Monday, November 02, 2015

OECD Tax man ready to change blacklisting rules on Panama


OECD says Panama pledge a positive step

The country faces a review on its financial services sector by the Global Forum.

Following the announcement of President Juan Carlos Varela on the commitment of Panama to exchange financial information, the director of the Center for Fiscal Policy and Administration of the Organization for Economic Cooperation and Development (OECD) Pascal Saint-Amans acknowledged that the pledge is a step forward for Panama but said the country still has a long way to go.
Saint-Amans spoke with La Prensa during the annual meetings of the International Monetary Fund and World Bank, which concluded yesterday in Lima, Peru. The following are questions and answers from the interview.
What do you think of Varela's pledge?
It is a good step forward. In October of last year, 94 countries committed themselves to the automatic exchange of information. They pledged to implement the standard. Panama was one of the few jurisdictions that did not make the pledge, along with Bahrain, the Marshall Islands, Vanuatu and Nauru, with Panama being the only significant financial center.
Panama said it would exchange information, but that it would not accede to a multilateral convention. what is your opinion of that?
From a legal point of view, once a commitment is made, it has to be implemented. To share information, it can be done through a multilateral convention, or it can be done bilaterally. In that case, one should move fast if you want to grant the exchange of information to all interested countries that meet the standard of confidentiality.
Do you think that Panama will pass to the second phase of the review of its jurisdiction?
The peer review, which includes 30 countries, has made that recommendation to the Global Forum, which has until the end of October to decide. I think it was premature of Panama to announce that, as it broke the rules of confidentiality. It is more than likely, but who knows. There are members of the Global Forum who are not in the peer review group. We have to wait for the Global Forum, which is the sole decision-making body in this matter. In substance, it is true that the members of the review group have recognized some progress that was made in Panama.

Varela said that debate on the exchange of information should be conducted in the UN. Do you agree?
It is an opinion I respect completely. But in this case, there are 127 jurisdictions, including Panama, that are members of the Global Forum. What matters is that all countries are equal. No longer is the OECD a group of countries dictating what rules other countries have to make.
In Panama there is a concern because the steps demanded by the OECD could hurt the competitiveness of the financial services industry. Do you agree?
It is not true. Because all countries have moved. What happens is actually the opposite. Panama won a competitive advantage by not conforming. That is why other countries think that the situation is very unfair because Panama is receiving money that they have lost. The perception in Panama is really different from the perception outside.
Do you think that those flows of money look to hide the funds from tax authorities?
The reviewer group will decide that. But that's basically what we heard from the banking industry.
In the country there is a sense that a double standard is used. That the United States is not required to provide information with the same level of transparency that it demands from Panama. Is that a fair statement?
The rules are the same the United States is expected to act with reciprocity with any other country. Look at the review of the United States. It has a mark in regards to beneficiaries and they have to change. Currently they are providing required information, but not enough

- See more at:

See also 
More Pascal Saint-Amans statements in Panama: Profits for two men and a dog
The Economic Case for Tax Havens

Wednesday, August 12, 2015

Regulators open to offers for Panama bank

The reorganization committee of Banco Universal started last week the process of sending letters to all general license banks to participate in the sale process of the company. Banco Universal was intervened by the regulators back in June 2015 and is one of the smallest banks of the Panamanian banking system.

The process of receiving proposals will be open for 20 days, said Gustavo Villa, secretary general of the Superintendency of Banks of Panama (SBP).  Those interested in acquiring the operations of Banco Universal  will have 20 days, starting August 10, to submit their bids.

In negotiating Banco Universal operations there are two possible scenarios: the purchase of the loan portfolio, or the purchase of portfolios, plus deposits.

Interested parties will have available a virtual data room with general information about the bank after signing a confidentiality agreement. They should express a non-binding offer at that time, and if they are interested or not to continue in the process.  The entire sale process is expected to last between 90 and 120 days.

BANCO UNIVERSAL, S.A. (under intervention)
FINANCIAL STATEMENTS (in thousands of dollars)

June 2015

Local Deposits in Banks
At Sight
Timed Deposits
Foreign Deposits in Banks
At Sight
Timed Deposits
Minus Reserves
Minus Reserves
Minus Reserves
Of Individuals
At Sight
Timed Deposits
From Banks
At Sight
Timed Deposits
From Individuals
At Sight
Timed Deposits
From Banks
At Sight
Timed Deposits
Capital Reserves
Other Reserves
Dynamic Reserves
Other Reserves
Retained Earnings
Earnings for the Period
Gain or Loss in Securities available for Sale
Subordinated Debt

For full text see
Statements from

Monday, July 06, 2015

Panama: Profits for two men and a dog

Global Finance magazine has an interview with a technocrat featured as "the new guard" Pascal Saint-Amans (@PSaintAmans), an OECD veteran named director of its Centre for Tax Policy and Administration in February 2012, who is overseeing the guidelines review.

