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French Digital Devices Tax--Translation

Published Aug 04, 2019 - Follow author Allison: - Permalink

I posted this as a public google doc but in case it is useful, here is a side by side google translate of the French DST (official French text here) (highlights my own of course):



TEXTE ADOPTÉ n° 256
« Petite loi »

ASSEMBLÉE NATIONALE
CONSTITUTION DU 4 OCTOBRE 1958
QUINZIÈME LÉGISLATURE

SESSION ORDINAIRE DE 2018-2019
9 avril 2019

PROJET DE LOI
portant création d’une taxe sur les services numériques
et modification de la trajectoire de baisse de l’impôt sur les sociétés,

ADOPTÉ PAR L’ASSEMBLÉE NATIONALE EN PREMIÈRE LECTURE.

(Procédure accélérée)

L’Assemblée nationale a adopté le projet de loi dont la teneur suit :
Voir les numéros : 1737, 1838, 1800 et 1819.
...............................................................
TEXT ADOPTED No. 256
"Small law"

NATIONAL ASSEMBLY
CONSTITUTION October 4, 1958
FIFTHPARLIAMENT

SESSION OF 2018-2019
April 9, 2019

BILL
establishing a tax on digital services and modified downward trajectory of corporation tax,


ADOPTED BY THE NATIONAL ASSEMBLY AT FIRST READING.

(Accelerated procedure)

The National Assembly adopted the following draft law:
See the numbers: 1737, 1838, 1800 and 1819.
................... ......................................

Article 1er

Article 1

1
I. – Le code général des impôts est ainsi modifié :
I. - The general tax code is amended as follows:
2
1° Le chapitre II du titre II de la première partie du livre Ier est ainsi rétabli :
1 ° Chapter II of Title II of the first part of Book I is reinstated:
3

« CHAPITRE II

"CHAPTER II

4
« Taxe sur certains services fournis
par les grandes entreprises du secteur numérique

" Tax on certain services provided by large enterprises in the digital sector

5
« Art. 299. – I. – Il est institué une taxe due à raison des sommes encaissées par les entreprises du secteur numérique définies au III, en
contrepartie de la fourniture en France, au cours d’une année civile, des services définis au II.

" Art. 299. - I. - A tax is levied due on the sums collected by the companies of the digital sector defined in III, in return for the supply in France, during a calendar year, of the services defined in II.

6
« II. – Les services taxables sont :

"II. - The taxable services are:

7
« 1° La  mise à disposition, par voie de communications électroniques,   d’une interface numérique qui permet aux utilisateurs d’entrer en contact avec d’autres utilisateurs et d’interagir avec eux, notamment en vue de la
livraison de biens ou de la fourniture de services directement entre ces utilisateurs. Toutefois, la mise à disposition d’une interface  numérique n’est pas un service taxable :

"(1) The provision, by means of electronic communications, of a digital interface which enables users to come into contact with other users and to interact with them, particularly with a view to the delivery of goods or the provision of services directly between those users. However, the provision of a digital interface is not a taxable service:

8
« a) Lorsque la personne qui réalise cette mise à disposition utilise l’interface numérique à titre principal pour fournir aux utilisateurs :

"(a) When the person making the provision uses the digital interface principally to provide users with:

9
10
11
« – des contenus numériques ;
« – des services de communications ;
« – des services de paiement, au sens de l’article L. 314-1 du code monétaire et financier ;

" - digital content;

"- communications services;

"- payment services, within the meaning of Article L. 314-1 of the Monetary and Financial Code;

12
« b) Lorsque l’interface numérique est utilisée pour gérer les systèmes et services suivants :

"(b) Where the digital interface is used to manage the following systems and services:

13




14




15







16
« – les systèmes de règlements interbancaires ou de règlement et de livraison d’instruments financiers, au sens de l’article L. 330-1 du même code ;
   « – les plates-formes de négociation définies à l’article L. 420-1 dudit  code ou les systèmes de négociation des internalisateurs systématiques définis à l’article L. 533-32 du même code ;
 « – les activités de conseil en investissements participatifs, au sens de  l’article L. 547-1 du même code, et, s’ils facilitent l’octroi de prêts, les services d’intermédiation en financement participatif, au sens de l’article
L. 548-1 du même code ;
      « – les autres systèmes de mise en relation, mentionnés dans un arrêté  du ministre chargé de l’économie, dont l’activité est soumise à autorisation
et l’exécution des prestations soumise à la surveillance d’une autorité de régulation en vue d’assurer la sécurité, la qualité et la transparence de transactions portant sur des instruments financiers, des produits d’épargne ou d’autres actifs financiers ;

“- interbank settlement systems or the settlement and delivery of financial instruments within the meaning of Article L. 330-1 of the same Code ;

  "- the trading venues defined in Article L. 420-1 of the said Code or the trading systems of the systematic internalisers defined in Article L. 533-32 of the same Code;

 "- Participatory investment consulting activities, within the meaning of Article L. 547-1 of the same Code, and, if they facilitate the granting of loans, participatory financing intermediation services, within the meaning of Article L. 548-1 of the same Code;

"- the other linking systems mentioned in an order of the Minister for the Economy whose activity is subject to authorization and the performance of services subject to the supervision of a regulatory authority with a view to ensure the security, quality and transparency of transactions involving financial instruments, savings products or other financial assets;

17
« c) Lorsque cette mise à disposition n’est pas un service qui relève du 2° du présent II et que l’interface numérique a pour objet de permettre
l’achat ou la vente de prestations visant à placer des messages publicitaires dans les conditions prévues au même 2° ;

"(c) Where such making available is not a service falling under 2 ° of this II and the purpose of the digital interface is to allow the purchase or sale of services intended to place advertising messages under the conditions provided for the same 2 °;

18
« 2° Les services commercialisés auprès des annonceurs, ou de leurs mandataires, visant à placer sur une interface numérique des messages publicitaires ciblés en fonction de données relatives à l’utilisateur qui la
consulte et collectées ou générées à l’occasion de la consultation de telles interfaces. Ces services peuvent notamment comprendre les services  d’achat, de stockage et de diffusion de messages publicitaires, de contrôle publicitaire et de mesures de performance ainsi que les services de gestion  et de transmission de données relatives aux utilisateurs.

2 ° Services marketed to advertisers, or their agents, aiming to place on a digital interface targeted advertising messages based on data relating to the user who

consults it and collected or generated during the consultation of such interfaces. Such services may include, but are not limited to, purchasing, storing and advertising, advertising control and performance measurement services, and user data management and transmission services.

19
« Sont  exclus des  services taxables  les services mentionnés  aux 1° et 2° du présent II fournis entre entreprises appartenant à un même groupe, au sens du dernier alinéa du III.

"Taxable services are excluded from the services mentioned in 1 ° and 2 ° of this II provided between enterprises belonging to the same group, within the meaning of the last paragraph of III.

20
« III. – Les entreprises mentionnées au I sont celles, quel que soit leur  lieu d’établissement, pour lesquelles le montant des sommes encaissées en contrepartie des services taxables lors de l’année civile précédant celle
mentionnée à ce même I excède les deux seuils suivants :

"III. - The companies mentioned in I are those, regardless of their place of establishment, for which the amount of sums received for taxable services in the calendar year preceding the calendar year mentioned above exceeds the following two thresholds:

21

22
« 1° 750 millions d’euros au titre des services fournis au niveau mondial ;
     « 2° 25 millions d’euros au titre des services fournis en France, au sens de l’article 299 bis.

