Taxation Commission Chair outlines key to balancing international tax regulation
In an article published in the latest edition of "World Commerce Review", Christian Kaeser, Chair of the ICC Commission on Taxation and Global Head of Tax at Siemens AG describes the criticism on multinational enterprises (MNEs) engaging in aggressive tax planning schemes as “lopsided” given that they do so legally and are simply embracing tax benefits that are willingly and openly granted by governments.
“Enterprises … will consider the tax environment in their investment decisions and try to lower the tax expense by setting up their business structures in a tax-efficient way using the various tax benefits that are offered to them by many countries.” Mr Kaeser states that MNEs should not be targeted as scapegoats for public failure to design an effective tax system.
The key to balancing local tax legislations while avoiding double-taxation of businesses operating internationally, Mr Kaeser said, is a dispute resolution mechanism that ensures that it is neither the taxpayer who defines the “fair share” of tax nor two or more countries, which leads to deviating results.
“If both sides would enforce their ideas of “fairness”, the taxpayer would end up paying his taxes twice,” Mr Kaeser wrote. “Such a result would contradict many decades of concerted efforts to overcome double taxation fostering global growth and international trade and business – which so far has been the mandate of the OECD. Unfortunately, this is a likely outcome of the current discussions around BEPS. It is this negative potential which should worry everybody, especially given the fragile state of the world economy after the financial and economic crises of the past years.”
Mr Kaeser concludes his article by highlighting that close to a hundred years ago, the International Chamber of Commerce proposed that if no other settlement could be achieved the taxable income should simply be split leaving both disputing countries with half of it to tax.
The ICC Commission on Taxation today brings together 130 taxation specialists from some of the world's leading companies and tax consultancy firms to examine major policy issues of interest to world business and voice business views on government and intergovernmental projects affecting taxation. Mr Kaeser was appointed Chair of the Commission in March 2014.
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