G20 Communique: Cross Border Tax Setting Schedule And Poor Pparency Will Be Defended.

The G20 Hangzhou summit communiqu stated that it will continue to support international tax cooperation to establish a global fair and modern international tax system and promote growth, including promoting the ongoing tax base erosion and profit pfer (BEPS) action plan, tax information exchange, and developing tax capacity building in developing countries.

And so on, in order to promote growth and raise tax certainty.

Huang Jia, PWC's chief partner of China's Shanghai, analyzed the purpose of the international tax cooperation in the communique, which is to promote economic growth, that is, to promote the sustainability and inclusive growth of the global economy.

Moreover, the communiqu is very pragmatic in promoting international tax cooperation, and has put forward specific timetables and roadmaps, such as requiring relevant countries to sign and approve the multilateral tax collection and management Mutual Aid Convention, and implement the automatic financial information exchange standard by the end of 2018.

In addition, the communiqu is clear.

The area that has not yet achieved satisfactory progress in implementing the international tax pparency standards will consider developing defensive measures.

According to one industry analysis, these measures may include unilateral tax protection bases for G20 countries, full taxation of multinational enterprises' profits, and restrictions on capital inflow and outflow, trade restrictions and cargo restrictions on the above jurisdictions.

Huang told our reporter that the development of globalization and emerging industries poses challenges to tax rules, policies and collection and management systems. Under such circumstances, international taxation is at a time of historic pformation.

The existing tax rules are often not able to keep pace with the global economic development. This provides opportunities for some multinationals to pfer their profits to zero tax or low tax areas by using legal arrangements (or legal loopholes).

This problem is called BEPS.

The OECD calculates conservatively that governments lose up to $250 billion a year in BEPS behavior.

Against this background, G20 leaders commissioned the OECD BEPS project at the 2013 St Petersburg summit to implement the international tax reform program aimed at revising the international community.

To curb pnational corporations from circumvention of global tax obligations and to erode national tax bases.

In October 5, 2015, OECD released all 15 outputs of the BEPS project and endorsed G20 leaders in November of that year.

At present, the countries that joined the BEPS action plan have expanded from the original 61 to the present 85.

The international tax cooperation advocated by the communique is another major issue.

Huang said that due to the different development of different countries and the time needed for revision of domestic laws, the communiqu on the basis of consultation with the parties decided that the relevant countries should sign and ratification of the multilateral tax collection and Mutual Aid Convention as soon as possible or through bilateral agreements, and implement the standard of automatic exchange of financial accounts by the end of 2018.

In the communique, the "list of jurisdictions will be considered for the development of defensive measures". According to the analysis of the industry, a country should avoid duplication of Taxation on multinational operations under the condition of full pparency of international taxation. For example, a multinational company has a profit of 100 yuan, levying a profit of 80 yuan in A, and levying a tax of 20 yuan in another country.

However, under the condition of insufficient international tax pparency, the A tax authorities can not judge whether the multinational company has 20 yuan profit in another country, nor is it clear whether the 20 tax profits are reasonable on the other side.

Under such circumstances, a more extreme case of defensive measures is to impose a full tax on the profits of the multinational company unilaterally, that is, to impose a tax on the profits of 100 yuan.

This is a very simple defensive measure, the source said.