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The Trials and Tribulations of the Digital Economy: A #TLTaxCon19 Panel

The Trials and Tribulations of the Digital Economy: A #TLTaxCon19 Panel

Find here the full transcript for our #TLTaxCon19 panel on the trials and tribulations of the digital economy.

Mateo Jarrin: First, I'd like each one of the panellists to kind of introduce yourselves. So very briefly, just a couple minutes, let us know who you are. And we'll get started with the set of questions we have. The OECD helped us out with this panel by releasing their unified approach earlier this week, so we'll have plenty to talk about. So, Stella, would you like to please introduce yourself quickly?

Stella Raventós-Calvo: Hello, good morning, my name is Stella Raventós-Calvo. I'm a tax lawyer practicing in Spain. I currently chair the fiscal committee of the Confédération Fiscale Européenne (CFE), Tax Advisers Europe, which is the most important, I would say, probably the only confederation of all associations of tax advisors throughout Europe.

Ronaldo Apelbaum: So my name is Ronaldo Apelbaum. I came from Brazil. I'm a tax lawyer in Brazil. In the last ten years, I have been working for IT companies in Latin America. So a lot of these issues about digital tax, digital economy, they are always on my mind, we’re always talking about that. So thanks to Mateo for the invitation, and it’ll be a pleasure to talk to you about what's happening on the other side of the world.

John Richardson: My name is John Richardson. I live in Toronto, Canada. I run a boutique law practice basically helping anybody afflicted by US extraterritorial laws, meaning CBT, FATCA, that sort of stuff. And I am delighted to be here.

Mateo Jarrin Cuvi: Thank you. So what's great about this panel is we have three very different perspectives. We have representatives from Latin America, the US and Spain. So we'll get the different opinions and takes on what is going to happen with the taxation of the digital economy.

Question 1: What are your thoughts on the OECD’s latest idea regarding residual profit and their three-tiered approach allocating 3 profit categories to market jurisdictions?

Stella Raventós-Calvo: Thank you. The very first thing we should consider is that this is a very political debate. It's not a technical debate. It was obviously, people in all countries, I would say not just developing countries, but also developed countries have the feeling that digital…that's another point of discussion. What's a digital company? What's the digital economy? I've never believed in the digital economy. I believe in digital businesses, which is completely different because everything's going digital, but it's not essentially digital, the world is not entirely digital. But the voice was raised that digital companies didn't pay much in…didn't pay at all in many countries. And as a consequence of that and of the US tax system, they didn't pay at all. They didn't pay in the markets where they were active because of the existing rules. And, therefore, they had to pay. That's what the GAFAs was about.

Therefore, the OECD with its BEPS project started looking into an Action 1. Although it must be said that Action 1 was not against base erosion, it had nothing to do. Mentally, it had something to do with base erosion, but not technically. You cannot erode a base if you are complying with existing rules, so digital businesses were not eroding tax bases, they simply had not the rules in force to tax a presence in the country when there's no physical presence. That was the OECD model and the OECD’s existing rules, and they were not avoiding that. Simply, the rules didn't exist.

However, the OECD chose to put this Action 1 into the BEPS project, but it found itself in a situation where the economy was advancing and the business models were advancing very quickly. They didn't have the tools. And by the time they reacted, public opinion and the interest of individual countries was so high in the matter that they couldn't come up with an answer. That's the reason why many countries reacted with a unilateral measure, DST or whatever you want to call it.

Even the European Union proposed, in view of the popular sentiment, that digital businesses were not properly taxed. They came up with the two proposals for a directive, the most immediate one, the DST. And this year, we have to put that into context also with the US tax reform because unavoidably we are being led by the US again. I've heard with a lot of interest Filippo’s presentation, it all seems to come from the US, and I know they are the empire, the dominant economy, but still we are very easily led. And then we ended up with the US and India, on the other hand, the European Union, on the other hand, and this year things were pushed forward by Mr. Macron and Mr. Trump. And, in my view, that's my personal view, they had to come up with something very quickly. And that's what the OECD came up with one week ago.

