income
tax rate to 30% (from 28%) through 2012; reduce
to 29% in 2013 and back to 28% in 2014
Greece
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Increased VAT rate to 23%, follows the 2%
increase in March 2010,
France
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2011 Finance Act includes a 0.25% systemic
risk bank tax
Global trends in taxation
Trends in tax policy: competitiveness of a
tax system
What makes a tax system competitive:
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Employment
costs
Territoriality
The tax rate
Red tape
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The definition of the tax base
Innovation
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Competitiveness
The quality of tax policy making
The way in which tax is
administered and collected
Tax base
Tax rate
Foreign
direct
investment
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DPD5389
Tax administration challenges – international
flows
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Tax administrators are being asked to police the current tax base more forcefully
► Playing catch-up in a rapidly globalizing world
► Under pressure to get “fair share” of global tax pie
► Sharpening focus on closing the “tax gap”
► Having to work smarter, more collaboratively and more efficiently
“This is also an excellent opportunity to look forward to what I see as the
next rung in the evolutionary ladder of international tax administration: the
progression from cooperation to coordinated action on global tax issues.
As you can see, we’re moving from just cooperation and sharing of
information to the very early stages of planning actual coordinated efforts
among countries.”
IRS Commissioner and OECD FTA Chairman Douglas Shulman,
speaking before the OECD and BIAC, 8 June 2010
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Global trends in taxation
Tax co-operation: the aims of other tax
administrations
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JITSIC (Joint International TAX Shelter
Information Center) founded in 2004 with
Australia, United States, Canada and the
United Kingdom as its members
China, France, Germany and Korea now
joining
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EY Global Transfer Pricing Reference Guide for
2011 lists 61 countries with Transfer Pricing
Regulations
The same EY TP Reference Guide listed 41
countries in 2008
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Latvia , Lithuania and Estonia agree on
Joint Audits in 1999
In 2006 the OECD issued “module 5 on
conducting simultaneous tax examinations”
September 2010, joint audit protocols
appeared in an OECD report and practical
guide issued at the end of the Istanbul FTA
meeting. The OECD report identified the
need for joint audits and for tax
administrators to cooperate and collaborate
more closely
Meanwhile EY has assisted several of its
clients with simultaneous audits in some
cases involving 7 or more countries
“I think the big thing about JITSIC in particular is that we are today sharing information within
bilateral treaties days, no more than weeks, after an event, rather than years as it used to be..”
– Dave Hartnett, Permanent Secretary for Tax, HM Revenue & Customs
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Global trends in taxation
Tax co-operation: tax payers and tax
authorities
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Shared objectives?
► Certainty, sooner.
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Client approach/same time
dispute resolution
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Netherlands: Horizontal
Monitoring
United States: CAP Program
UK
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Risk banding
Introduction of CRMs
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Alternative Dispute
Resolution (ADR)
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Pre-filing (Advance Ruling
Practices)
Post Filing
(mediation/arbitration)
APA’s
Mutual Agreement
Procedures
Global trends in taxation
International norms: increasing role of
international organisations
International Monetary Fund
World Trade Organization
OECD
Fiscal strategy
The World Bank
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G - 20
European Commission
Global trends in taxation
Inbound tax forum
Looking to the future: a modern regime
Global trends
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Taxation choices increasingly governed by competitive environment.
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Greater alignment of interests between different governments
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.. but still areas for tax competition: tax rates or tax base
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International pressure has proved to be successful in aligning tax
systems …
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… but not in all areas (environmental, bank levies)
Reform considerations
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Simple:
Clear and readily applicable law
Fair: Burden according to one’s means
Predictable:
No surprises
Manageable:
Appropriate tax administration: large
business office
Sustainable:
Consistent and apparent direct of tax
policy
Diverse:
Range of taxes, no over reliance on one
source
Trends in International Taxation
Thank you!
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