Andrew Hickman
Head カジノシークレット 出金 時間ransfer Pricing Unit, Centre for Tax Policy and Administration
Organisation for Economic Co-operation and Development
Comments on the Public Discussion Draft on カジノシークレット 出金 時間:
(Hard-to-Value Intangibles)
Keidanren hereby submits its comments on the Public Discussion Draft "カジノシークレット 出金 時間: Hard-to-Value Intangibles" published by the OECD on June 4, 2015.
Some companies arbitrarily transfer intangibles under development (including rights therein) at an undervalued price to a low-tax jurisdiction and then shift substantial amount カジノシークレット 出金 時間he income derived from the intangibles to a subsidiary domiciled in that jurisdiction. Such a wrongful practice has been pointed out as one カジノシークレット 出金 時間he root causes of base erosion and profit shifting (BEPS). We do understand the need of nations to devise measures against abusive arrangements カジノシークレット 出金 時間his kind.
However, the proposed approach is, albeit some ingenuities shown, essentially an attempt to levy taxes using hindsight, in that it is designed to adjust the ex-ante pricing カジノシークレット 出金 時間ransactions based on the ex-post outcomes. As such, a question arises as to its appropriateness as a measure against BEPS. Aware カジノシークレット 出金 時間he difficulty in valuing intangibles and the need to eliminate arbitrariness, companies that conduct controlled transactions involving intangibles endeavor to value the intangibles using methods that are as diverse as possible. Thus, tax administrations should respect the relevant agreements and management decisions, as well as the taxpayer's valuations underlying them, to the fullest extent. If these could nevertheless be overturned depending on the ex-post outcomes, tax consequences would become unpredictable while the administrative load relating to documentation and the burden of proof would increase.
It is debatable in the first place whether independent enterprises always have a price adjustment clause built into their agreements or renegotiate the agreement terms. There also are cases in which profit generated by intangibles is less than anticipated. Furthermore, as the criteria for application カジノシークレット 出金 時間he proposed approach are neither sufficiently clear nor objective, they may be broadly interpreted by tax administrations. A question would also arise regarding the appropriateness and timeliness of additionally introducing such an extremely powerful taxation tool in the circumstances where a variety of measures to enforce taxation have already been recommended pursuant to the actions カジノシークレット 出金 時間he BEPS Action Plan.
In view カジノシークレット 出金 時間hese, we cannot help feeling that the proposed approach goes beyond what is necessary to achieve the objective. In the ensuing process of finalizing the revisions to Chapter VI カジノシークレット 出金 時間he Transfer Pricing Guidelines, we suggest that the scope of application カジノシークレット 出金 時間he proposed approach be at least narrowed, and that the following matters at a minimum be considered:
(1) Scope and Features of Hard-to-Value Intangibles (HTVI)
Paragraphs 9 and 10 describe the scope and features of HTVI. As these paragraphs merely provide qualitative explanations, we suggest that several examples of anticipated situations be added. For instance, paragraph 9 refers to an absence of カジノシークレット 出金 時間uot;reliable comparables,カジノシークレット 出金 時間uot; a カジノシークレット 出金 時間uot;lack of reliable projections,カジノシークレット 出金 時間uot; and カジノシークレット 出金 時間uot;highly uncertainカジノシークレット 出金 時間uot; assumptions, while paragraph 10 mentions カジノシークレット 出金 時間uot;intangibles that separately are not HTVI but which are connected with the development or enhancement of other . . . HTVIカジノシークレット 出金 時間uot; and カジノシークレット 出金 時間uot;intangibles that are anticipated to be exploited in a manner that is novel at the time of the transfer.カジノシークレット 出金 時間uot; All of these, though, are concepts that can be broadly interpreted. We are strongly concerned that numerous intangibles may in substance fall within the category of HTVI.
(2) Significant Difference
We suggest that a clear definition be provided of the カジノシークレット 出金 時間uot;significant differenceカジノシークレット 出金 時間uot; between ex-ante projections and ex-post outcomes referred to in paragraph 13. Each country faces different BEPS concerns and deals with different types of businesses and transactions, which we presume may make it difficult to set uniform criteria. Still, it would be necessary to adopt numerical criteria such as the percentage of deviations and monetary amounts, at least, in order to prevent tax administrations from enforcing taxation subjectively and arbitrarily.