“-1 ° 750 million euros for services provided worldwide;

“-2 ° 25 million euros for services provided in France, within the meaning of Article 299a.

23
« Pour les entreprises, quelle que soit leur forme, qui  sont liées, directement ou indirectement, au sens du II de l’article L. 233-16 du code  de commerce, le respect des seuils mentionnés aux 1° et 2° du présent III s’apprécie au niveau du groupe qu’elles constituent.
"For companies, whatever their form, which are related, directly or indirectly, within the meaning of II of Article L. 233-16 of the Commercial Code, compliance with the thresholds mentioned in 1 ° and 2 ° of this It is appreciated at the level of the group that they constitute.
24
« Art. 299 bis. – I. – Pour l’application du présent chapitre :
"Art. 299 bis. - I. - For the purposes of this chapter:
25
« 1° La France s’entend du territoire  national, à l’exception des collectivités régies par l’article 74 de la Constitution, de la Nouvelle-Calédonie, des Terres australes et antarctiques françaises et de l’île de Clipperton ;
"(1) France means the national territory, with the exception of the communities governed by Article 74 of the Constitution, New Caledonia, the Southern Territories and French Antarctic and Clipperton Island;
26
« 2° L’utilisateur d’une interface numérique est localisé en France s’il la consulte au moyen d’un terminal situé en France ;
"2° The user of a digital interface is located in France if he consults it by means of a terminal located in France;
27
« 3° (nouveau) Les encaissements versés en contrepartie de la fourniture d’un service taxable défini au 1° du II de l’article 299 s’entendent de l’ensemble des sommes versées par les utilisateurs de cette interface, à l’exception de celles versées en contrepartie de biens ou de services dont l’achat n’est pas indispensable à l’utilisation de l’interface et n’en permet pas une utilisation dans de meilleures conditions ;
  "3° (new) Receipts paid in consideration for the supply of a taxable service defined in 1 ° of II of article 299 are the sum of the sums paid by the users of this interface, to the except those paid for goods or services the purchase of which is not essential for the use of the interface and does not permit its use under better conditions;
28
« 4° (nouveau) Les encaissements versés en contrepartie de la fourniture d’un service taxable défini au 2° du même II s’entendent de l’ensemble des
sommes versées par les annonceurs, ou leurs mandataires, en contrepartie de la réalisation effective du placement des messages publicitaires ou permettant  de réaliser un tel placement dans de meilleures conditions.
"4 ° (new) Receipts paid in consideration for the supply of a taxable service defined in 2 ° of the same II all the are sums paid by the advertisers, or their agents, in return for the actual realization placement of advertising messages or to make such an investment in better conditions.
29
« II. – Les  services taxables  mentionnés au 1° du II  de l’article 299 sont fournis en France au cours d’une année civile si :
"II. - The taxable services mentioned in 1 ° of II of article 299 are provided in France during a calendar year if:
30
« 1° Lorsque l’interface numérique permet la réalisation, entre utilisateurs de l’interface, de livraisons de biens ou de prestations de services, une telle opération est conclue au cours de cette année par un utilisateur localisé en France ;
"1 ° When the digital interface allows the realization, between users of the interface, of deliveries of goods or services, such an
operation is concluded during this year by a user located in France;
31
« 2° Lorsque l’interface numérique ne permet pas  la réalisation de livraisons de biens ou de prestations de services, un de ses utilisateurs dispose au cours de cette année d’un compte ayant été ouvert depuis la France et lui permettant d’accéder à tout ou partie des services disponibles sur cette interface.
2 ° When the digital interface does not allow the realization of deliveries of goods or services, one of its users has during this year an account that has been opened from
France and allowing him to access all or part of the services available on this interface.
32
« III. – Les services taxables mentionnés au 2° du II de l’article 299      sont fournis en France au cours d’une année civile si :
"III. - The taxable services mentioned in 2 ° of II of article 299 are provided in France during a calendar year if:
33
« 1° Pour les services autres que ceux mentionnés au 2° du présent III, un message publicitaire est placé au cours de cette année sur une interface numérique consultée par un utilisateur localisé en France ;
"1 ° For services other than those mentioned in 2 ° of this III, an advertising message is placed during this year on a digital interface consulted by a user located in France;
34
« 2° Pour les ventes de données qui ont été générées ou collectées à l’occasion de la consultation d’interfaces numériques par des utilisateurs, des données vendues au cours de cette année sont issues de la consultation d’une de ces interfaces par un utilisateur localisé en France.
2 ° For the sales of data that were generated or collected during the consultation of numerical interfaces by users, data sold during this year are derived from the consultation of one of these interfaces by a user located in France.
35
« IV. – Lorsqu’un service taxable mentionné au II de l’article 299 est    fourni en France au cours d’une année civile au sens des II ou III du présent
article, le montant des encaissements versés en contrepartie de cette fourniture est défini comme le produit de la totalité des  encaissements versés au cours de cette année en contrepartie de ce service par le pourcentage représentatif de la part de ces services rattachée à la France évalué lors de cette même année. Ce pourcentage est égal :
"IV. - Where a taxable service referred to in II of article 299 is provided in France during a calendar year as defined in II or III of this
article, the amount of the receipts paid in return for that supply is defined as the product of all the receipts paid during this year in return for this service by the representative percentage of the share of these services attached to France evaluated during the same year. This percentage is equal to:
36
« 1° Pour les services mentionnés au 1° du II du présent article, à la proportion des opérations de livraisons de biens ou de fournitures de services pour lesquelles l’un des utilisateurs de l’interface numérique est localisé en
France ;
"1 ° For the services mentioned in 1 ° of II of this article, the proportion of the operations of deliveries of goods or supplies of services for which one of the users of the digital interface is located in
La France ;
37
« 2° Pour les services mentionnés au 2° du même II, à la proportion      des utilisateurs qui disposent d’un compte ayant été ouvert depuis la France et permettant d’accéder à tout ou partie des services disponibles à partir de
l’interface et qui ont utilisé cette interface durant l’année civile concernée ;
2 ° For the services mentioned in 2 ° of the same II, the proportion of users who have an account having been opened from France and allowing access to all or part of the services available from
the interface and who used this interface during the calendar year concerned;
38
« 3° Pour les services mentionnés au 1° du III du présent article, à la proportion des messages publicitaires placés sur une interface numérique consultée par un utilisateur localisé en France ;
"3 ° For the services mentioned in 1 ° of III of this article, the proportion of advertising messages placed on a digital interface consulted by a user located in France;
39
« 4° Pour les services mentionnés au 2° du même III, à la proportion    des utilisateurs pour lesquels tout ou partie des données vendues ont été générées ou collectées à l’occasion de la consultation, lorsqu’ils étaient
localisés en France, d’une interface numérique.
'4 ° For the services mentioned in 2 ° of the same III, the proportion of users for whom all or part of the data sold were generated or collected during the consultation, when they were
located in France, a digital interface.
40
« Art. 299 ter. – Le fait générateur de la taxe prévue à l’article 299 est constitué par l’achèvement de l’année civile au cours de laquelle l’entreprise définie au III du même article 299 a encaissé  des sommes en contrepartie de la fourniture en France de services taxables. Toutefois, en cas de cessation d’activité du redevable, le fait générateur de la taxe intervient lors de cette cessation.
"Art. 299 ter. - The operative event for the tax provided for in Article 299 is the completion of the calendar year in which the enterprise defined in Article 299 (III) has received cash in return for the supply in France of taxable services. However, in the event of the cessation of activity of the taxable person, the chargeable event occurs during the cessation.
41
« Le redevable de la taxe est la personne qui encaisse les sommes. La     taxe devient exigible lors de l’intervention du fait générateur.
"The person liable for the tax is the person who cashes the money. The tax becomes chargeable when the generating event occurs.
