The star-studded FEE Tax Day

On 29 April, FEE* held its 4^th Tax Day in Brussels. As well as a healthy debate on the state of tax policy, the event also doubled as the launch of FEEs innovative report entitled “The Future of Tax Policy: A Matter for Society as a Whole”. This brings together a range of 22 opinions from across the spectrum into a single publication.

200 policy makers, business leaders and tax experts from 26 European countries attended the event, including some “stars” of the world of tax:

• Pascal Saint-Amans of the OECD;
• Commissioner Moscovici;
• Pierre Gremegna the Luxembourg Minister of Finance;
• Martin Kreienbaum DG International Tax at the German Finance Ministry; and
• Michael Izza CEO of ICAEW.

In summary, the key themes of the day were:

• BEPS has had successes so far. However it faces challenges caused by countries taking unilateral actions rather than waiting for coordinated multilateral reforms at the end of the process;
• Tax transparency is here to stay, and is only going to get greater;
• Businesses need to get better at talking about what they do and their approach to tax;
• Professional advisers have a part to play, and ethical standards and codes of conduct are part of tackling mistrust;
• And last but not least, our old friend CCCTB is back on the table. More of this in a separate blog….

What this tells us is that we are in for a very interesting couple of years in the world of tax. How BEPS, DPT, State Aid and CCCTB all fit into one multilateral solution (and that means global, not just European) is anyone’s guess.

Here is a quick trot though some of the highlights, with apologies to those who don’t get a mention.

The event was opened by FEE President Petr Kriz, who set the scene and made a compelling case for the role of European accountants in the tax debate.

Pascal Saint-Amans resisted the temptation to run through the history of BEPS, but posed a question as to what the tax world might look like in 2 to 3 years time.

His comments were very pointedly aimed at those he sees as jumping the gun on tax reform. His message ranged from the subtler plea for people to hold on and wait for BEPS to be completed, to a description of a nightmare scenario with impatient governments taking populist measures, and DPTs everywhere. He expressed concern that unilateral, uncoordinated actions can lead to double taxation and double non-taxation. This is exactly the opposite of the objective.

Most of us are surprised by the progress of the BEPS project in the last 18 months. However, I think Pascal’s claims that “Hybrids are dead”, “The era of treaty shopping is over” and “CBCR becomes real in 2017-18. It is a game changer” may still be a little aspirational.

He finished with one final dig at the UK…

“Almost all countries are waiting for the outcomes, for coordinated, not unilateral measures.”

Martin Kreienbaum, expressed strong support for BEPS, without losing sight of the need for competitiveness and support for businesses. “Tax competition is good but cannot be unlimited”.

Reiterating Pascal’s position, Martin said that all want to see coordinated action by OECD members, and want to avoid unilateral action. He acknowledged that countries are free to act unilaterally, but should not undermine coordinated action.

Industry perspective came from Charlotte Redcliffe, Head of Tax at Centrica plc and Dag Wyntin, Group Tax Manager at KBC Group. This consisted of three key points:

• Businesses bear a lot of commercial risk and significant external factors such as commodity prices. Tax should not be one of these. Businesses need certainty and stability in the tax regime. Tax reform should not make an existing capital project uneconomic going forward;
• Transparency and reporting is not the solution to everything. As Charlotte put it “The risk is that the compliant will become even more compliant, whereas those who are not compliant will continue on their way.”
• Businesses need to try harder to communicate with stakeholders on tax, combat the climate of mistrust and headline grabbing over simplification. As Dag put it, “Tax reputation is no longer being talked about in tax departments. It is now discussed at Board level”.

Actually, I think tax has moved further than that, is no longer confined to the Boardroom and is firmly on the external facing agenda of many multinationals.

Pierre Gramegna, set out all the progressive steps Luxembourg has taken recently to address some of those issues which “seemed acceptable before the economic crisis, [but] do not now”, including abolishing bank secrecy and agreeing to a number of EU Directives around taxation.

His key message was balance. Avoiding a race to the bottom or a race to the top. And a warning that the absence of balanced public finances may see tax rates racing to the sky.

Joseph Stead of Christian Aid provided the civil society perspective. He brought the debate out of an introspective look at EU tax regimes and into the harsh reality of the developing world. To put the need for capacity building into context, he said that sub-Saharan African would need 650,000 more tax officials to have the same average number per capita as the rest of the world.

He also opened a much more philosophical angle around the purposes of taxes, and whether you can solve all the problems associated with international taxation with laws alone.

Michael Izza clearly set out the role of the accountancy profession as part of the solution, under three headings:

• Ethics: Accountancy based organizations set an ethical standard for their members. Unfortunately not all advice is provided by those covered by such ethical standards. Even the Code of Conduct, which covers a wider group of tax advisers, is not perfect. The challenge remains as to whether it has teeth, and who polices it;
• Reform: The G20 must support the OECD to make the necessary changes to tax regimes. But also, the accountancy profession must commit to make reforms. In the UK, the accountancy profession is working on better ways to identify those giving unethical advice;
• Capacity: Every country needs a strong professional body and a strong tax administration. ICAEW is working on over 20 projects around building capacity in developing countries, “…but if many others joined, we could make a real difference.”

In practical terms, he said that:

• Tax authorities are getting increasing better at tracking down evaders through technology and the use of data analytics;
• Businesses and the profession need to get better at talking about what they do.

It was then the turn of Commissioner Pierre Moscovici.

I am not going to attempt to summarize his entire speech. A full transcript can be found here.

But the main themes were:

• “…advancing an agenda focused on fairness, transparency and a truly single market from a taxation point of view.”
• “…today's fiscal rules fragment the internal market along national lines, increase the administrative burden of doing business in several European countries and reduce legal certainty.”
• “…aggressive tax planning and the overall lack of transparency across Europe have a corrosive effect on the principle of "no taxation without consent".”
• “Much more progress must be made on transparency in corporate taxation if we are to tackle corporate tax avoidance. Personally, I am in favour of full tax transparency - for governments and for businesses - but this is not a decision to be taken lightly.”
• “…the relaunch of the Common Consolidated Corporate Tax base (or CCCTB), which would harmonise the tax base for many companies operating across borders in the EU and allow businesses to consolidate their taxable profits across Member States. The CCCTB is a key building block in the agenda for fairness, transparency and a truly single fiscal market.”

The event closed with FEE CEO, Olivier Boutellis-Taft, stressing that taxpayers, tax advisors, policy makers and civil society must cooperate to move towa rd responsible taxation and legislation.

Although Pascal Saint-Amans did paint one scenario where economic recovery meant that the whole debate about tax evasion and avoidance lost momentum, I don’t think he, or anyone else in the room really believed that to be the likely way forward. Politicians have invested too much, and civil society has too much at stake to let this story go cold. Tax policy is on the agenda, and is staying there.

* FEE (Federation of European Accountants) is an international organisation based in Brussels that represents institutes of professional accountants and auditors from 36 European countries with a combined membership of more than 800,000 professional accountants.