Mateo Jarrin Cuvi: Thank you, Stella. John, I know you read it a few days ago and you have plenty to say. I know you have plenty to say always. So, please.

John Richardson: I really love coming to this conference, I came last year because I live in Canada, I don't really pay a lot of attention to the OECD generally. And I was horrified when I came last year, I was absolutely horrified to read this thing that came out a week ago or whatever.

I sort of want to add rather than repeat some of the things that were said. But what this really is, the most problematic thing about this is that it’s fundamentally a deemed income provision. I think everybody agrees fundamentally, okay, that there's a price to have access to markets. Let's look at this just in terms of normal day-to-day life. Okay, you want to advertise, you have to pay money to get into a market. If you want to access a computer, a consumer market, and this is aimed at things that are targeted to consumers, you have to pay the price and I do agree that the price of that is that you have to be taxed and be willing to pay tax and that, kind of, that's the fee, so to speak, to be able to get the profits.

The problem here is that as it states in this report that these international tax rules are, they are 100, and they are 99 years old, okay. They actually date back to the 1920s, where the world was just totally absolutely different. Okay, where all business was local, etc. Now, what we have is, it's not even a question of business being international. It's a question of business being without borders, global sort of thing, and that's why it's important that something be done to make sure that all businesses, not just the Facebooks and the Googles—I mean, they're just the symptom of the problem—that all businesses pay the price they need to be able to generate the profits in that country. It's not a question of fair share, it’s a question of that's the cost of business, so to speak, right?

But what we have going on here is the wrong answer to the right question, if I can put it that way. Spending most of my time thinking about US tax laws, I'm very used to and wary of anything that is a deeming provision. Now, you mentioned the US tax reform, and one of the things that happened was a massive expansion of what's called the subpart F regime, which is a fancy way of obscuring a system of rules to tax people on income they never actually received. That's what a deeming provision is and the amount A in this three-tiered thing is, in fact, a deeming provision. It is entirely possible and it would be my absolute expectation that if this were to go through as suggested, there will be plenty of companies that are going to be paying tax on income they never got, profits they never received, etc. And that is very problematic.

First of all, it's entirely unjust but secondly, we have to look at this contextually. So what does it mean? Let's take Facebook, for example. Probably the better solutions is to abolish Facebook than reform international tax; what possible value does Facebook bring to the world? So let's imagine that France went after them. Okay, let's imagine that under these rules that they have to pay X dollars tax on X dollars income in France now, you know that they got to deal with their US tax situation. So obviously, it's going to involve complete rethinking, I think expansion of the foreign tax credit rules. Because make no mistake about it, tax practitioners just sort of behave mechanically: Is this a credit, is that a credit? But politically, the United States hates foreign tax credits. Okay, they regard every foreign tax claim to a foreign tax credit is effectively stealing from the US economy. All right, that's really how this stuff is based, so I can easily imagine a situation where, I think it's a foregone conclusion, that as this thing is written, companies are going to be paying tax on income they never received, okay? They're not going to be able to use it as a tax credit and so it's going to involve massive double taxation. In fairness, wrong answer to right question, but interesting starting point for this discussion.

Mateo Jarrin Cuvi: Thank you, John. Ronaldo, your thoughts coming from Brazil.

Ronaldo Apelbaum: Okay, so what's really fun when we come from countries like Brazil, Argentina, Colombia, Peru, Mexico, when I was coming here to the event, 12-hour flight, so a lot of time to think because I'm unable to sleep. And I was wondering about and I was reading the new proposal, and I was wondering about taxation in countries where there is a massive use of technology, but there is almost no payment of taxes coming from the IT companies.

So I was looking at my cell phone. And I have a lot of payments that I do here. So Spotify, Google Drive, OneDrive and other payments. I'd like to ask you: how many invoices I receive every month related to all the things that I pay? Can you tell me how many invoices in Brazil are issued for this kind of services? Zero. And that's funny because if you go to the novel side of São Paulo, you’ll see the most beautiful building is from Google. Another very beautiful building is for Facebook. A lot of people work there, hundreds of people work for Google and Facebook in Brazil, and where's the tax? So where's the payment? I pay every month. I pay in dollars. It's not allowed in Brazil to make payments of services in US dollars. So it's very clear that this payment is not going to the Brazilian company; it's going to the US, it’s going to Ireland. So, and that's funny because, what happens in Brazil? Of course, we have a lot of problems. We had two years ago a judicial decision and we stayed without WhatsApp in Brazil for two days. So you imagine how people reacted to that.

