Is it Possible for Countries to Increase Tax Compliance by Developing an Administrative Program that Encourages Cooperation between Them?

 

 

On January 18^th to 19^th, 2012, over forty countries came together at the Forum on Tax Administration (FTA) in Buenos Aires.  Their purpose was to address the question of whether increased co-operation with other member countries of the group would improve their own country’s tax administration efforts. 

 

The most heated topic of conversation was about the ongoing fight against offshore tax abuses.  According to the OECD final report, the forum concluded with “a unified and strengthened commitment to combat offshore tax abuse.”  The report states:

 

Our strategy includes unprecedented sharing and exchange of information and coordinated action to better identify and tirelessly pursue the promoters and users of abusive offshore schemes. Those who once felt safe concealing their money and assets overseas are now in an increasingly risky position.

 

Other topics discussed included the need to work smarter in times of shrinking budgets, and the necessity for each country to strengthen their relationship with large multi-national business through what the group described as “efficient and effective strategies that benefit both the taxpayer and taxing authority.”  Below is a summary of the main points from the discussion provided by the OECD:

 

Offshore Compliance
Although there have been some high-profile successes in the fight against offshore tax abuse, resulting in significant additional tax revenues and real improvements in transparency and exchange of information, it is far too soon to declare victory. When promoters and facilitators feel that we are tightening the net, they may simply move to a new location. We will be relentless in our pursuit of them – no matter where they may be. Our Offshore Compliance Network is building on the achievements of individual countries to improve our collective ability to deter, detect, and deal with offshore tax evasion. An early priority is to better understand the structures used to hide offshore wealth. We further agreed that collaboration must now include coordinated actions by countries to finally put an end to offshore non-compliance.

Taking the Relationship between Tax Administrations and Large Business Taxpayers Further
The FTA has worked hard in recent years to foster a more constructive relationship between large businesses and tax administrations. An adversarial relationship between tax administrations and multinational corporate taxpayers serves neither of our purposes well and is contrary to our common goals, which are earlier and greater certainty, consistency, and efficiency. To this end, we agreed that we need to create innovative strategies for issue resolution that are less time and resource intensive for both, while still promoting a climate that encourages compliance with tax laws. We will pay particular attention to the process of conducting and resolving transfer pricing cases. Overall, we intend to move away from a hide and seek approach to one based on greater transparency on the part of both taxpayers and tax administrations. As more companies put good tax compliance at the heart of their corporate governance, this will be easier to achieve.

 

Tax Administration in the Current Climate
The continued fragility that permeates the global economy demands that we work smarter.  In this context, it is important for tax administrations to be efficient and effective in carrying out the roles entrusted to them. We are committed to sharing best practices among ourselves and with developing countries to continually improve the quality of tax administration across the world. We also recognize that high quality customer service is essential to nurture high levels of voluntary compliance.

 

For more information about the topics discussed at the meeting and to view the FTA’s latest reports please visit www.oecd.org/tax/fta.