Governments must deliver on pledge to work with business to stem unlawful tax avoidance, ICC tells Russian minister
As debate intensifies on the issue of international tax avoidance, ICC has stressed the critical importance of distinguishing between fraudulent practices and the use of justifiable and fully sanctioned methods such as tax planning and tax optimization.
The alert came in a letter from ICC Secretary General Jean-Guy Carrier to Minister of Finance of the Russian Federation Anton Siluanov, ahead of the G20 Summit in St. Petersburg in September and responds to increased public criticism of the tax planning methodologies used by several multinational companies.
On behalf of the world business organization Mr Carrier said that while ICC strongly opposes tax fraud and tax evasion, companies are increasingly struggling to allocate profits to countries where they do business as a result of globalization. Such profit allocations are being increasingly challenged by governments, at the expense of business.
“Recent concerns expressed by several countries on the importance of ‘securing their revenue bases’ … are understandable. However, as tax planning is legal, this responsibility falls on national governments who, working collectively, should agree on where and how profits are to be taxed and amend their rules accordingly,” Mr Carrier said. “Governments need to clarify, in plain language, both the letter and intention of the law for business to be able to fully comply.”
The letter calls for greater cooperation between governments and the global business community to achieve a balanced and effective tax system cooperative compliance and recommends that governments embrace the concept of cooperative compliance, with joint audits by two or more countries, as an approach to eliminating undesired types of tax planning.
“This will stop double taxation of business and will address all profits. While the methodology for joint audits is still in its infancy, corporate cooperative compliance has been endorsed by many countries since 2008 and should be fully embraced by governments around the world,” said Mr Carrier.
Since the 1920s, almost from the introduction of corporate income tax, ICC has led the global tax debate on behalf of the world business community and has suggested a balanced allocation between source and residence countries. Today, with a global network reaching 6.5 million companies, chambers of commerce and business associations in more than 130 countries, ICC will undertake a project to work with business experts and other interested parties on the development of a global tax regime suitable for the public and private sectors that would contribute to economic growth and job creation.
Download the ICC Secretary General’s letter to the Minister of Finance of the Russian Federation
For more information on the subject visit the ICC Taxation Commission