But, in general, yes, we are free to use the technology. In general, yes, we can do whatever we need to be done in these platforms, and where is the tax going? It’s not going to Brazil. So when I read the report and I see all the discussions, what comes in my mind is and I have no answer for that. What's the best way to distribute it? In Latin America, we're talking about 600 million people and 90% of these people, they have smartphones. So they use a lot of IT services. And I don't see the companies paying not even sales tax, not even VAT, and imagine income tax in these companies. So it's a good challenge for us to discuss how to bring the money to all the jurisdictions in a way that would be fair for everybody to have some part of the taxation.

Stella Raventós-Calvo: Yes. And I fully share your view, Ronaldo. I think it's fair and that's why I said I don't talk about digital economy. I talk about digital businesses. There's some businesses that create value and raise a lot of money from the market. And I think it's fully justified that this market should get its share of revenue and taxes. Absolutely. I'm not discussing that. I’m fully aligned with that.

My problem lies with that not that specific proposal. There are many things in this, the OECD, I don't know. I know you're not very conversant with OECD, but for us in Europe, and in the OECD is the maximum inspirator and they’re trying to find a solution, which is acceptable to all jurisdictions. The problem lies with the proposal. Because there's so many question marks about it, it's impossible to implement. At the same time, advocating simplicity, it's completely lost to me here.

The first thing is that they're not just focusing on some digital businesses. They say that this proposal could be in principle applicable to all businesses that have a very heavy digital side. And that's my first point, what businesses? In my view, the rules for allocating profits to bricks-and-mortar businesses are clear and have worked for many decades already. So what should these businesses, what weight should these businesses have of digital to be included in this? Because we might find ourselves OPEL or General Motors fall within this because you can choose the car you're going to buy through the Internet. This is the first point that needs to be clarified because otherwise we will find ourselves in a very confusing world. That's the first thing.

It’s said by the OECD, “The approach covers highly digital business models but goes wider – broadly focusing on consumer-facing businesses with further work to be carried out on scope and carve-outs.” That's worrying. I don't think anyone can either object or approve of this because you don't have enough elements to know what we're talking about. Consumer-facing businesses, oh my god, all businesses are consumer-faced. What difference does it make that you look at the advert on your mobile phone or you just have a magazine and you look, oh, I like this photograph. So this is the first point that concerns me.

And then they’ve tried to put into a formula three aspects, which are, they look at the consumers. But the first amount A to be considered is a share of deemed residual profit allocated to market jurisdiction using a formulaic approach, the new taxing. The new taxing right, I can understand. It's a new thing. It's a new nexus. But what's the deemed residual profit allocated to market jurisdiction? What's the residual profit of Facebook? I'm a lawyer and not an economist. But this escapes me totally and I think so many issues are open here that the discussion will be extremely difficult.

John Richardson: I certainly would agree with you. One thing I would add, the issue is largely this notion of deemed residual profit and the allocation. But one of the things that I find very disturbing about it is that they appear to be trying to roll this out with assumed or deemed rates of profit for certain types of businesses and industries. And not only is it absurd, but it removes all incentives basically, I think, for companies to even bother to compete against each other. They've essentially legislated away any value to being a good businessman. Because all you can get is your deemed to get this rate of return on this or that.

And this reminds me very much of, I don't know how many of you are familiar with the new US GILTI laws, any of you? Okay. Yeah, the way this works and this is even worse, I think what’s proposed here. What they're doing is they're saying, effectively, we can quibble about technicalities, but effectively for all of these businesses, that they're allowed to have a 10% return on assets. In other words, that's their deemed profit and anything beyond that, okay, ready, rather they can have an actual 10% return, anything beyond that is subject to a deeming provision, okay, where you're taxed, on whether you received it or not, and this reminds me very…do you agree with that? Very much of the GILTI rules? And this stuff is horrific. Okay. I mean, just Google his stuff and just see, I mean, the only winners are the lawyers if they want to get involved in it.