42
« Art. 299 quater. – I. – La taxe prévue à l’article 299 est assise sur le montant, hors  taxe sur la valeur ajoutée, tel que défini au IV de l’article 299 bis, des sommes encaissées par le redevable, lors de l’année au
cours de laquelle la taxe devient exigible, en contrepartie d’un service taxable fourni en France.
"Art. 299 quater. - I. - The tax provided for in Article 299 is based on the amount, excluding value added tax, as defined in Article 299 (IV), of the sums collected by the taxable person, in the year in which
during which the tax becomes due, in return for a taxable service provided in France.
43
« Toutefois, ne sont pas prises en compte les sommes versées  en contrepartie de la mise à disposition d’une interface numérique qui facilite
la vente de produits soumis à accises, au sens du 1 de l’article 1er de la directive 2008/118/CE du Conseil du 16 décembre 2008 relative au régime général d’accise et abrogeant la directive 92/12/CEE, lorsqu’elles présentent un lien direct et indissociable avec le volume ou la valeur de ces ventes.
'However, the sums paid in return for the provision of a digital interface which facilitates are not taken into account.
the sale of excise goods within the meaning of Article 1 (1) of Directive 2008/118 /Council Directive of 16 December 2008 on the general excise system and repealing Directive 92/12 / EEC where they have a direct and inseparable link with the volume or value of those sales.
44
« II. – Le  montant de la  taxe est calculé  en appliquant à l’assiette  définie au I un taux de 3 %
"II. - The amount of the tax is calculated by applying to the base defined in I a rate of 3%.
45
« Art. 299 quinquies. – Pour l’application du présent chapitre, les sommes encaissées dans une monnaie autre que l’euro sont converties en appliquant
le dernier taux de change publié au Journal officiel de l’Union européenne, connu au premier jour du mois au cours duquel les sommes sont encaissées.
"Art. 299 quinquies. - For the purposes of this Chapter, sums received in a currency other than the euro shall be converted by applying
the latest exchange rate published in the Official Journal of the European Union, known as the first day of the month in which the sums are cashed.
46
« Art. 300. – I. – La taxe prévue à l’article 299 est déclarée et liquidée par le redevable selon les modalités suivantes :
"Art. 300. - I. - The tax provided for in article 299 is declared and liquidated by the taxable person in the following manner:
47
« 1° Pour les redevables de la taxe sur la valeur ajoutée soumis au régime réel normal d’imposition mentionné au 2 de l’article 287, sur l’annexe à la déclaration mentionnée au 1 du même article 287 déposée au
titre du mois de mars ou du premier trimestre de l’année qui suit celle au cours de laquelle la taxe est devenue exigible ;
"(1) For the taxable persons liable for the value added tax subject to the normal real tax system mentioned in 2 section 287, on the schedule to the return referred to in paragraph 1 of the same section 287 filed for
the month of March or the first quarter of the year following the year in which the tax became due;
48
« 2° Pour les redevables de la taxe sur la valeur ajoutée soumis au        régime réel simplifié d’imposition prévu à l’article 302 septies A, sur la déclaration annuelle mentionnée au 3 de l’article 287 déposée au titre de l’exercice au cours duquel la taxe est devenue exigible ;
2 ° For the taxable persons liable for the value added tax subject to the simplified real taxation system provided for in Article 302f A, on the
annual declaration referred to in paragraph 3 of Article 287 filed for the financial year in question. during which the tax became due;
49
« 3° Dans tous les autres cas, sur l’annexe à la déclaration prévue au 1 de l’article 287, déposée auprès du service de recouvrement dont relève le siège ou le principal établissement du redevable, au plus tard le 25 avril de
l’année qui suit celle au cours de laquelle la taxe est devenue exigible.
"3 ° In all other cases, on the annex to the declaration provided for in 1 of article 287, filed with the collection office to which the head office or the principal place of business of the taxable person belongs, not later than 25 April of
the year following the year in which the tax became due.
50
« II. – La taxe est  acquittée dans les conditions  prévues à l’article 1693 quater, sauf par les redevables soumis au régime  réel simplifié d’imposition prévu à l’article 302 septies A, pour lesquels elle est
acquittée dans les conditions prévues à l’article 1692. Sans préjudice des dispositions prévues aux articles L. 16 C et L. 70 A du livre des procédures fiscales, elle est recouvrée et contrôlée selon les mêmes procédures et sous les mêmes sanctions, garanties, sûretés et privilèges que les taxes sur le chiffre d’affaires. Les réclamations sont présentées, instruites et jugées  selon les règles applicables à ces mêmes taxes.
"II. - The tax is paid in accordance with Article 1693 quater, except by the taxable persons subject to the simplified real taxation regime provided for in Article 302f A, for which it is paid under the conditions set out in Article 1692. Without prejudice to the provisions of articles L. 16 C and L. 70 A of the book of fiscal procedures, it is recovered and controlled according to the same procedures and under the same sanctions, guarantees, security and privileges as the taxes on the digit business. Claims are presented, processed and judged according to the rules applicable to these same taxes.
51
« III. – Tant que le droit de reprise de l’administration est susceptible   de s’exercer, conformément à l’article L. 177 A du livre des procédures fiscales, les redevables conservent, à l’appui de leur comptabilité,
l’information des sommes encaissées mensuellement en contrepartie de chacun des services taxables fournis, en distinguant celles se rapportant  à un service fourni en France, au sens des II et III de l’article 299 bis et, le cas échéant, celles exclues de l’assiette en application du second alinéa du I de l’article 299 quater, ainsi que les éléments quantitatifs mensuels utilisés pour calculer les proportions prévues au IV de l’article 299 bis. L’information sur les sommes encaissées mensuellement précise, le cas échéant, le montant encaissé dans une monnaie autre que l’euro et le montant converti en euro selon les modalités prévues à l’article 299 quinquies, en  faisant apparaître le taux de change retenu en application du même article 299 quinquies.
"III. - As long as the right of repossession of the administration is likely to be exercised, in accordance with Article L. 177A of the book of the fiscal procedures, the taxable persons keep, in support of their accounts,
the information of the sums received each month for each of the taxable services provided, distinguishing those relating to a service provided in France, within the meaning of II and III of Article 299a and, where appropriate, those excluded from the tax base pursuant to second subparagraph of Article 299c (1) and the monthly quantitative elements used to calculate the proportions provided for in Article 299a (IV). The information on the sums received monthly shall specify, where appropriate, the amount received in a currency other than the euro and the amount converted into euros in the manner provided for in Article 299d, showing the exchange rate used. under the same Article 299d.
52
« Ces informations sont tenues à la disposition de l’administration et lui sont communiquées à première demande.
"This information is held at the disposal of the administration and is communicated to him on first request.
53
« IV. – Lorsque le redevable n’est pas établi dans un État membre de  l’Union européenne ou dans tout autre État partie à l’accord sur l’Espace économique européen ayant conclu avec la France une convention d’assistance administrative en vue de lutter contre la fraude et l’évasion fiscales ainsi qu’une convention d’assistance mutuelle en matière de recouvrement de l’impôt, il fait accréditer auprès du service des impôts compétent un représentant assujetti à la taxe sur la valeur ajoutée établi en France, qui s’engage, le cas échéant, à remplir les formalités au nom et pour le compte du représenté et à acquitter la taxe à sa place. » ;
"IV. - Where the person liable is not established in a Member State of the European Union or in any other State party to the Agreement on the European Economic Area which has concluded an assistance agreement with France for the
Administrative purpose of combating tax evasion and tax evasion as well as a mutual assistance agreement on the collection of tax, it has accredited to the relevant tax service a representative liable for the value added tax established in France, who undertake, where appropriate, to complete the formalities in the name and on behalf of the principal and to pay the tax in its place. "
54
2° Le II quater de la section II du chapitre Ier du livre II est ainsi rétabli :
2 ° IIc of Section II of Chapter I of Book II is hereby reinstated:
55
« II quater : Régime spécial de la taxe sur certains services fournis par les grandes entreprises du secteur numérique
  
