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International cooperation in the field of combating tax avoidance and implementation of the Common Reporting Standard
Abstract
Introduction. The strengthening of globalization processes caused significant changes in the international taxation system. The negative consequences of globalization include large-scale tax avoidance and erosion of the tax base. These phenomena caused systematic steps by international organizations in the direction of substantiating the scope of action for the realisation of the process of automatic exchange of information on financial accounts in accordance with the General Reporting Standard and other documents. Ukraine has joined the initiatives of the international community and is consistently implementing measures for their adaptation and implementation. At the same time, there are some limitations in the application of the developed standards, which can be used by unscrupulous taxpayers as a loophole for harmful tax practices. Problem Statement. The scientific basis for the implementation of the BEPS Plan, in particular, the introduction of the process of automatic exchange of information on financial accounts in accordance with the General Reporting Standard. Purpose. Identification of key milestones in the formation and implementation of the BEPS Plan, as well as identification of some limitations and shortcomings in the provisions and procedures of automatic exchange of information on financial accounts, which may lead to abuse, improper actions, violations of confidentiality and security. Methods: analysis and synthesis, comparative analysis, analytical, implementation of a systemic approach to the study of issues Results. The systemic steps of international organizations regarding the implementation of the BEPS Countermeasures Plan and the development of relevant decisions and documents were analyzed. Some limitations in the application of the developed solutions, which can be used by unscrupulous taxpayers as a loophole for the continuation of harmful tax practices, have been identified. The actions of the Ukrainian government regarding joining the international community in the matter of automatic exchange of information on financial accounts are outlined. Conclusions. Therefore, systemic measures for the implementation of the BEPS Countermeasures Plan provide for the formation of a methodology for the application of mechanisms for such countermeasures, in particular principles, directions, tools, procedures and technologies that make impossible or complicate the processes of blurring the tax base and avoiding taxation. For this purpose, key international organizations, in particular the OECD, the Council of Europe, the G20 and the G8, have decided and prepared a number of documents, as well as standards, model and standard agreements to involve national governments in the implementation of joint efforts to counter BEPS, among which a special place is occupied by the Model Competent Authority Agreement (CAA) for automatic exchange of information and Common Reporting Standard. At the same time, when implementing agreements and standards, risks arise due to: avoidance of reporting by some financial institutions and other subjects of legal relations; breach of confidentiality; departure of some countries from general practice and standard procedures, etc. While developing a platform for legal, administrative, financial and economic, technical and technological support for the implementation of BEPS countermeasures, Ukraine should take into account the lessons of negative experience and prevent limitations of the specified standards.
... Among Ukrainian scholars, Kateryna Klymenko (Klymenko, 2022), Yana Oliynyk, Maria Kucheriava (Oliynyk & Kucheriava, 2021), and Olga Ivanytska (Ivanytska, 2022) have contributed to the discourse on CRS implementation in Ukraine. Their research provides insights into the specific challenges and opportunities faced by Ukraine in aligning with international tax standards and implementing automatic exchange of tax information. ...
The article studies the Common Reporting Standard (CRS), an information standard for the automatic exchange of tax information between states that are parties to the Multilateral Competent Authority Agreement (MCAA). It also explores the prospects of Ukraine’s participation in the exchange under this standard. The study analyzes the information subject to international exchange, types of financial institutions required to collect and submit tax-relevant information to authorities for international exchange, account types, tax residents, and methods of verifying client integrity when opening accounts. The article aims to systematize knowledge about the prerequisites for creating, the mechanism of intergovernmental tax cooperation within the CRS framework, current results achieved under this standard, Ukraine’s accession status, steps taken by Ukraine towards implementing automatic exchange of tax information, and recommendations for accountable entities and account holders on complying with CRS rules. The study employed a comprehensive research methodology, including a literature review, analysis of normative documents, and comparative analysis. The conclusions emphasize the crucial importance of Ukraine’s accession to the CRS standard for ensuring proper tax compliance and budgetary revenues, particularly amid full-scale Russian aggression. The study also describes the challenges, especially regarding compliance with tax data exchange requirements by financial institutions and account holders. It underscores the need for strong political will from Ukrainian authorities to overcome obstacles and ensure effective CRS implementation. Overall, the study highlights the significant role of CRS in improving tax collection while acknowledging the hurdles ahead. The research perspective on this topic is extensive, given that automatic tax information exchange, particularly under the investigated standard, is currently being established and is relatively underexplored by researchers.
The implementation of a constituent element of a three-tier model of transfer pricing documentation – a report in the context of the countries of the multinational group of companies – is a prerequisite for Ukraine's joining the Multilateral Competent Authority Agreement as a measure for implementation of Action 13. The Ministry of Finance of Ukraine, together with the State Tax Service of Ukraine, developed a Roadmap on preparation and harmonization of the draft regulatory legal acts necessary to ensure implementation of the Law of Ukraine dated January 16, 2020 No. 466-IX, according to which the development, approval and registration of the regulatory legal acts for the country-by-country reporting and the procedure for filling it out must be completed until November 23, 2020. The purpose of the article is to determine the institutional basis for improving the legislation of Ukraine in the field of international exchange of information for tax purposes, in particular, the development of recommendations and proposals of the OECD in the field of country-by-country reporting of the multinational group of companies. In the course of study, the authors examined the OECD documents that form the institutional basis for the development of methodological and organizational support for reporting in the context of countries. In accordance with Action 13 of the BEPS Action Plan, jurisdictions of the world have undertaken to increase the transparency of taxation by enshrining in law the requirement to disclose information on the general distribution of their income, taxes and other indicators by the location of economic activity of multinational group of companies. The comparative analysis of the terminology and content of information to be disclosed in the country-by-country reporting in accordance with OECD documentation and Law № 466-IX shows that there is a discrepancy in terminology, indicators and degree of data disclosure in some indicators.
