CURRENT ISSUES 2014-2015


De-enveloping


THE BIG PROBLEM THAT clients face is that they


BEPS


IS BEPS (BASE EROSION AND PROFIT shifting) a threat to our industry? I think


that the biggest threat is that it is a rather political process. Politics and taxes are still something which I do not think match very well, because politicians do not know much about taxation and how taxation should be handled, not to mention transfer pricing, which is certainly not their cup of tea! Here are some quotations from the G20 Meeting in Brisbane: “We are taking actions to ensure the fairness of the international tax system and to secure countries’ revenue bases.” “Profits should be taxed where economic


activities deriving the profits are performed and where value is created.” “We are committed to finalising this work in 2015, including transparency of taxpayer- specific rulings found to constitute harmful tax practices.” “To prevent cross-border tax evasion, we endorse the Global Common Reporting Standard for the automatic exchange of information on a reciprocal basis.” I think these show that the politicians want


The evidence is that politicians want to – and will – take it further, but in what way it will be taken further is still to be determined.


032


The ITPA Green Book 2016 www.itpa.org


to take this further. They will take it further, but in what way it will be taken further is still to be determined. What I find difficult in the whole process is that everyone says BEPS is necessary because there is a lot of abuse of taxation and double tax treaties, but in fact there are no published facts to prove that tax treaties are being abused, so we do not know how big the abuse is. But on the other hand, we are really changing the whole system, or trying to change it. In Europe it is obvious that the process cannot be stopped, but it is questionable whether we are heading in the right direction.


[ JIMMIE VAN DER ZWAAN, from BASE EROSION AND PROFIT SHIFTING, (BERLIN) ]


are often not able to de-envelope without triggering significant tax charges. One of the express policy objectives of ATED was to encourage ‘de-enveloping’, but the government did not introduce a moratorium or ‘window of opportunity’ that would allow de-enveloping to take place. On the contrary, it also introduced the General Anti-Abuse Rule (GAAR) and, more recently, extended the scope of Disclosure of Tax Avoidance Schemes (DOTAS), so that it covers ATED, and both of these measures impose boundaries on what can and can’t be done in the quest to de-envelope. It is of course right that ‘de-enveloping’ should not be managed in a way that secures an abusive tax advantage (as required by the GAAR) or is part of a tax avoidance scheme (as required by DOTAS). However, the difficulty lies in deciding what falls the right or the wrong side of the line. As HMRC states in the DOTAS guidance, while they want you to de-envelope, they want you to do it “in a manner that is acceptable to HMRC”.


[ JONATHON CONDER, from AN UPDATE ON UK RESIDENTIAL


PROPERTY, (JERSEY) ]


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