"IIc: Special tax regime on certain services provided by large undertakings in the digital sector

56
« Art. 1693 quater. – I. – Les redevables de la taxe prévue à l’article 299 autres que ceux soumis au régime réel simplifié d’imposition prévu à l’article 302 septies A acquittent cette taxe au moyen de deux acomptes
versés lors de l’année au cours de laquelle elle devient exigible et au moins égaux à la moitié du montant dû au titre de l’année précédente.
" Art. 1693 quater. - I. - Persons liable for the tax provided for in Article 299 other than those subject to the simplified real tax scheme provided for in Article 302f A shall pay this tax by way of two installments
paid during the current year. from which it becomes due and at least equal to half of the amount due for the previous year.
57
« Le premier acompte est  versé lors de la déclaration  de la taxe devenue exigible l’année précédente.
"The first installment shall be paid when the tax becomes due the previous year.
58
« Le second acompte est versé :
"The second installment shall be paid:
59
« 1° Pour les redevables de la taxe sur la valeur ajoutée soumis au        régime réel normal d’imposition mentionné au 2 de l’article 287, lors du dépôt de l’annexe à la déclaration mentionnée au 1 du même article 287
déposée au titre du mois de septembre ou du troisième trimestre de l’année ;
" (1) For the persons liable for the value added tax subject to the normal real tax system mentioned in 2 of article 287, when depositing the annex to the declaration mentioned in 1 the same article 287
filed for the month of September or the third quarter of the year;
60
« 2° Dans les autres cas, au plus tard le 25 octobre, lors du dépôt de    l’annexe à la déclaration prévue au même 1 déposée auprès du service de recouvrement dont relève le siège ou le principal établissement du redevable.
"2 ° In other cases, no later than 25 October, when filing the annex to the declaration provided for in the same 1 deposited with the collection office to which the head office or the principal establishment of the taxable person belongs.
61
« II. – Les redevables qui estiment que le paiement  d’un acompte conduirait à excéder le montant de la taxe définitivement dû peuvent  surseoir au paiement de ce dernier ou minorer son montant.
"II. - Taxable persons who consider that the payment of a deposit would lead to exceeding the amount of the tax definitively due may defer the payment of the latter or reduce its amount.
62
« Lorsqu’un redevable fait usage de la faculté prévue au premier alinéa du présent II et que le montant de la taxe finalement  dû est supérieur de plus de 20 % au montant des acomptes versés, l’intérêt de retard prévu à l’article 1727 et la majoration prévue à l’article 1731 sont applicables.
"The interest for late payment and the increase mentioned in the second paragraph of this II shall be applied to the positive difference between, on the one hand, the sum of the amount of each of the two installments which would have been paid in the absence of any modulation to the and, on the other hand, the sum of the amount of each of the two installments actually paid.
63
« L’intérêt de retard et la  majoration mentionnés au deuxième alinéa  du présent II sont appliqués à la différence positive entre, d’une part, la somme du montant de chacun des deux acomptes qui auraient été versés en
l’absence de modulation à la baisse et, d’autre part, la somme du montant   de chacun des deux acomptes effectivement versés.
"Where a debtor makes use of the option provided for in the first paragraph of this II and the amount of the tax finally due is more than 20% higher than the amount of the installments paid, the late payment interest provided for in Article 1727 and the increase provided for in Article 1731 shall apply.
64
« III. – Le montant de taxe dû est régularisé lorsqu’elle est déclarée. Le cas échéant, les montants à restituer aux redevables sont imputés sur
l’acompte acquitté lors de cette déclaration puis, si nécessaire, sur celui acquitté postérieurement la même année ou, en cas d’absence ou d’insuffisance des acomptes, remboursés.
"III. - The amount of tax due is regularized when it is declared. Where applicable, the amounts to be refunded to the taxable persons shall be deducted from
the advance paid on that declaration and, if necessary, from the amount paid later in the same year or, in the event of absence or insufficiency of the down payments, reimbursed.
65
« Art. 1693 quater A. – En cas de cessation d’activité du redevable, le montant de la taxe prévue à l’article 299 qui est dû au titre de l’année de cessation d’activité est établi immédiatement. Elle est déclarée, acquittée
et, le cas échéant, régularisée selon les modalités prévues pour la taxe sur la valeur ajoutée dont il est redevable ou, à défaut, dans les soixante jours suivant la cessation d’activité.
"Art. 1693 quater A. - In the event of cessation of activity of the taxable person, the amount of the tax provided for in Article 299 which is due in respect of the year of cessation of activity shall be determined immediately. It shall be declared, paid
and, where appropriate, adjusted in accordance with the terms laid down for the value added tax to which it is liable or, failing that, within sixty days following the cessation of activity.
66
« Art. 1693 quater B. – I. – Un redevable de la taxe prévue à l’article 299 qui n’est pas soumis au régime réel simplifié d’imposition prévu à
l’article 302 septies A peut choisir de déclarer et d’acquitter la taxe pour l’ensemble des redevables du groupe, au sens du dernier alinéa du IV de l’article 299, auquel il appartient. Dans ce cas, l’article 1693 ter ne s’applique pas à cette taxe.
"Art. 1693 quater B. - I. - A taxable person provided for in section 299 who is not subject to the simplified real tax system provided for in
Article 302f A may elect to declare and pay the tax for all the persons liable for the group within the meaning of the last paragraph of Article 299 IV, to which he belongs. In this case, Article 1693 ter does not apply to this tax.
      
67
« Cette option est exercée avec l’accord de l’ensemble des redevables  du groupe concerné.
"This option is exercised with the agreement of all taxpayers of the group concerned.
68
« II. – Le redevable recourant à l’option prévue au I formule sa demande auprès du service des impôts dont il dépend. Cette option prend effet pour les paiements et remboursements intervenant à compter de la déclaration
déposée l’année suivant la réception de la demande par ce service.
"II. - The taxpayer using the option provided for in I formulates his request to the tax office on which he depends. This option takes effect for payments and refunds occurring from the declaration
filed the year following receipt of the request by that service.
69
« III. – L’option est exercée pour au moins trois années.
"III. - The option is exercised for at least three years.

