An interesting exchange at the United Nations tax committee on Monday, tinged with a certain irony.
In the run up to the meeting, the United States Council for International Business had written a pretty angry letter to the Committee, copying in half the US Treasury, complaining about the committee’s new practical manual on transfer pricing (discussed in part 1 of this post). USCIB has some process concerns, and wants a public consultation, but its content issues focus on trying to excise any remaining text in the manual that is not watertight in its endorsement of the OECD transfer pricing guidelines. Richard Murphy and Alex Cobham’s analysis of the letter explains more.
In the tax committee’s parent body, the UN’s Economic and Social Committee (ECOSOC) a debate has been raging for some time about the tax committee’s 1) funding and 2) status. As the responses to last year’s consultation show, developing countries want 1) more funding and 2) an intergovernmental status for the UN’s tax work, while the OECD countries want 1) no more funding and 2) no change to the committee’s status.
So it was amusing to hear the tax committee’s Mexican chair respond to USCIB’s concerns by stating that the committee 1) had no funds to organise a public consultation, and 2) wasn’t obliged to take on board any comments, since it is purely a committee of experts expressing their individual opinions, not an intergovernmental body. “Please keep your intervention short, as there is no room for negotiation on this,” was his last word to USCIB. I wonder if business will consider supporting increased resources and status for the committee as a result?
The committee then agreed the manual as drafted, although this was followed by a remark from the United States official observer to the meeting suggesting that, since the manual is a “living document”, it might seek to implement USCIB’s suggested deletions after the membership of the tax committee changes next year.
This wasn’t the only US versus the World moment of the tax committee meeting so far. On Tuesday the committee agreed to start work on a new article for its model convention that would give developing countries the right to tax payments for technical services, management and consultancy fees made by their taxpayers to people resident overseas. Depending on how it’s done, this could be seen either as a step to help tackle “base erosion and profit shifting” (a form of tax dodging that we can refer to as ‘BEPS’) or a fundamental shift in the balance of taxation towards developing countries.
Numerous developing country representatives spoke up in what was the most animated session so far this week, all describing the pressing need for this change to help them tackle BEPS. In contrast, official observers from the US and UK (two countries that are probably big recipients of the kinds of fees to be taxed) not only argued for the need to clarify between the two possible aims, but also cast doubt on the developing countries’ argument that there was a problem at all.
The committee noted their objection and carried on regardless.
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