The other thing that strikes me about it is that we talked about creating a new taxing right. And that's an interesting way of putting it. But to me, this looks an awful lot like the US concept of citizenship-based taxation. We're all, well, which by the way, is a bad thing. Make a note, bad thing, okay, because what it means is that it's a notion of deemed tax residency without any necessary connection to the jurisdiction at all. And it reminds me of this very much. Again, I fully agree these companies need to be paying tax, right? But there might be some other ways to go about this. Like, the first might be to get rid of Article 7 of the tax treaty, which, as you all know, says that unless you have a permanent establishment in the country, which really is code for physical presence, then you can't be taxed. Maybe some basic amendments to these treaties could actually go a long way and solve this rather than getting involved in this stuff. I agree with you that this cannot be implemented in any predictable way. Or, I think, any way that it strikes me as something where every participant is going to see unfairness.

Question 2: Oxfam’s John Langerock tweeted, “The big winners of this [Unified Approach] reform are all transfer pricing units of the Big Four!” What are your thoughts on this take?

Ronaldo Apelbaum: I don't know if this guy has already worked in a Big 4 company, I worked in a Big 4 company. And my salary was around $100 per month. So maybe it's good for the partners of the transfer pricing unit, and not for the Big 4 guys that need to calculate that.

But, in fact, and what we see in this new proposal of the report is that they are creating a kind of file. I'm tired of files. Everybody has in some time seen how it's difficult in Latin America to deal with files. So in Brazil, we work five, six, ten times more than other countries to fill files. They’re filling all kinds of information, numbers and numbers and numbers and facts. And what we see at the end of the day is absolutely nothing. So in the last company that I worked for, I received a tax auditor in the company from Brazil’s IRS. And he told me, “Something's wrong here, inside this company, I want to check.” A lot of things are wrong here. So what do you want? “I want to understand, I can't understand. You have been growing in the last five years and you are paying zero of income tax.” And then I told him, “You need to understand there is something called a tax planning. Multinational companies, they do tax planning. So we move revenue from one part to the other. We create agreements in order to move our revenue to countries where the taxation is lower.”

Stella Raventós-Calvo: Did you tell them that?

Ronaldo Apelbaum: Yes, why not? Everybody does that. Why not? So IT companies, digital companies, digital business in Brazil, for instance, they are created to not have profits inside the country. Profit is always moved to other parts. So it's very funny because we have this fact on one side. And, on the other hand, we have tax authorities.

For instance, in Brazil, they are feeling that they are empowered because of these kinds of reports. So, BEPS, the OECD, they are always saying, “No, all the countries desire to have revenue, taxation must be paid off around the world.” And now what we have? We have, let's say, maybe mature discussions here in UK, in the US, in Canada, and when you go to the tax authorities in countries like Brazil and Argentina, what we hear from them, “Yes, we want our part of this.” So tell me how to calculate, I have no idea. But we have a file, put your numbers here in this file, and we will tell you how much tax you should pay here. But we are not only going to tell you how much, we are going to send you a fine of 150% because you haven't paid that before. Oh my God, so, I don't know how much I should pay. They don't know how much we should pay. It's not calculated, there is no legislation, there is no law, there is nothing. They just come with a number. I don't know if you know, but interest in Brazil is 1% per month. So if I didn't pay the tax five years ago, I can pay the tax, a fine that may come to 150% plus 60% of interest on that amount. So if I didn't pay $100, I will receive a tax assessment of at least $250 when I’m under a tax audit. So this is crazy.

And then they come with these papers because, of course, I have been seeing a lot of events like this in Latin America, and tax authorities are on the table, and they are saying, “I'm going get you. You have to pay me.” How much? “No idea. We need to discuss a new law to implement that. But I feel that I can already go and catch your guy.” So this is what's happening. And this is funny, because when I saw your presentation, I think that you are in a world, and I'm in a completely different world. But it's very funny. So this is the implication that we have in developing countries. Tax authorities feel that they can simply charge you because now, what's fair? It's fair to pay taxes, wherever you are doing your business. And we know that should not be like that.