« Le redevable renonçant à l’option formule sa demande de renonciation auprès du service des impôts dont il dépend. Cette renonciation prend effet
pour les paiements et remboursements intervenant à compter de la déclaration de l’année déposée l’année suivant la réception de la demande par ce service.
"The taxpayer renouncing the option formulates his request for renunciation to the tax office on which he depends. This renunciation takes effect for the payments and refunds occurring from the declaration of the year filed the year following the reception of the request by this service.
70
« L’option s’applique pour la taxe due par tout nouveau membre du    groupe concerné. En cas de désaccord de ce dernier, il est renoncé à  l’option dans les conditions prévues au deuxième alinéa du présent III.
"The option applies for the tax due by any new member of the group concerned. In case of disagreement of the latter, the option is waived under the conditions set out in the second paragraph of this III.
71
« IV. – La déclaration déposée par le redevable recourant à l’option mentionne les montants dus par chaque membre du groupe.
"IV. - The declaration filed by the taxpayer using the option mentions the amounts owed by each member of the group.
72
« V. – Le redevable recourant à l’option prévue au I obtient les remboursements de la taxe due par les redevables membres du groupe consolidé, le cas échéant, par imputation des montants dus par les autres membres et acquitte les droits et les intérêts de retard et pénalités prévus au chapitre II du présent livre en conséquence des infractions commises par   les redevables membres du groupe.
"V. - The taxpayer using the option provided for in I shall obtain refunds of the tax due by the consolidated group of taxable persons, if any, by charging the amounts owed by the other members and paying the fees and interests of the delay and penalties provided for in Chapter II of this Book as a result of the offenses committed by the class members.
74
« VI. – Chaque redevable  membre du groupe est tenu solidairement   avec le redevable recourant à l’option prévue au I au paiement de la taxe et, le cas échéant, des intérêts de retard et pénalités correspondants que le redevable recourant à l’option prévue au même I est chargé d’acquitter, à hauteur des droits, intérêts et pénalités dont le redevable membre du groupe serait redevable si l’option mentionnée audit I n’avait pas été exercée. » ;
"VI. - Each taxpayer who is a member of the group is jointly and severally liable with the taxpayer using the option provided for in Article I to pay the tax and, where applicable, interest on arrears and penalties corresponding to the taxpayer using the option provided for in the same I is liable to pay, up to the amount of the rights, interests and penalties of which the party liable for the group would be liable if the option mentioned in audit I had not been exercised. " ;
75
3° À l’article 302 decies, après les mots : « des articles », est insérée la référence : « 299, » ;
3 ° In Article 302i, after the words: "Articles", the reference is inserted: "299,";
76
(Supprimé)
4 ° (Deleted)
77
II. – Le titre II de la première partie du livre des procédures fiscales est ainsi modifié :
II. - Title II of the first part of the Book of Tax Procedures is amended as follows:
78
1° Le I ter de la section II du chapitre Ier est ainsi rétabli :
1 ° I ter of Section II of Chapter I is hereby reinstated:
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« I ter : Taxe sur certains services fournis  par les grandes entreprises du secteur numérique
'I ter: Tax on certain services provided by large undertakings in the digital sector
80
« Art. L. 16 C. – L’administration fiscale peut demander au redevable  de la taxe prévue à l’article 299 du code général des impôts  des justifications sur tous les éléments servant de base au calcul de cette taxe
sans que cette demande constitue le début d’une vérification  de comptabilité ou d’un examen de comptabilité.
' Art. L. 16 C. - The tax authorities may ask the person liable for the tax provided for in Article 299 of the General Tax Code to justify all the elements used to calculate this tax without this request being the beginning of an accounting audit or an accounting examination.
81
« Cette demande indique expressément  au redevable les points sur lesquels elle porte et lui fixe un délai de réponse, qui ne peut être inférieur à deux mois.
"This request expressly indicates to the person liable for the points to which it relates and fixes a time limit for replies, which can not be less than two months.
82
« Lorsque le redevable n’a pas répondu ou  a répondu de façon insuffisante à la demande de justifications dans le délai prévu par celle-ci, l’administration fiscale lui adresse une mise en demeure de produire ou decompléter sa réponse dans un délai de trente jours, en précisant, le cas échéant, les compléments de réponse souhaités. Cette mise en demeure mentionne la procédure de taxation d’office prévue à l’article L. 70 A. » ;
"Where the person liable has not replied or has not replied sufficiently to the request for justifications within the period provided for therein, the tax authorities shall send him a formal notice to produce orspecified
complete his reply within aperiod of time. thirty days, specifying, if necessary, the desired additional answers. This formal notice mentions the automatic taxation procedure provided for in Article L. 70 A. ";
83
1° bis (nouveau) Après  le troisième  alinéa de l’article  L. 48, il est inséré un alinéa ainsi rédigé :
1 ° bis (new) After the third paragraph of Article L. 48, a paragraph is inserted as follows:
84
« Pour   le redevable  membre d’un groupe   mentionné à l’article 1693 quater B du code général des impôts, l’information prévue au premier alinéa du présent article porte, en ce qui concerne la taxe prévue à l’article 299  du code général des impôts et les pénalités correspondantes,sur les montants dont ce redevable serait redevable en l’absence d’appartenance au groupe. » ;
"For the taxpayer member of a group referred to in article 1693 quater B of the general tax code, the information provided for in the first paragraph of this article shall, in respect of the tax provided for in Article 299 of the General Tax Code and the corresponding penalties, on the amounts of which that person would be liable in the absence of membership of the group. "
85
2° Le B du I de la section V du même chapitre Ier est complété par un    article L. 70 A ainsi rédigé :
2 ° B of I of section V of the same Chapter I is supplemented by an article L. 70 A as follows:
86
« Art. L. 70 A. – Lorsque, dans les trente jours de la réception de la       mise en demeure mentionnée au dernier alinéa de l’article L. 16 C, le redevable s’est abstenu de répondre, n’a pas complété sa réponse ou l’a complétée de manière insuffisante, l’administration  fiscale peut procéder à la taxation d’office du redevable au titre de la taxe prévue à l’article 299 du code général des impôts. » ;
"Art. L. 70 A. - Where, within thirty days of the receipt of the notice mentioned in the last paragraph of Article L. 16 C, the taxpayer has refrained from answering, has not completed his answer or has insufficiently completed it, the tax authorities may proceed to the ex officio taxation of the taxable person in respect of the tax provided for in article 299 of the general tax code. "
87
(nouveau) L’article L. 177 A est ainsi rétabli :
3 ° (new) Article L. 177 A is thus reinstated:
88
« Art. L. 177 A. – Par dérogation au premier alinéa de l’article L. 176,  pour la taxe sur certains services fournis par les grandes entreprises du
secteur numérique prévue à l’article 299 du code général des impôts, le  droit de reprise de l’administration s’exerce jusqu’à la fin de la sixième année suivant celle au cours de laquelle la taxe est devenue exigible conformément aux dispositions de l’article 299 ter du même code.
"Art. L. 177 A. - By way of derogation from the first paragraph of Article L. 176, for the tax on certain services provided by large enterprises in
the digital sector provided for in Article 299 of the General Tax Code, the right to take back the administration shall continue until the end of the sixth year following the year in which the tax became due in accordance with the provisions of Article 299 ter of the same Code.
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« Par dérogation au deuxième alinéa de l’article L. 176 du présent      code, pour la taxe prévue à l’article 299 du code général des impôts, le
droit de reprise de l’administration s’exerce jusqu’à la fin de la dixième année suivant celle au cours de laquelle la taxe est devenue exigible conformément à l’article 299 ter du même code. »
"Notwithstanding the second paragraph of Article L. 176 of this Code, for the tax provided for in Article 299 of the General Tax Code, the right of repossession of the administration is exercised until the end of the tenth year following the year in which the tax became due in accordance with Article 299b of the same Code.
90
III. – La taxe prévue à l’article 299 du code général des impôts due au  titre de l’année 2019 donne lieu au paiement d’un acompte unique, acquitté dans les conditions que l’article 1693 quater du même code prévoit pour le
second acompte.
"III.- The tax provided for in article 299 of the general tax code for the year 2019 gives rise to the payment of a single deposit, paid under the conditions that article 1693 quater of the same code provides for the
second down payment .
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Il est égal au montant de la taxe qui aurait été liquidée sur la base des sommes encaissées en 2018 en contrepartie du ou des services taxables
fournis en France. Le pourcentage représentatif de la part des services rattachés à la France défini au IV de l’article 299 bis du même code est évalué lors de la période courant du lendemain de la publication de la présente loi au 30 septembre 2019.
It is equal to the amount of the tax that would have been liquidated on the basis of the sums collected in 2018 in exchange for the taxable service or services
provided in France. The representative percentage of the services attached to France defined in IV of article 299 bis of the same code is evaluated during the period running from the day after the publication of this law to 30 September 2019.
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Pour la liquidation de la taxe prévue à l’article 299 du code général des impôts due au titre de l’année 2019, le pourcentage représentatif de la part des services rattachés à la France défini au IV de l’article 299 bis du même code est évalué lors de la période courant du lendemain de la publication de la présente loi au 31 décembre 2019.
For the liquidation of the tax provided for in article 299 of the general tax code for the year 2019, the representative percentage of the share of services attached to France defined in IV of article 299 bis of the same
 code is assessed during the period running from the day after the publication of this Act to 31 December 2019.
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IV. – L’option prévue à l’article 1693 quater B du code général des    impôts peut, pour la taxe prévue à l’article 299 du même code due au titre  de l’année 2019, être exercée jusqu’au 30 septembre 2019 et prend effet à
partir du premier paiement à compter de cette date.
IV. - The option provided for in article 1693 quater B of the general tax code may, for the tax provided for in article 299 of the same code due for the year 2019, be exercised until September 30, 2019 and take effect
from the first payment from that date.
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V (nouveau). – Le   Gouvernement   remet au Parlement,   avant le 30 septembre de chaque exercice, un rapport sur les négociations conduites au sein de l’Organisation de coopération et de développement économiques
pour identifier et mettre en œuvre une solution internationale coordonnée destinée à renforcer l’adéquation des règles fiscales internationales aux évolutions économiques et technologiques modernes. Ce rapport précise notamment, pour chaque proposition figurant dans le document de consultation publique de février 2019 ou toute autre proposition postérieure, la position de la France, de l’Union européenne et de chaque juridiction fiscale participant à ces travaux et la motivation de chacune de ces positions, l’état d’avancement des négociations, les perspectives d’aboutissement et  l’impact budgétaire, fiscal, administratif et économique pour la France et les entreprises françaises. Il rend compte aussi, le cas échéant, des progrès des travaux menés sur ces questions dans le cadre de l’Union européenne ou tout autre cadre international pertinent.
V (new). - The Government submits to Parliament, by 30 September of each financial year, a report on the negotiations conducted within the Organization for Economic Co-operation and Development
to identify and implement a coordinated international solution designed to enhance the adequacy of international tax rules to modern economic and technological developments. This report specifies in particular, for each proposal contained in the public consultation document of February 2019 or any other subsequent proposal, the position of France, the European Union and each tax jurisdiction participating in this work and the motivation of each of them. these positions, the state of negotiations, the prospects for success and the budgetary, fiscal, administrative and economic impact for France and French companies. It also reports, where appropriate, on the progress of work on these issues within the framework of the European Union or any other relevant international framework.
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Il fait également état de l’incidence de ces négociations sur la taxe sur les services numériques prévue à l’article 299 du code général des impôts et indique, le cas échéant, la date à laquelle un nouveau dispositif mettant en œuvre la solution internationale coordonnée pourrait se substituer à cette taxe.
It also reports on the impact of these negotiations on the digital service tax provided for in Article 299 of the General Tax Code and indicates, where appropriate, the date on which a new scheme implementing the coordinated international solution could substitute for this tax.
96
Il peut faire l’objet de débats dans les conditions prévues  par les règlements des assemblées parlementaires.
It may be debated under the conditions provided by the regulations of the parliamentary assemblies.

