On October 20th, Taxlinked hosted its webinar on country-by-country reporting and other international tax issues in the Caribbean.
Moderated by Priscilla Lachman, IBFD’s Regional Editor for the Caribbean, this event introduced our community to what’s trending in the taxation sector in a little known area of the world.
Our distinguished panel of experts included Wayne Lovell, Partner in Tax Services with KPMG Barbados; John G. Rienstra, Chief US Tax Lawyer with IBFD, and; Aki Corsoni Husain, a Partner with Harneys who focuses on BVI and the Cayman Islands.
To download or take a look at the webinar’s full transcript, follow the link HERE.
Below are some of the event’s main highlights. Happy reading!
What’s your experience with BEPS in your jurisdiction?
Wayne Lovell: “There is still some uncertainty as to what the Caribbean is going to do...But we will see that the Caribbean is going to be interesting because of the CARICOM double taxation agreement, which is a source-based treaty and how that is going to be treated…[Furthermore], a situation like BEPS will have perhaps greater implication on Barbados because of the country being an international financial services center and promoting itself as a holding company jurisdiction.”
Aki Corsoni Husain: “Both the BVI and Cayman governments are currently consulting with the private sector in terms of what measures and what a responsible jurisdiction should be towards BEPS…Both jurisdictions are keen to work with the international community, work with the UK government, share certain responsibilities on behalf of its own two territories in the Caribbean as well…We would expect full implementation of the BEPS program in the territories there once that becomes the norm internationally, once there are OECD-style obligations on jurisdictions to comply with them. But at the moment, we don’t really have any more detail than that sort of guiding principles that the government wants to work constructively and is a willing participant in this.”
Are there any visible measures of BEPS being implemented in your region?
Aki Corsoni Husain: “I think it’s fair to say that there is an infrastructure already in place as far as disclosure mechanisms go. Now, in terms of the more substantive and tax adviser side of BEPS and things like transfer pricing and CFC legislation, that is obviously something that is entirely new for the jurisdictions that we practice in.”
Do you think there will be practical issues arising from Action 13 or country-by-country reporting?
John Rienstra: “The US has responded quite quickly on Action 13 and country-by-country reporting. The US issued final regulations on this in June of this year and so they’re effective for tax years of multinationals that began after the 30th of June.
And, if we focus for the moment on calendar year taxpayers, it means that calendar years taxpayers will begin filing in their information for the 2017 taxable year. That’s going to create what’s called the gap year problem because the BEPS action plan actually called for multinational reporting to commence on January 2016. So, for US multinationals, there is this gap problem in the sense that the US reporting is delayed for one year longer than what BEPS Action 13 of the OECD and the G20 specified.
The option out of that is that the Treasury Department has informed taxpayers that they can file a voluntary report to cover 2016 to prevent the gap. And the Treasury Department is also working with foreign governments to try to put in place a system so that US multinationals and their constituent entities won't be penalized for the delay in the reporting.”
Aki Corsoni Husain: “One of the things that I would say that could happen and it has happened, for example with both FATCA and to a certain extent CRS as well, is that various jurisdictions take home different interpretations to the various terminology and implement rules in a slightly different way that can create these anomalies…So, I think it will be interesting to see how this progresses and what those anomalies become.
One of the other concerns obviously is one of disclosure and the fact that the concern amongst the private sector would be how protected would disclosures between governments be. So, if we have a tax authority without very good security over its filings or something like that, what’s the risk of sensitive tax information becoming leaked and being misrepresented in the media, as well.”
Wayne Lovell: “Because we are a holding company jurisdiction, we are concerned about information and who would have access to the information and this is perhaps why legislation and so on has not been fully enacted yet. The actors are trying to find the right balance because we want to maintain the country as a place for international trade and commerce, international manufacturing and a holding company and, at the same time, be attractive to investors who will comply with the requirements of the MCAA and so on.”
Would you call your jurisdiction(s) a tax haven?
Aki Corsoni Husain: “I think it’s fair these days that they think themselves as international finance centers. And the key point there is that they provide holding companies or vehicles or structures that allow persons based internationally to be able to do and undertake certain financial business that would be prohibitively expensive or simply not possible but for the presence of the IFCs.
The easiest one to think of is where you have a joint venture between two enterprises for different countries and they want a neutral jurisdiction. And again, I think that Cayman and BVI have been able to provide that neutrality while implementing the rule of law. The fact that they have English common laws is finding the legal principle again, but reinforces the point that they are centers that can be used for international finance business without too much concern.”
John Rienstra: “From the point of view of the US, we don’t blacklist countries under our CFC, but we do have a tax rate test and then also the larger issue of multinationals being looked at by the EU for the so-called state aid favorable rulings by the tax administrations that reduce the amount of local tax being paid by these companies.”
Wayne Lovell: “What I want to add is that if we identify several key features that make a country a tax haven and some are low tax, lack of effective exchange of information, lack of transparency and a low requirement of substantive activity. If we look at these features, let’s say regarding Barbados. Barbados’ domestic tax rate is 25%. The global average is 23.63%. Barbados has exchange of information clauses in most of its—I think in all of its double taxation treaties. We have entered into a FATCA agreement with the US and we have entered the MCAA and reporting via CRS.”
Please feel free to download the full transcript HERE.