Bob Norton, Chief Income Tax Officer at Vertex Inc., returned from the GWU-IRS International Tax Conference with the following reflections:
Over 700 tax professionals descended upon the nation's capitol last week to learn the latest in international tax trends and issues facing multinational corporations. The annual conference sponsered by the George Washington Universtity Law School and the Internal Revenue Service is one of a kind, offering panels of top experts and IRS personnel with "no holds barred" interactions.
As expected, there was no shortage of tax lawyer speak and coverage of the litany of issues these days. Subjects like Competent Authority/Mutual Agreement Procedures (which are on the rise globally), PEs, transfer pricing, Section 1248, PTI, 901(m), 909 splitters, reverse hybrid entity treatment under Notice 2010-92, Reg 1.701-2(e), Section 367 (a) & (b), OFLs, withholding on equity swaps under 1.863 and more. Fun stuff for very few people on the planet.
Listening to these experts rattle off the code, regs and legislative histories of the various provisions, I wondered how in heavens name can anyone understand these rules let alone COMPLY with them. How do tax professionals AND tax authorities administer these exceedingly complex subjects? How do tax professionals obtain the data from their company's systems in order to analyze and comply with these provisions? How can they plan for tax outcomes? How is this level of complexity accounted for under Fin 48? How are these positions supported on audit?
And these are only the US's rules. As noted by noted expert, Pamela Olson, over the last 15 years Foreign Direct Investments (FDI) has increased substantially to the point where now more than 50% of the world's FDI originates from developing economies (versus the G7 for instance). So, these developing countries are adopting and evolving their tax codes to support this growth. And many are not the friend of the OECD, instead viewing the OECD as a "rich man's club". The insuation being that the international tax standards espoused by the OECD are largely aimed at protecting the G20 at the expense of the rest of the world. What does this mean for the future of international tax policy and cross-border tax administration?
At the end of the day, all of these rules need to be complied with, a consideration that is virtually never addressed by the legislators and not well understood by a company's CFO or audit committee. The result: RISK. Perhaps the Tax 2.0 community will grow large enough one day where we can bring this important viewpoint into the tax policy and legislative process in furtherance of tax operational improvements by taxpayers and tax administrators alike.
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