Stella Raventós-Calvo: It's so obvious that your tax authorities need a lot of education. This to me, I feel as if we were going back in history in the 1920s. This unified approach was discussed by the League of Nations as a curiosity. The Spanish representative defended the Spanish system, which was that of allocating a portion of the global profits to each country. And it was discarded by the OECD in 1963 with a draft and came up with this notion of separate enterprise. And that's the base for Article 9 and for the transfer pricing exercise, which to me, personally, I'm not talking here about the CFE, I'm talking as a lawyer, it's a bit of an artificial construction because it goes beyond the rational. In my view, the guidelines are not that clear for starters. I mean, if you ask 20 different transfer pricing experts about a solution, they will come up with different answers, which means that from the legal point of view, it's completely useless. You know that when you have a tax audit on transfer pricing, you will end up with an assessment, that's for sure. That's the only thing you can be sure of.

Thank God in Europe—I know that’s something you don't have—we have the convention. First, it was the arbitration convention and then we have the directive not to have double taxation when you have an assessment. What I think we will see in the future and you will have to live with that and push your tax authorities with that, is the mutual agreement procedure to find out a solution because, without that, these cases of double taxation will double or triple or whatever. And we will need a tool at least not to be taxed twice. I think we have all companies, businesses, also individuals, have to pay their fair share of taxes, but it's just once, and it's a discussion which has involved taxpayers, but, actually, it concerns tax authorities. That's it.

John Richardson: I don't think that they are any more or less affected than anybody else. Part of this is to get the transfer pricing thing off the table. Right. So I'm not sure where that comes from.

Stella Raventós-Calvo: Apparently they don't want to exclude it totally. They want to put it into the formula.

John Richardson: In the context of what we’re talking about, the digital economy. I mean, the paper talks about grandfathering extractive industries, which would be the 1920 business model. I have no idea.

Stella Raventós-Calvo: Purely extractive industries.

John Richardson: But it's clearly a minority. But the back and forth on this is indicative of part of the problem; we don't even know what an extractive industry is. I mean here we're talking about this. Facebook probably thinks they're an extractive industry.

Stella Raventós-Calvo: Doesn't this look to you as an anti-globalization program or tax protectionism stemming from the US?

John Richardson: Why do you think it’s coming from the US? Because it's like GILTI? Okay, I would agree that the GILTI thing is a very troubling analogy. I certainly agree with that. My view of the OECD is they're capable of having taught this up on their own.

Stella Raventós-Calvo: That’s the inclusive framework, it's not just the OECD.

John Richardson: It’s bad no matter what. But what strikes me about this is, I mean, we all agree on the complexity and the lack of clarity and definitions. I'm probably going to be lynched here, but I was really not all that offended by the French proposal to just slam a revenue tax on these people. Well, just simply the 3% of the revenue. I do appreciate, I mean, people immediately started screaming about how there's no income and blah, blah, blah. But that strikes me as a possible solution to this problem that avoids all of the other things we're talking about. I mean, I think the discussion and the bureaucracy of this is so troubling that I just don't think it's workable. And maybe what you do is you give companies a choice, you can submit your income to taxation, you write a law that says you can have a choice. You're going to be taxed and you have a choice of how to do it. One, you can be taxed on your profit in the company and we're going to do something about the transfer pricing rules, etc., with a clawback thing. Something like that. Or you can pay a 3% revenue tax. And I think that's not so bad, actually, in terms of solving the problem. I realized that that's a point of significant disagreement.

For the record, I am an anti-tax person generally. But looking for pragmatic solutions on this, I think this collapses under its own weight for lack of definitions and everything else. And why not just give them a choice? You can submit your income for taxation or you pay a flat revenue tax. I'm not really offended by that.

Question 3: Should a digital tax like the new French tax on revenue be permissible? Does it make economic sense?