It is very revealing that Saint-Amans told Global Finance in an interview: “Profits cannot be located in a place where you have two men and a dog,” which basically means that Panama will never cease to be in black or grey lists (or that Panama has 3 million people and 1.5 million dogs).



Multinational corporations could have a much more difficult time shifting profits to low-tax jurisdictions—and deductions to high-tax ones—under new OECD rules.
When Apple CEO Tim Cook testified in defense of the computer giant’s tax practices on Capitol Hill in late May, Cook was speaking for many multinational corporate executives when he insisted that Apple paid every bit of tax the company owed to the US and other countries. But that, according to critics, is precisely the problem. The current international tax system, based on a practice known as transfer pricing, lets multinationals shift income from parent companies or their subsidiaries located in high-tax jurisdictions, such as the US, to those in low-tax regimes, and do the opposite with deductions. As a result, critics say, companies artificially minimize their liabilities or even avoid them entirely, and do so legally, thanks to the widely accepted current basis for transfer pricing.
With a great deal of scrutiny coming to bear on corporate tax practices worldwide, the Organisation for Economic Co-operation and Development (OECD) is looking at ways to revamp its guidelines on international tax practices. Until there is clarity on how this review will evolve, however, corporations are wondering, and worrying over, what it will ultimately mean. An OECD report in February to the G20 countries noted: “There is increased segregation between the location where actual business activities take place and the location where profits are reported for tax purposes.”
And though the cost to governments, many of whom are facing sovereign debt woes because of gaping fiscal deficits, may be impossible to gauge precisely, some estimates put it in the trillions of dollars. “If we could estimate it, we could tax it,” says David Spencer, an international tax attorney based in New York, who describes the problem as “monumental.”
The scope of the tax shortfall is evident in a 2008 World Trade Organization estimate that only 40% of world trade occurs between independent companies. The rest is conducted intracompany—and taxing of that income falls under the current murky transfer pricing rules. That proportion has probably decreased since then, as the global economic downturn has seen industries consolidate further. To help close this gap in lost tax revenues, the OECD has revisited the guidelines it established in 1995, and revamped in 2010, as the basis of transfer pricing practices in most of the world. An action plan that the OECD presented to the G20 in late July detailed 15 steps it expects to take over the next year to two and a half years to deal with transfer pricing and related issues.
The OECD is acting after being accused of dragging its feet. “The current system is not workable,” says H. David Rosenbloom, a professor and director of the International Tax Program at New York University—and former Treasury official.
The evolving perspective at the OECD is owing in part to changes within the organization’s structure. Some critics say that much of the tax staff of the OECD until recently was “captured” by private industry, with members moving between positions in the organization and private industry as if through a revolving door. But it may have as much to do with the shifting power of member countries. Countries such as Brazil, China and India have rejected the OECD’s guidelines in favor of their own, more draconian regulations, bringing pressure to bear on the organization to enact change.
Pascal Saint-Amans
Saint-Amans, OECD: Profits cannot be located in a place where you have two men and a dog
Regardless of the reason behind it, the OECD has had “a very serious change of heart” about the current system, observes Spencer. “There is a new guard that realizes it’s up against the wall.”
The new guard includes Pascal Saint-Amans, an OECD veteran named director of its Centre for Tax Policy and Administration in February 2012, who is overseeing the guidelines review. As Saint-Amans told Global Finance in an interview: “Profits cannot be located in a place where you have two men and a dog.”
The OECD recently got an extra push to end such practices from the G8 countries, which issued a communiqué at their meeting in June that called for countries to share corporate as well as individual tax information without being asked to do so. Philip West, a former international tax counsel for the US Treasury and now a partner in the Washington, DC, office of law firm Steptoe & Johnston, said at a global tax conference in late April in New York City that such mandatory information sharing would represent the “first step” toward a far more onerous system for multinational enterprises than the one currently in place.
In fact, a growing number of countries aren’t waiting for the OECD to act. France recently slapped Amazon and Google with tax bills of €700 million ($930 million) and €1.7 billion, respectively, for reassessed liabilities based on their transfer pricing practices, while Denmark hit Microsoft with a €778 million reassessment. India is seeking $2.5 billion from Vodafone in a long-running dispute over that company’s 2007 acquisition of telecom assets from another company based in the Cayman Islands and Mauritius. All of those companies declined to comment, as did Apple and several other multinationals contacted for this article. For such companies, uncertainty over tax liabilities are increasingly a key concern. If the OECD fails to come up with a more effective system, companies may find that “individual countries do their own thing,” Robert Stack, deputy US Treasury secretary and the department’s international tax counsel, warned at the tax conference in New York.
The question is what type of change the OECD can get most if not all countries to accept, since it operates by consensus. Even if its action plan is accepted by the G20, as is expected at a meeting this month, and the OECD finalizes its proposal within the envisioned time frame, global governments and legislatures would then have to pass laws to embrace them. During that interval, corporations are sure to lobby against many of the changes—and dissenting countries, to push for even stronger ones.
The OECD’s current transfer pricing guidelines are used widely in tax treaties based on the so-called “arm’s-length” principle, under which companies are supposed to price intracompany transactions as if they were conducted between independent companies. That is supposed to result in appropriate taxation by each jurisdiction.
But critics say such pricing can understate income, because independent companies naturally enjoy smaller profits on transactions than those between parents and their subsidiaries, thanks to economies of scope and scale. And so-called “comparables”—based, for example, on royalty agreements within industries—that companies currently rely on to price cost-sharing agreements and other transactions between parents and subsidiaries may be even more misleading in the case of difficult-to-value intangible assets. Yet those assets are increasingly the basis of such transactions.