(3) Exemption
Paragraph 14 sets two exemption criteria: one is to provide カジノシークレット 出金 時間uot;full detailsカジノシークレット 出金 時間uot; of ex-ante projections, and the other is to provide カジノシークレット 出金 時間uot;satisfactory evidence that any significant difference . . . is due to unforeseeable or extraordinary developments or events.カジノシークレット 出金 時間uot; With regard to the first criterion, we suggest that the word カジノシークレット 出金 時間uot;fullカジノシークレット 出金 時間uot; be deleted. The term カジノシークレット 出金 時間uot;full detailsカジノシークレット 出金 時間uot; may allow tax administrations to demand disclosure of source code and other trade secrets that are essentially unrelated to taxation, or to otherwise act in a way that deviates from the norm, in exchange for not taxing the transaction in question.
As for the second criteria, given an undue burden it would impose on taxpayers, either the criterion should be deleted or the burden of proof (or disproof) should rest with tax administrations. When a company has valued transactions using a multifaceted method and submitted the results to the tax administration, the company is considered to have fulfilled its obligation. It would be excessive to impose upon the company any more burden of proof. Furthermore, the word カジノシークレット 出金 時間uot;satisfactoryカジノシークレット 出金 時間uot; needs to be clarified because what constitutes カジノシークレット 出金 時間uot;satisfactoryカジノシークレット 出金 時間uot; evidence is unclear. (Similarly, although paragraph 12 refers to カジノシークレット 出金 時間uot;where the tax administration is able to confirm the reliability of the information,カジノシークレット 出金 時間uot; it is not clear in what situations tax administrations are viewed as able to make such confirmation.)
In addition, consideration should be given to incorporating the following three elements into the exemption criteria:
(i) Restricting the scope of application to transfers to low-tax jurisdictions
As the proposed approach is presented as part カジノシークレット 出金 時間he BEPS Project, its application should be restricted to the transfer of HTVI to a low-tax jurisdiction. In fact, the majority of cases to which the proposed approach will apply are expected to involve such transfers. However, it may be difficult to revise the Transfer Pricing Guidelines in a manner that restricts their application to particular jurisdictions. If that is the case, the scope of application カジノシークレット 出金 時間he proposed approach may be properly narrowed by formulating the criteria in such a way that the approach will in substance apply to transfers to low-tax jurisdictions only.Specifically, one possible option to achieve this is to restrict the scope of application to transactions in which the linkage between the existence of HTVI and the ex-post profit levels is clear. When HTVI has been transferred to a low-tax jurisdiction, especially to a tax haven, it is safe to assume that the degree カジノシークレット 出金 時間he contribution of factors other than HTVI to the profit levels is relatively low, and therefore that identifying the correlation between HTVI and the profit levels is comparatively straightforward. By contrast, in the case カジノシークレット 出金 時間ransfers to non-low-tax jurisdictions that include advanced industrialized countries, we assume that the profit levels cannot be explained by HTVI alone because there are other conceivable reasons, such as a new owner of HTVI having added value.
(ii) Excluding a transaction once a certain period has passed after its implementation
With the business environment changing daily, it is rather normal that developments not factored into initial projections arise. To prevent taxpayers from suffering unpredictable tax consequences for a long period カジノシークレット 出金 時間ime, a transaction should be excluded from the scope of application カジノシークレット 出金 時間he proposed approach once a certain period カジノシークレット 出金 時間ime has elapsed since the transaction was entered into.(iii) Considering companies' ex-post adjustments and adopting a method that focuses on shareholding
We assume that the proposed approach will obviously not apply to cases in which a company has voluntarily adjusted profit levels among the associated enterprises using a residual profit analysis and other methodologies. The Public Discussion Draft, though, appears to provide no clear explanation on this point. As it would be excessive for a tax administration to make an adjustment according to the ex-post outcomes on top カジノシークレット 出金 時間he voluntary adjustment already made by the company, this point should be added to the exemption criteria or otherwise clearly stated.Consideration should also be given to adopting a method whereby the application カジノシークレット 出金 時間he proposed approach will be more focused on transactions that have a greater risk of involving arbitrariness. For example, it is conceivable to restrict its application to transactions conducted between the parent and its subsidiary that is wholly owned and directly controlled by the former.
(4) Dispute Resolution and Accumulation of Cases
If the proposed approach were to be adopted, it would become part of Chapter VI カジノシークレット 出金 時間he Transfer Pricing Guidelines. In that event, every effort should be made to ensure that any double taxation resulting therefrom is resolved, in accordance with the provisions of Articles 9 (Associated Enterprises) and 25 (Mutual Agreement Procedure) カジノシークレット 出金 時間he OECD Model Tax Convention, as a matter involving the application カジノシークレット 出金 時間he arm's length principle—although it is debatable whether the approach constitutes a measure consistent with that principle.
Additionally, from the perspective of preventing arbitrary enforcement, it is crucial to accumulate cases カジノシークレット 出金 時間axation, share them internationally, and thereby refine the application criteria.
Sincerely,
Subcommittee on Taxation
KEIDANREN