KempHoogstad at the IFA congress
The major topic of the congress was an effort by the traditional developed European economies to effectively collect taxes from entities operating businesses in their countries. The main intentions are and will be:
(i) Increasing the exchange of information between tax authorities. The aim is to eliminate the advantages of tax havens with very low or zero taxation;
(ii) Broader and more active cross-border cooperation during inspections. Tax audits of companies could be carried out and coordinated in more countries simultaneously, and they could be focused on typical cross-border aspects: transfer prices, transferring profit to a more favourable jurisdiction and other potential structures created artificially for the sake of decreasing the amount of due tax;
(iii) Long-term struggle against BEPS (base erosion and profit shifting). Efforts are being made to tax the activities of international organisations in the country where the profit is made according to real activity and not the formal structure of the company; and
(iv) Eliminating the concealment of untaxed capital abroad. Bank privacy will be upheld, but it should not be an obstacle to collecting taxes. Developed countries have started implementing systems that force tax payers who transfer capital abroad to either prove the origin and the real owner of the capital to the financial authority or to tax it. For example, the United States uses the FATCA system to gather information about recipients of money sent from the USA abroad. The European Union plans to establish a similar system.
The Czech Republic is involved in this effort on both sides of the battle field. It has a relatively developed economy, and as a member of the OECD, fights against the artificial transfer of taxation to tax havens (e.g. by conducting treaties on the exchange of tax information, which we informed you about in our newsletters). On the contrary, as a country dependant on investments from other countries of the European Union, it will confront the efforts of more developed countries to concentrate the taxation of corporations at the location of their actual management. Moreover, the Czech Republic tries hard to improve its tax system by means already common in the well-established systems of western Europe.
More information about the current and future development in international taxation that was discussed at the IFA Congress will be presented in our next newsletter.