As a result, some critics go so far as to label the arm’s-length principle a tax-avoidance device designed to help companies move income to tax havens, where subsidiaries that do little or nothing can claim income. These critics want to see the OECD move toward what is called “formulary apportionment,” where profits are allocated among jurisdictions based on a formula that takes into account returns on assets or some other measure of profit.
The most strident proponents of such a change would also require companies to report the income they make in each country to every jurisdiction, a system that, when combined with formulary apportionment, is known as “unitary taxation.” The mandatory sharing of information among countries along the lines called for by the G8 would resemble that type of reporting, as its June communiqué seeks “a common template for country-by-country reporting.”
But it falls far short in the eyes of some. “You can’t stop income shifting to tax havens without unitary taxation based on formulary apportionment,” says Michael McIntyre, a law professor at Wayne State University.
Some supporters of the formulary approach nonetheless say unitary taxation is unfeasible. And defenders of the current system warn that the formulary approach, at least without agreement on the formula to be used, would result in taxation of the same income in more than one jurisdiction, an outcome known as double taxation, which is now avoided by tax treaties that embrace the arm’s-length principle. Says Patrick Evans, chief tax counsel of the Washington, DC–based industry group Tax Executives Institute: “Our members are extremely concerned about the double taxation issue, and if there’s no agreement on the formula, then double taxation is likely.”
Saint-Amans says he doesn’t care whether the OECD ultimately keeps the arm’s-length principle in place or jettisons it in favor of the formulary approach, as he sees problems with both. “I am agnostic,” he points out. But the OECD’s action plan continues to favor the arm’s-length principle. Saint-Amans adds that it would be difficult, if not impossible, to get countries to agree on what formula to use for the formulary approach. Quips Saint-Amans: “I don’t have a century to work on that.”
For a microcosmic view of the problem, consider the US. It has such a system in place for state and local taxes, but at last count the 50 states were using some 20 different formulas to apportion profits. And China and India are unlikely to accept any formula that doesn’t include a premium for the advantage that their cheap labor provides companies based elsewhere.
Instead, the OECD action plan calls for better enforcement of the arms-length principle, a position that the US supports but that Brazil, China and India, as well as many other countries, do not. They want more stringent rules.
The Treasury’s Stack told the April tax conference that the US doesn’t like the formulary approach, and that its own efforts to improve enforcement of the arms-length principle would be helped immensely if Congress simply repealed what are known as “check the box” rules for subsidiaries called “controlled foreign companies,” under which their parents can simply instruct the IRS to ignore them for tax purposes, so tax on their income is indefinitely deferred. Still, Stack acknowledged that “we are alone” among individual countries supporting the arm’s-length principle.
Although the OECD action plan backs the principle, many observers expect mandatory information sharing to strengthen the hand of authorities now in the dark about what companies are doing to shift profits to low-tax jurisdictions and deductions to high-tax ones. Saint-Amans says he’s more concerned with “double nontaxation,” where income is taxed nowhere, than with double taxation, though he warns that if countries don’t accept the OECD’s new guidelines, companies will doubtless face more double taxation.
The action plan also contains concrete measures aimed at what it calls tax “avoidance.” One of the most significant would curtail deductions on intracompany loans that are more like equity investments than debt, which bank holding companies use widely. Another would close the loopholes concerning tax residency that many technology companies have exploited to great effect. (See sidebar for a look at how Apple has done so.)
Regardless of what exactly the OECD eventually does, many experts contend that companies will find it difficult to continue using their most aggressive tax practices because of the backlash they now produce. Marc Sanders, a partner in the Amsterdam-based consulting firm VMW Taxand, told the April tax conference in New York that more and more companies have concluded that such practices now pose too much tax and reputational risk. As Sanders put it, “Mere letterbox or conduit companies don’t cut it anymore.”
The case study on Apple that the US Senate’s Permanent Subcommittee on Investigations outlined in hearings in May offers a perfect example of what tax experts call “double nontaxation.”
Neither the company nor its Irish subsidiary Apple Operations International paid any tax anywhere on $29.9 billion that AOI earned from 2009 to 2012, owing to the difference in the way the US and Ireland define residency for tax purposes.
How so? Although AOI, which has no employees but is the holding company for most of Apple’s foreign entities, is incorporated in Ireland, it is not tax-resident in Ireland. That’s because AOI is neither managed nor controlled there, which is how Ireland defines tax residency, but rather in the US. And because AOI was not incorporated in the US, which is how the US defines residency, AOI is not a US tax resident under US tax law. The result of that double nontaxation is almost $30 billion in “stateless income,” to use yet another term of international tax art.
There are two basic approaches to taxing income shifted by multinational corporations to, from and between subsidiaries in different jurisdictions, as follows:
1) The arms-length principle. Under this approach, which is used by most countries in the developed world under guidelines established by the OECD, companies must price these transactions as if they were conducted between independent companies (in effect, using the “market price” for the transaction).
Supporters say the arms-length principle for “transfer pricing” is the fairest means of taxing income generated by multinationals. Critics say companies take advantage of the leeway provided by this approach to shift more income to low-tax jurisdictions and more deductions to high-tax ones than they should so as to minimize or avoid tax.
2) Formulary apportionment. Under this approach, which the OECD is being urged by many emerging countries as well as nongovernmental organizations to adopt, companies would pay tax on such cross-border transactions based on a formula for apportioning profits among the jurisdictions in which they operate.
Critics say such a system would result in income being taxed by more than one jurisdiction unless countries can agree on a formula, and they contend such agreements would be difficult if not impossible to achieve. Supporters say its no more necessary for countries to agree on a formula for apportioning profits according to where they are earned than it is for them to apply the same tax rates, so long as they can resolve their difference through tax treaties, as they do now.
Some supporters say such a system should also require that companies report to each country what they earn elsewhere. When such reporting is combined with formulary apportionment, the resulting approach is known as “unitary taxation.”

