Setting the scene - what’s on the menu for tonight’s virtual dinner party? [1m28]
Lucy’s virtual dinner party guests are:
- Claire Cowen, International Tax Director with over 20 years of experience of advising businesses on international tax matters.
- David Sayers, Partner who leads our transfer pricing and international tax services globally.
- Sandy Cochrane, Indirect tax leader for our Large, Listed and International businesses team.
Starter: Base Erosion and Profit Shifting (BEPs) [2m57]
Claire explains the background to BEPs and the actions that have been implemented at various stages.
She explores the 15 actions already addressed by BEPs and how they’ve come a long way to eliminate harmful tax practices to create a more global tax system. She explains how these have resulted in more administration and disclosure in some cases, and a different tax result in others.She goes on to discuss how many of the measures affect businesses of all sizes, because a lot of companies now have a global footprint and she welcomes the international community’s moves towards sustainable tax practices with meaningful governance, but there is still more to do.
Claire considers the key actions for businesses, including whether existing group structures are fit for purpose and whether tax structures reflect the substance of the business in terms of where risks and rewards lie.
Main course: Pillar 1 and 2 issues [9m33]
David discusses the developments on the remaining outstanding action from the BEPs initiative which are notably called Pillar 1 and Pillar 2 issues and how to deal with the digital economy in consumer facing businesses.
He traces the challenges the digital economy has faced since the original OECD proposals in 2013 and how those have evolved through a combination of early resistance and ultimately political will facilitating what may well be an agreement amongst the international community.
David explains however that there is still a long way to go in terms of ironing out the detail of the issues concerned and identifying exactly which businesses are going to be affected prior to possible implementation in 2023. Apparently, over 130 countries have agreed this in principle, but what exactly have they committed to?
Dessert - Indirect tax considerations in respect of digital services and what this means for international businesses or those businesses looking to expand [23m04]
Sandy highlights the complexity from an indirect tax perspective of operating internationally where remote sales of goods and services can create sales taxes, tariffs and administration in the territory or even each State (in the case of the US) that a customer is based in.
Final thoughts – Key actions for businesses [29m19]
Lucy concludes the virtual dinner party with some of the key actions for businesses including:
- If you have responsibility for the group’s tax affairs, and if you haven’t already, you will need to review the BEPS actions and consider how these impact your group now and in the future. You’ll also need to understand how the BEPS measures are enshrined in the relevant local country statute, as this will be different from country to country;
- If you are responsible for a subsidiary you will need to engage with your parent company or group headquarters to obtain the information you need to ensure compliance with local tax legislation.This is because you will need group information, like the group’s worldwide net interest expense, as just one example;
- you’ll need to keep abreast of the tax systems in which you operate as these change to keep pace with a modern economy. As we heard from David and Sandy, we’re expecting more changes on digital sales taxes and the introduction of a global minimum tax.
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