17 May 2012 Roundtable, 2012-0444141C6 - International Initiatives - ILBD

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Discussion of CRA's involvement in JITSC, the OECD, the Global Forum on Transparency and Exchange of Information and the Forum on Tax Administration.

Position: Comments provided.

Reasons: Refer to document.

International Fiscal Association (IFA) Conference
Canada Revenue Agency Roundtable
May 17, 2012

International Initiatives

Question

Can you give us an update on other international initiatives and co-operation such as JITSIC, OECD, Global Forum on Exchange of Information?

Response

Joint International Tax Shelter Information Center (JITSIC)

JITSIC continues to provide the International and Large Business Directorate (ILBD) opportunities to collaborate with international partners in addressing Aggressive Tax Planning. France and Germany are now both full members of JITSIC bringing the total membership to 9 countries – Canada, Australia, the U.S., the U.K., Japan, Korea, China, France and Germany. There are no plans to increase the membership at this time.

Our core work remains exchanging information on abusive tax schemes and those who promote them. Taxpayer specific exchanges are our priority and are conducted within bilateral treaties.

We have exchanged critical information on a significant number of cases. Noteworthy examples include offshore credit cards, tax shelters, foreign tax credit generators, structured financing, hybrid instruments and other financial products.

We anticipate reaching our 1000th exchange in the first quarter of this fiscal period.

JITSIC has also played a role in addressing offshore and tax haven non-compliant activities.

JITSIC will continue to play an important role in tackling cross-border abusive tax transactions. The work of JITSIC fits naturally within the current international agenda of increased use of information exchange, sharing of intelligence between tax authorities and the focus on cross-border tax avoidance.

OECD

The Canada Revenue Agency (CRA) continues to be an active participant in all areas of the OECD's work on tax, which is carried out by the Committee on Fiscal Affairs (CFA) and the Forum on Tax Administration (FTA).

At the CFA, Canada is jointly represented on many sub-bodies by both CRA and Finance Canada; the CRA participates in Working Parties 1 (Tax Treaties), 6 (Taxation of Multinationals), 9 (Consumption Taxes), and 10 (Exchange of Information and Tax Compliance).

Canada is currently the Chair of Working Party 6, which is responsible for maintaining and updating the OECD Model Tax Convention (MTC), so we will focus our update on that CFA sub-body.

• WP6 is currently working on two major projects; one involves the Transfer Pricing Aspect of Intangibles and the other focuses on transfer pricing simplification.
• The intangible project, since its commencement in July 2010, is progressing rapidly.

• Three business consultations were held and at its March 2012 meeting, WP6 discussed the first proposed revised draft of Chapter VI, as a single document.

• In addition to the revised draft of Chapter VI, the document includes a proposed revision of the Annex to Chapter VI.

• The Annex contains examples to illustrate the application of the provisions of the specific parts of the Chapter.

• WP6 approved, at its May 2012 meeting, the release of an interim version of the revised Chapter VI, as a Discussion Draft for public comments, to be provided by September 14, 2012.

• It is anticipated that a public consultation on the Discussion Draft will be held in November 2012.

• To address concerns from Non-OECD Economies regarding the complexity of OECD transfer pricing guidelines, the project on the Administrative Aspects of Transfer Pricing started with a survey of the transfer pricing simplification measures adopted in several participating countries.

• Released in June 2011, the Multi-Country Analysis of Existing Transfer Pricing Simplification Measures, analyzed five categories of simplification measures.

• These measures, combined with the public comments received on the administrative aspects of transfer pricing, helped identify the following work streams:

• Revision of the language of Chapter IV with respect to safe harbour.
• Creation of model memoranda of understanding (MOUs) for use by country competent authorities in adopting bilateral safe harbours.
• Work on streamlining transfer pricing documentation.
• Work related to the allocation of low value added services.
• Development of draft MOUs, and potentially other tools, related to the processing of low-due diligence Advanced Pricing Arrangements.
• Currently, WP6 is finalizing the revision of the existing guidance on safe harbours, in Chapter IV, to reflect the experience acquired by countries since 1995.

• WP6 has approved the release of a Discussion Draft on the revision of the revised Transfer Pricing Guidelines language on safe harbours and related draft MOUs, for public comments, to be provided by September 14, 2012.

• A preliminary draft on the work streams related to transfer pricing documentation and the allocation of low value added services will be prepared during the summer of 2012 for initial discussion at the November 2012 WP6 meeting.

• Revisions will be expected following the November meeting, with additional discussions in March 2013 and the publication of a Discussion Draft for public comment thereafter. More details on these work streamlines will be released in the future.

• The OECD's first Global Forum on Transfer Pricing, which took place on March 26 and 27, 2012, was attended by about 300 tax officials from 90 countries, economies and international organizations.

• The need to simplify transfer pricing rules, to strengthen the guidelines on intangibles and to improve the efficiency of dispute resolution was discussed.

• The Global Forum panels were a great opportunity to hold thorough discussions with a large number of country representatives on important transfer pricing matters.

• Delegates appreciated the discussions to improve the administration of transfer pricing and to provide support for the efficient implementation and development of transfer pricing regimes in non-OECD economies.

Global Forum on Transparency and Exchange of Information

• The Global Forum on Transparency and Exchange of Information, which now has 108 members, is the multilateral framework which continues to work to improve the international flow of information for tax purposes.
• It conducts peer reviews of its member jurisdictions' ability to co-operate with other tax administrations in accordance with the internationally agreed standard.
• Canada has made significant progress in negotiating Tax Information Exchange Agreements (TIEAs) since signing its first agreement in 2009. Currently there are 14 TIEAs in force, 2 more are signed and another 14 are under negotiation. These are in addition to Canada's 89 comprehensive tax treaties which also include exchange of information.

Forum on Tax Administration

• The FTA is a Commissioner-level body whose membership is comprised of representatives from 43 countries, including all of the G20 and selected non-OECD economies.
• Canada is represented by the Commissioner of the Canada Revenue Agency, and subject matter experts from across the Agency are involved in its work of the FTA, either as delegates to sub-bodies or participants on task groups.
• The work of the FTA is steered by a Bureau, which is a subset of 12 Commissioners, including our own, and all projects are sponsored by a Commissioner.
• Unlike the CFA, which is policy focused, the FTA concerns itself solely with tax administration issues.
• The work of the FTA is carried out in three ways:

1. Networks – recently created bodies that meet virtually to address key and emerging trends in real time

2. Sub-groups – made up of subject matter experts from the compliance and service areas – they meet once a year and carry out work as directed by the FTA Bureau

3. Priority Projects – These projects are typically more horizontal in nature and are carried out by a task team.

• The CRA is actively engaged in all aspects of FTA work and our Commissioner is the sponsor of the Large Business Network.

Jackson MacGillivray
2012-044414
May 17-18, 2012