Article 1er bis (nouveau)

Article 1 bis (new)

1
Le Gouvernement remet au Parlement, dans un délai de trois mois à compter de la promulgation de la présente loi, un rapport dressant un état  des lieux de la fiscalité pesant sur les entreprises du secteur du commerce.
Il précise les différences de prélèvement entre les entreprises du commerce physique et les entreprises du commerce en ligne, notamment transnationales.
The Government shall submit to Parliament, within three months of the promulgation of this law, a report on the state of taxation of businesses in the commerce sector. It specifies the differences in the levy between the companies of the physical trade and the companies of the on-line trade, in particular transnational
2
Ce rapport élabore des propositions en vue d’aboutir à un cadre fiscal      plus équitable entre les différentes formes de commerce.
This report elaborates proposals for a more equitable fiscal framework between different forms of trade.

Article 2
Article 2
1
I. – Le  deuxième alinéa  du I de l’article 219  du code général des impôts est complété par une phrase ainsi rédigée : « Par dérogation, pour   les exercices ouverts du 1er janvier au 31 décembre 2019, le taux normal de
l’impôt est fixé, sans préjudice des dispositions prévues au 2° du c du présent I, à 33,1/3 % pour les redevables ayant réalisé un chiffre d’affaires égal ou supérieur à 250 millions d’euros. »
I. - The second paragraph of I of Article 219 of the General Tax Code is supplemented by a sentence worded as follows: "By way of derogation, for the financial years beginning on 1 January to 31 December 2019, the normal rate of the tax is fixed, without prejudice to the provisions of 2 ° c of this I, to 33.1 / 3% for taxable persons having a turnover equal to or greater than 250 million euros.
2
II. – Le chiffre  d’affaires mentionné à la seconde phrase du deuxième    alinéa du I de l’article 219 du code général des impôts s’entend de celui réalisé par le redevable au cours de l’exercice ou de la période d’imposition,
ramené s’il y a lieu à douze mois. Pour la société mère d’un groupe mentionné à l’article 223 A ou à l’article 223 A bis du code général des impôts, le chiffre d’affaires est apprécié en faisant la somme des chiffres d’affaires de chacune des sociétés membres de ce groupe
"II.- The turnover referred to in the second sentence of the second paragraph of I of Article 219 of the General Tax Code refers to that made by the taxpayer during the financial year or period of taxation,
reduced to if necessary at twelve months. For the parent company of a group referred to in article 223 A or article 223 A bis of the general tax code, the turnover is assessed by summing the turnover of each of the member companies of this group.
3
III. – Au   premier alinéa   du 2° du F du I   de l’article 84 de   la loi n° 2017-1837 du 30 décembre 2017 de finances pour 2018, les mots :
« , dans sa rédaction résultant du 1° du présent F, » sont supprimés.
III. - In the first paragraph of 2 ° F of the I of article 84 of the law n ° 2017-1837 of the 30 December 2017 of finances for 2018, the words:
", in its wording resulting from the 1 ° of this F," are deleted.
4
IV. – Les  dispositions  des I et II s’appliquent  aux exercices clos à compter du 6 mars 2019.
IV. - The provisions of I and II apply to financial years ending on or after 6 March 2019.

Article 3 (nouveau)
Article 3 (new)
1
  À compter de 2020, le Gouvernement  remet au Parlement, avant le   30 septembre de chaque année, un rapport sur les résultats de la taxe prévue à l’article 299 du code général des impôts et sur son impact économique. Ce rapport précise également la répartition du produit de la taxe en fonction,
d’une part, des catégories de services mentionnées au II du même article 299  et, d’autre part, de l’origine géographique des groupes redevables.