The article is devoted to the issues of the methodology of the analysis of the base erosion and profit shifting (BEPS) for the development of managerial approaches to counteracting these destructive phenomena in Ukraine. Eleven types of data sources identified by the OECD that can be used for BEPS analysis are determined. It is shown that most sources of information for the purposes of analyzing the scale and effects of BEPS have significant limitations: their absence or limited representativeness in some countries; regulatory restrictions on access to data; lack of most financial data to reflect the activities of multinational corporations (MNCs). The indicators that testify to BEPS or dangerous phenomena of financial abuse, which are reflected in reporting, are analyzed, namely: 1) disconnect between financial and real economic activities; 2) high profit rates of low-taxed affiliates of top global MNCs; 3) high profit rates of MNC affiliates in lower-tax locations; 4) MNCs vs. "comparable" non-MNC effective tax rate differentials; 5) profit shifting through intangibles; 6) profit shifting through interest. It is proved that for Ukraine the calculation of a number of indicators can be complicated due to the delay in the publication of official data; lack of appropriate statistical reporting. In general, indicators show that they provide limited information about financial transactions and cannot reliably relate any changes and their reflection to BEPS. Therefore, the implementation of measures to combat BEPS should be based not only on the results of calculations of OECD indicators, but also on other empirical studies that provide reliable information on the development of income transfer between countries.
The article is devoted to substantiating the need to develop and strengthening the competencies and capabilities of tax services to identify and stop tax evasion in the global economic space characterized by the use of aggressive tax planning schemes related to the taxation of cross-border companies. The aim of the article is to determine the procedures and consequences of the introduction in Ukraine of the standard of automatic exchange of information for tax purposes, the advantages of which are its potential to curb significant tax evasion offshore. Research methods: methods used in this research goes as following: comparative analysis, systematic analysis, cognitive-analytical, data base analysis etc. It is established that the exchange of information between the tax authorities of different countries is the most important among the international instruments to combat cross-border tax evasion schemes, and the main international tool for cooperation in overcoming the asymmetry of tax information is the introduction of a standard for automatic exchange of information for tax purposes. Emphasis is placed on the parameters set by the CRS standard for the identification and exchange of information and the steps that need to be taken to implement it in Ukraine. Research methods: methods used in this research goes as following: comparative analysis, systematic analysis, cognitive-analytical, data base analysis etc. Author arrives at the conclusion that the dates of establishment of the automatic taxation and financial information exchange system in Ukraine (in accordance with CRS standards) are not being followed sufficiently. In this paper author discusses the importance of systematic and methodological establishment of the automatic taxation and financial information exchange system in Ukraine (in accordance with CRS standards) as well as suggests the methods that would efficiently speed up the process of law enforcement project development in Ukraine as well as other normative acts.
This paper provides a brief review of the academic literature that assesses the quantitative importance of tax avoidance behaviour of multinational entities (MNEs) by means of income shifting from high-tax to low-tax affiliates. Existing studies unanimously report evidence in line with tax-motivated profit shifting (despite using different data sources and estimation strategies). In terms of shifting channels, there is evidence consistent with strategic mispricing of intra-firm trade, the location of valuable intellectual property at low-tax affiliates and debt-shifting activities. The quantitative estimates vary across approaches and studies though. The paper moreover stresses that some care should be warranted when interpreting profit shifting estimates as they often rely on non-trivial assumptions.
en This paper provides a quantitative review of the empirical literature on profit‐shifting behaviour of multinational firms. We synthesize the evidence from 27 studies and find a substantial response of profit measures to international tax rate differentials. Accounting for confounding factors by means of meta‐regressions, we predict a tax semi‐elasticity of subsidiary pre‐tax profits of about 0.8. Moreover, we disentangle the tax response by means of financial planning from the transfer pricing and licensing channel. Back‐of‐the‐envelope calculations suggest that transfer pricing and licensing are the dominant profit‐shifting channels.
Résumé
fr La réponse des profits des firmes plurinationales aux fiscalités différentielles : taille de l’effet et canaux de déplacement du fardeau fiscal. Ce mémoire fournit une revue quantitative de la littérature empirique sur le comportement de déplacement des profits des firmes plurinationales. On synthétise les résultats de 27 études et on découvre qu’il existe une réponse substantielle des mesures de profit aux différentiels dans les taux d’imposition entre nations. Tenant compte des facteurs confusionnels grâce aux méta‐régressions, on prédit une semi‐élasticité des impôts des profits avant‐taxes des filiales de l’ordre de 0,8. De plus, on démêle la composante de la réponse fiscale attribuable à la planification financière de celle attribuable aux prix de cession interne et à la concession de licences. Des calculs préliminaires suggèrent que ce sont là les canaux principaux de déplacement des profits.
Taxation is at the core of countries' sovereignty, but in recent years, multinational companies have avoided taxation in their home countries by pushing activities abroad to low or no tax jurisdictions. The G20 asked OECD to address this growing problem by creating this action plan to address base erosion and profit shifting. This plan identifies a series of domestic and international actions to address the problem and sets timelines for the implementation.
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