Concerns and challenges of tax information sharing and anti-avoidance 

I'm Rodney Lawrence. I'm a partner in the U.S. firm. I'm the partner in charge of International Tax. Well one of the key concerns is something that we talked about at the summit just today. Got a lot of interest from taxpayers and clients in the audience because they're seeing it today, and that's the whole question of tax authority sharing information globally without the taxpayers’ knowledge. And what I mean by that is that one tax authority can examine a company in its jurisdiction and obtain information, and then it can freely exchange that information with a different taxing authority, who can then choose to use that information in examining the company over there. What it means and the discussion we had with clients at the conference, is that all of a sudden you need to be thinking globally about what your information looks like. Don't just give your information to your local authority and assume it stops there. If it's got any references to cross border material just assume it's going overseas. So the discussion we had today was really interesting because it was about clients saying yeah, I need to be thinking about how this information will look to that authority let alone this authority. It's a big thing.

Different tax authorities treat information differently. And one of the big concerns that clients have is the confidentiality of the information and how best to safeguard that. If anyone has been watching the press on this topic recently, they would have seen a lot of press about a U.S. taxpayer who handed information over to the Internal Revenue Service. The Internal Revenue Service then gave that information to the Japanese tax authorities. It was really sensitive information. That information somehow made its way to competitors of the U.S. company, and all of a sudden they're at a competitive disadvantage. So it's a really serious thing. And what we were talking about today is that clients need to be thinking about that when they hand material over. Gosh, where could this end up because I lose control of it immediately?

So, a question the clients often have is, “gosh can't I stop this?” So the answer to that is, “no.” The next question clients have is, “are there rules and regulations that prevent this information being disclosed?” And yes there are, but what the rules and regulations say is that the tax authorities have to use their best efforts. So there is no taxpayer protection. The taxpayer can't come along and say you're not doing your job. It's just for the tax authority to say, “I'm trying my best to keep it confidential.”

It's interesting because a lot of people ask us what's the same as between ASPAC and say the United States and what's different? So this information sharing thing is becoming the same. Certainly different countries have different levels of safeguards for confidentiality. That's good. But more and more countries are sharing information. Just during this year, the G20 signed an agreement committing every member country to share information freely. The bit that's starting to look a little different is between ASPAC and the Americas, is the whole question of tax avoidance legislation. It's a lot different. In the ASPAC region, everyone is starting to look a little like Australia, in that they have a generalized you know it when you see it kind of test. Whereas in the Americas and in particularly in the United States, at least in a cross-border context, we are far more literal in our approach. We look at treaties and we apply the black letter as opposed to a, ‘you'll know it when you see it’ feel so that's a divergence between the regions we see now.

One of the things we think about is, where is information sharing going? And the frank answer now, if you're a company conducting business in multiple jurisdictions, is this is already here, and it's already active and it's only going to get more active. People have been talking about information sharing for years. It is now happening, and as a tax director or a senior executive in a corporation, you need to know that this is only going to become more and more common. That whatever information you give to your country is going to make it to a whole host of other countries, and more and more countries are signing up to this. So, the old days of, I'll tell this tax jurisdiction one thing and then if I get examined over here I'll tell them something different — that's gone. You need a far more global mindset. The other thing we wonder about is, where are all these tax avoidance rules going? Are they going to converge? They seem to be converging within regions. So Europe tends to have a view — we don't really like them. ASPAC tends to have a view — we'll know it when we see it. It makes tax planning very hard. The Americas seems to be pulling back, so it's somewhere in between ASPAC and Europe. And I don't think that ASPAC and the Americas will converge on the question of tax avoidance legislation. I think they will continue to go their own way. And what that means for our clients is that they shouldn't just assume that if they know how the rules work in Asia, that the same rules apply in the Americas. It's just different, and vice versa.