Full text in

Wednesday, July 01, 2015

Video: Emerging financial centers condemn EC list

 Eurocrat Pierre Moscovici presents EC Top 30 Listed (at minute 14)

 Reply from Barbados



St. Lucia

Friday, June 26, 2015

European Commission issues "black list" of 30 "tax havens"

Action Plan on Corporate Taxation

On 17 June 2015, the Commission adopted an Action Planpdf Choose translations of the previous link for fair and efficient corporate taxation in the EU.
The Action Plan sets to reform the corporate tax framework in the EU, in order to tackle tax abuse, ensure sustainable revenues and support a better business environment in the Single Market.
See the timelinepdf. 

5 Key Areas for Action have been identified:

1. Re-launching the Common Consolidated Corporate Tax Base (CCCTB)
2. Ensuring fair taxation where profits are generated
3. Creating a better business environment
4. Increasing transparency
5. Improving EU coordination 
map of non-cooperative tax jurisdictions has also been published, in a move to reinforce the EU's response to external threats to Member States' tax bases.
The Commission also adopted a decision to prolong the Platform on Tax Good Governance, and revise its scope and working methods.
For further information

The map was drawn up on the basis of work done by the Platform for Tax Good Governance and the information provided by EU Member States.

Top 30 listed countries: Andorra, Liechtenstein, Guernsey, Monaco, Mauritius, Liberia, Seychelles, Brunei, Hong Kong, Maldives, Cook Islands, Nauru, Niue, Marshall Islands, Vanuatu, Anguilla, Antigua and Barbuda, Bahamas, Barbados, Belize, Bermuda, British Virgin Islands, Cayman Islands, Grenada, Montserrat, Panama, St Vincent and the Grenadines, St Kitts and Nevis, Turks and Caicos, US Virgin Islands.

Panama is listed by Bulgaria, Croatia, Estonia, Greece, Italy, Latvia, Lithuania, Poland, Portugal, Slovenia, and Spain.

Full text in the European Commission website