  From 2020, the Government shall submit to Parliament, by 30 September of each year, a report on the results of the tax provided for in Article 299 of the General Tax Code and its economic impact. This report also specifies the distribution of the product of the tax in function, on the one hand, of the categories of services mentioned in II of the same article 299 and, on the other hand, the geographical origin of the groups liable to pay. 

2
Il peut faire l’objet d'un débat  dans les conditions prévues par  les règlements des assemblées parlementaires.

It may be debated under the conditions provided by the by-laws of the parliamentary assemblies.





Délibéré en séance publique, à Paris, le 9 avril  2019.

Le Président, Signé : RICHARD FERRAND
Deliberated in public session, in Paris, on April 9, 2019.

The President, Signed: RICHARD FERRAND


Tagged as: Digital services tax Tax law

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More Info + Better Analytics = Less Tax Evasion: Guest Post by Gaute Solheim

Published Apr 23, 2019 - Follow author Allison: - Permalink

There is little doubt that information is key to effective taxation, and that modern data collection systems are making tax administrators' (and in some ways, honest taxpayers') lives much easier.  I am personally wary of governments (or anyone) amassing all of the data gathering and analytic tools they might like, because I am concerned that life in the panopticon will not be tolerable for lots of reasons. My tolerance for leakage in taxpayer compliance to forestall the complete surveillance of all human activity by government may be higher or lower than others; I am not sure. But the following guest post by Gaute Solheim of the Norwegian Tax Administration gives a nice summary of the tax administrator's more optimistic view. Cross posted from the Surly Subgroup.

Do You Really Need More Information?

By Gaute Solheim, Senior Tax Advisor, Norwegian Tax Administration 

(Mr. Solheim writes in his individual capacity and does not purport to represent the views of the Norwegian Tax Administration.)
In a previous post, I explained with reference to the Cui 2017 paper on Third Party Information Reporting (TPIR) why I expect good quality TPIR, based on a primitive analysis of the human factor in corporate filings. When I started rereading Cui’s paper, I only read a few lines before a chapter heading from the CIA textbook “The Psychology of Intelligence Analysis” popped into my mind: Do you really need more information? That book contains a full chapter (starting on page 51) on how more information sometimes contributed nothing to the quality of the analysis, but was of immense help for the confidence of the analyst.
I will below make my argument for why the answer should be “yes” when it concerns the TPIR data mentioned by Cui in the paper, but it is a qualified yes. TPIR is a bit like cooking. Fantastic raw materials will not end up as gourmet meals on their own. You need a talented and skilled chef and a kitchen with the right tools, as well.
Having spent some time on capacity-building with less developed tax administrations than the Norwegian, I agree with Cui that establishing a TPIR machinery should not be the first priority in these countries. However, TPIR being the wrong starting point for some developing countries is not an argument for abstaining from it in Norway and other jurisdictions with better-resourced administrations. I will below state my case for why I find TPIR useful based on my observations working for the Norwegian Tax Administration (NTA) (which may of course differ from the opinions of the NTA itself).
My knowledge of U.S. or Canadian use of TPIR is limited, but there is a very fascinating story told in a paper by Keith Fogg about the work of the IRS agent Joe West. It is a story starting with an audit in the late eighties continuing into the nineties and ending with the IRS getting a summons for credit card information linking US taxpayers to bank accounts in the Caribbean. That information eliminated credit cards as an easy means of taxpayer access to evaded funds.
Norway was quick to copy and paste the IRS methodology. First as specific requested information. Then, a few years later, TPIR routines were in place, giving us digitally all the credit card transactions from financial institutions. The information was used in a large audit project identifying Norwegians with undeclared financial wealth in other jurisdictions. It did not take long before it was common knowledge among taxpayers that this modus operandi did not fly anymore. The value of this TPIR as a tool to uncover hidden wealth and income in foreign jurisdictions diminished quickly, as measured in volume of reassessments.
Warning: Do not use for tax evasion
Collection of TPIR is not without costs, and after some years, the extra revenue from reassessments probably did not cover the total cost of the collection of this dataset. One could then conclude that this was a big heap of worthless gigabytes. To me that would be flawed logic, like concluding that a fence is pointless if you never find anyone on the wrong side of it. TPIR done right is to a large extent automated audits. Taxpayers knowing that they will be selected for audit on specific issues are inclined to stay compliant or shift to another, more cumbersome, modus operandi like diamonds in a toothpaste tube (see here and here). The toothpaste modus operandi had a shorter life span than the credit card scheme, and then we got FATCA and CRS.
Calculating the value of TPIR as a mental fence keeping more taxpayers inside the compliance triangle would be a hard nut to crack. I will not even try, but I would be surprised if it was insignificant. The story starting with IRS agent Joe West auditing Dorchester Industries and owner Frank Wheaton Jr. in the eighties, and ending in Norway with a lot of TPIR data with few reassessments illustrates a life cycle. It started with tax authorities going out and collecting specific third-party information needed for cracking cases with serious tax evasion; it was later streamlined as part of the TPIR system; and it ended up as mental fences for tax compliance. Today, that specific TPIR has other analytical uses for the NTA as well.
Almost all the numbers needed for producing a correct tax return for the majority of personal taxpayers in Norway already exist digitally on some third party computer somewhere. The number of sources is much smaller than the number of taxpayers. Having a system of distributing digital numbers from a small number of sources to everyone, having everyone manually punch the same numbers into different kinds of software on their home computers, and then collect all these numbers—with all their typing mistakes—does not make sense to me. It did not make sense in 2010, either. For most Norwegian taxpayers, it has not made sense the last two decades.
The main use of TPIR in Norway today is to prepopulate individuals’ tax returns, which are then made available for the taxpayer for correction and amendments. All of this ensures that we may handle millions of tax returns untouched by humans, including auditing every single entry in most of them. The NTA can do this by relying on recycling of existing data established by the business sector as part of its recording of business transactions. Businesses do it on computers with software designed to handle these exchanges of information. It means that, as a taxpayer, I may go skiing this weekend instead of sitting indoors punching numbers into some tax program on a sunny winter weekend. I love it both as a taxpayer and from nine to five as a tax auditor.
A new deduction wanted by the Norwegian government illustrates why TPIR is the way to go. The government wants personal expenses for toll roads to be deductible from income. There is a logic behind that, but that’s not my focus. The public toll roads are 100% digital and all payments are linked to an identified person. To avoid double deductions, the gross toll road payment must be reduced by the amount each individual has reclaimed from his employer or deducted as business expenses. A large part of these toll payments sits as digital information on the servers of the employers.
The NTA’s way of thinking is that TPIR is our friend. The payments on cars registered to non-business people may be reported as TPIR from a few toll road operators. The correction for reclaimed or already deducted payments may be one more item in the existing TPIR filing from employers on each employee. We do not know at this stage what percentage of all the tax returns we may prepopulate with the correct deduction by using TPIR, but we are aiming very high. Designing the compliance program for this deduction without TPIR is not a tempting alternative.
Establishing the infrastructure needed for TPIR of a specific set of data is the main cost. The exchange itself is comparably very low cost if the software doing the job is well designed and integrated in the data systems of the reporting entities. Ask any tax manager, and they will tell you that tax auditors asking for information that the Enterprise Resource Planning (ERP) software (which manages business processes and accounting) is already programmed to produce is a small burden compared to collecting ad hoc sets of data that the ERP is not programmed to report.
We could do targeted audits, waiting three to five years and launch an identical audit program, collecting the same dataset ad hoc, and then spend a lot of resources on sorting out all the mistakes and non-compliance uncovered by the audits. It does not make sense in 2019 to operate like this. It is much more cost efficient to do the work needed to design the software and needed infrastructure that ensures that there will be a steady flow of good quality TPIR.
Within the OECD, there is a program called SAF-T, Standard Audit File for Tax. The core of this is that businesses must run their accounting on software designed for exchange of data in a standard digital format. When this is implemented, my guess is that we will see a new drop in cost per gigabyte TPIR, and it will certainly reduce the taxpayer’s cost of handing over data in response to ad hoc requests. Portugal is at the forefront of using SAF-T, with ten years of experience, generating gigabytes of TPIR monthly on VAT transactions and much more (see here and here).
The constant expansion of what tax administrations receive as TPIR should also influence the more rational taxpayers. They now know that you never know what the next dataset will be. Would you engage in a toothpaste scheme if you knew that FATCA was two years away? What tax administration veil of ignorance will be the next to fall with the help of TPIR? It gets harder and harder for the taxpayer to rationalize away the risk of future exposure of presently hidden activity.
I will restate that TPIR is a superb ingredient in the hands of a skilled chef in a well-equipped kitchen, but add that you really need a close partnership with your suppliers to make it happen without prohibitive costs.
Yes, we really need more information.