Stella Raventós-Calvo: I think if we talk about simplification, which is very important, at the end of the day, a possible solution, technically, it's not correct because the 3% digital services tax applies to the gross income, not to the net income. That, in itself, is not correct. But apart from that, the problem lies in the fact that from the trends of this DST, people have concluded that it's an indirect tax and therefore excluded it from double tax treaties. If an agreement were reached that this is a direct tax, someone has suggested, “Well, let's consider it a direct tax and include it as an additional clause in double tax treaties.” And then this tax could be credited in the resident’s country against profits. But imagine that you have DST everywhere and then you go to the US and, I'm just thinking out loud, and you go to the United States and then you have GILT. So, you have no credits for that tax and you have this 3% in France on gross income, 3% in the UK, 3% in Spain, 3% in Cyprus, 3% everywhere.

Ronaldo Apelbaum: So, if you allow me. And this is something interesting, an experience that I would like to bring from a country like Brazil. In the last 20 years, we have worked a lot with the simplification model. We need to simplify. It's a big country; we don't know what happens. As I told you, no invoices, so we are unable to check what really happens. So let's create simple taxes. Let's tax gross revenue. So, two of the VATs, you can laugh we have several VATs in Brazil, two of them are based on gross revenue. And what does it mean at the end of the day? We have no idea how much we pay taxes.

So I receive every month my bill from the telecom services for my mobile phone and Internet at home, and it's written there how many taxes I pay on that. So it's there. 33% of the state VAT. But that's false, that's not true because companies, they pay this 33% state VAT on telecom services, but we have to pay more 10% of VAT on gross revenue. And this is not in the invoice, it’s not in the information; people don't know that companies in Brazil pay that. So, when we talk about electricity, we pay 45% of VAT, but that's not true. We pay 70% of taxes on electricity. And this is the same mistake that this kind of tax in France is bringing; people need to know how much they're paying on their services. I need to know. Okay, it's 20%, it's 40%, it's 60%, it’s 70% like I told you. Okay, that's fine, but I have the right to know that. It's hidden. Everything is hidden; this kind of taxes brings, at the end of the day, hidden taxation.

So we have also taxation in Brazil on bank accounts. Now we are having a very big discussion of tax reform in Brazil. I don't know if you've seen that in the newspaper. And there is a big conflict, some of the congressmen want taxation on invoices and other congressmen want taxation, out of the invoice, they want taxes on gross revenue, they want taxes on the bank account. So, if we go to lunch today, and you pay for me, I decide to reimburse you. I'm going to pay 3% of taxation and you're going to pay another 3% of taxation only because I forgot my credit card and someone needs to pay my lunch and I'm giving the money back. So be very careful.

What's the solution? I don't know the solution; I'm not here to bring solutions. Otherwise, I would send an invoice for this. But what I'd like to alert is that this kind of taxation is terrible. It's horrible. And in some years, in some decades, people will start paying a lot of tax and they have no idea about it. So this is not a real solution. I’m bringing this experience from a place that has been practicing this in the last 20, 30 years, and now what we have is that people have no idea about the taxation of services and goods.

John Richardson: Well, I mean, I think you both make really great points. It obviously is a very difficult problem. On the tax credit thing that you raise, the US didn't have tax credits; that was sort of step two in the evolution of their taxation. Originally, foreign taxes paid were just deducted. And maybe that's a viable way of handling that situation. It's easy, it's a number that is easy and one of the problems with this stuff again is complexity.

You made a really interesting point about going back to the notion long time ago of local taxes versus maybe global taxes. It won't be too long before somebody suggests that all corporate tax should just be global. Picked up by, say, Mateo, it all gets paid to Mateo and then Mateo decides how to distribute it or something. There's clearly no answer to this that is going to be acceptable to everybody.

But my DNA generally comes down on the side of simplicity and getting the lawyers and accountants out of it to the extent possible. At the end of the day, I think the solution to this is going to fall somewhere in the area of something that's analogous to a sales tax or revenue tax or something like this. I just don't think that this deemed income thing is the way to go.

Questions 4 & 5: How do we define non-routine profits? And, secondly, the unified approach talks in terms of looking at the financial statements of the companies because the financial statements give us information. Does the panel think that the current International Accounting Standards actually will result in the information appearing in the financial statements that the tax authorities think they need to be able to calculate this?

Stella Raventós-Calvo: I’ll answer the first question. The OECD says, “This deemed residual profit will be the profit that remains after allocating what will be regarded as a deemed routine profit on activities to the countries where the activities are performed.” And I have the same doubt as you have: What is a routine profit? Does it mean that all companies have the same profits? It can't be. It's the same mistake, but this is among friends, when you have a transfer pricing exercise and the OECD tells you that the comparables cannot be multinational companies, you end up comparing a big multinational company with domestic companies. That's, in my view, completely mistaken, because you have—of course, multinational companies can deviate profits—but at least you have a more general view of what a multinational company does if you compare a multinational company with another multinational company, not with a domestic company, which has nothing to do with how a multinational company works. This contradicts it. I mean, there are a lot of contradictions because economists are less precise than we lawyers are. That's my way of thinking, we stick to the law; economists are a bit different. But what's a deemed routine? Do you know how much a company must make? It will depend on many, many factors. You can have the same product and one company will be a success and another company will fail. What's the deemed routine? I don't have the answer to that. I'm sorry.

Ronaldo Apelbaum: And talking about financial statements. This is something very, very interesting because almost all countries have now the same standards for financial statements and financial reports. So, the financial report will show the situation after tax planning, after business. So, I think that we are already taxing what is written in the financial statements. So, I don't see that it would really show the profitability of certain businesses or something like that. When we come to Brazil’s example, multinational companies in Brazil they sign a lot of royalty agreements and will send revenue abroad. And when you get the financial statement, of course, we're going to see at the end of the day, losses. So all multinational companies in Brazil and Argentina, they have losses. When you go to Venezuela and go to Argentina, yes, we need to have losses because sometimes you need government authorization to send dividends abroad. You're not free to send dividends. So I don't think that financial statements are something that will really bring about the real situation of the company and how much tax should be paid, how much should you pay in that jurisdiction based on the reports.

Peter Wilson: What the unified approach says, is that you look at the consolidated financial statements, so you don't look at the individual country statements, and they think that the consolidated financial statements are going to enable them to work out income earned per country, although they say, maybe not per country, maybe per business line. And then they think that somehow the consolidated financial statements are going to give information about the income that's earned from the customers in each country. That seems to me that they haven't even taken any advice from any accountant.

Ronaldo Apelbaum: But you see, on the other hand, we have the expenses and costs to make that business happen in a certain country. So, for instance, to make the same revenue in countries like Brazil or Argentina is much more difficult because of credit and collection, payables and things like that than in developed countries. So I would need not only to take in consideration revenue, I would need to take in consideration revenue and all the costs and expenses that I need to make the same revenue in that country. At the end of the day, what would be fair? To have a separate financial statement for each one of the countries to know exactly how much you should pay. So, at the end of the day, we come back to what we have in the past, non-consolidated but separating country-by-country reports, expenses and costs. This would be fairer.

What may happen if you don't have that? Countries would start to discuss which part of that revenue they should tax. Which part of the profits they should tax? And they will say, “No, it's not so hard to make business in Brazil. You need to have 15, 20 guys only to pay the tax.” No, this does not make sense; you should split that all around the world and profitability in countries in Latin America would be higher than they really are. So this is complicated. As I told you, I don't have the answers, just question and feelings about all this.

John Richardson: Yeah, the harder part is the deemed profit thing. I suppose that if you get a room of accountants together you could somehow manage to prescribe forms of financial statements or something that would focus on the revenue generated in a given country, which seems to me to be the key. But this whole deemed return on these businesses… It's like Orwell was an optimist, right? It’s completely Orwellian. I just don't think that this can be done. That's why I keep coming back to something that's more analogous to a revenue tax or some kind of sales tax but it has to be paid by the company instead of the consumer. It’s very difficult. One other point, do support Jenny. Support Jenny. You all agree? Support Jenny.

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