Tagged as: analytics compliance data evasion governance tax policy theory

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What Kinds of Corporate Entities Evade Tax? The Human Factor in Third Party Info Reporting

Published Apr 15, 2019 - Follow author Allison: - Permalink

Under what circumstances should we expect corporate entities to evade tax? The following guest post by Gaute Solheim of the Norwegian Tax Administration posits that it is most likely when they are small, owner-operator gigs, and much less likely when they are giant multinationals. The rationale, drawn from insights about why third party reporting is vital in a self-reporting system, is that the bigger the company, the more people have to work cooperatively to engage in fraud, many of whom will be employees with no direct economic upside. Of course there must be exceptions--Enron comes to mind. But Solheim's observation is that the human self-interest that makes third party reporting an effective compliance tool also minimizes the frequency and scope of Enron-type evasion. Cross posted from the Surly Subgroup.
Gaute Solheim, Senior Tax Advisor, Norwegian Tax Administration
(Mr. Solheim writes in his individual capacity and does not purport to represent the views of the Norwegian Tax Administration.)
I happened to reread a paper by Wei Cui from 2017 on Third Party Information Reporting (TPIR) some weeks ago. Based on my own practical experience working for the Norwegian Tax Administration, I found it hard to agree with him on uselessness of TPIR. In this post, I will explain why I expect good quality in TPIR filing. I plan to write a later post on why TPIR is useful.
I will start with crediting Cui for outlining very well what I will call “the story of the corporate tax revenue collection machine.” He does a good job describing how the government has outsourced the bulk of the revenue collection to corporations. I would love to see papers adding empirical numbers to this description. My Norwegian perspective is a world of VAT, corporations withholding taxes on wages and delivering massive amounts of data used to prepopulate the personal tax filings. The way Cui describe the role of the corporations in the “tax revenue collection machine” is probably even more spot on for me than for a reader with a US perspective.
As I read Cui, he expect legal entities to cooperate sufficiently to ensure fairly good quality TPIR. He does some reasoning on why this is to be expected, but I did not find his arguments very convincing. This may be because for some years I have had a different line of reasoning ending with the same conclusion. What follows is based on material I used in a talk some ten years ago for my colleagues at the Large Taxpayer Office in Norway. The theme of that talk was why we found less evasion in our segment of taxpayers than what other tax auditors found when auditing smaller entities. I called the talk “The Human Factor in Tax Filing”. I believe the reasoning I used there also may explain high quality TPIR.
To make it clear: This is about tax evasion (or deliberately misreporting). Tax avoidance is a different beast.
I started out by observing that legal entities cannot write, and hence are unable to fill out their own tax returns. They need human beings to help them. My next observation was that you can split these “helpers” into two groups. Group one is humans with direct economic upside from evasion, typically the owner(s) of the entities. Group two is humans with no direct economic upside from evasion, typically employees without an owner interest. My third observation was that the influence these two groups had on the filings was strongly linked to the size of the entities. In the smallest one-person owner/manager entities, people with direct personal economic upside from evasion (group one) have a large influence on the numbers filed. In the largest multinational corporations, people with no personal direct economic upside from cheating (group two) do most of the work.
Based on these unsystematic observations of reality, I made the following diagram of my estimate of how the influence of people with economic upside from misreporting (red line) and those without (blue line) varies as a function of entity size. The vertical axis goes from zero control to a hundred percent. On the horizontal axis, each entity is counted as one.Capture1st.PNGI do not have empirical studies to back up any claim that the balance of influence between the two groups shift at a specific gross income or similar figure. If forced to make a guesstimate, I would, for Norway, say somewhere around USD 5 million, with big variations among business segments. I will, for the sake of simplicity, use USD 5 million as the crossing point.
Corporations with less than USD 5 million in revenue are by far the main bulk of the population. Based on this perspective, we would logically start wondering why all these entities represented by humans with incentives to cheat average to a compliance rate of 90% or better. This is the perspective I understand Cui is debating in the last half of his paper, and he formulated some explanations that did not fully convince me.
As a longtime tax auditor, the number of entities to me is an administrative problem. I’ve always measured my own work in money saved: How much of the tax gap did I manage to plug? To get this perspective on reality, I must change the unit of measurement on the horizontal axis from entities to dollars. Each entity claims a space equal to the share of the total government revenue collected or paid by that entity.Capture2nd.PNGSomething very interesting happens to the perspective when we change from entities to dollars: The main bulk of government revenue is collected, reported and paid by the small group of big entities where the people with no upside is in full control over the numbers reported.
I only have hard numbers for corporate income tax (CIT) in Norway to back up this perspective, but I am confident that it holds true in general. Sixty-five percent of all CIT in Norway is paid by entities with revenue higher than approximately USD 150 million. The corporations with billions in revenue and thousands of employees are few, but they represent the bulk of what matters. When we use this perspective—money—we see that individuals with no personal gain from non-compliance handle the main share of input to the revenue collection machine and TPIR. This is true whether the reports are on wages and taxes withheld from them, VAT, or the entities’ own corporate income tax.
There is another important human factor, the down side. I have observed legal entities with feelings only when someone employed by the entity has made a mistake and the mistake has become public. The public relation department will issue a statement telling the public “The entity is very sorry that a trusted person have failed to live up to the high ethical standards of the entity as explicitly laid out in internal memos, rules, etc.” Then they throw that someone under the bus. Everybody knows this.
Since everybody knows this, it would be strange if that knowledge did not shape the behavior of the people engaged in taking care of compliance tasks on behalf of the huge impersonal corporation. They have no personal gain and they know who the scapegoat will be.
Based on this rather simple analysis of the human factors involved, I am convinced that compliance and quality TPIR is what I in general should expect from large corporations. I do know from experience that in some particular settings this will not hold true, but the big picture is to expect compliance. I will now shift to the smaller entities.
Cui gives a few examples illustrating how the employer and the employee have a win-win scenario in misreporting (cheating). He leaves out some elements that I find very practical in real life. I must confess that a few times in my life it has happened that I was guilty of doing something qualifying at least for a fine. But I’ve never been tempted to do something that relied on recruiting a partner in crime. Somehow human nature realises without thinking too hard about it that conspiracy is on a different scale than a moment of weak ethics. If you do not figure it out on your own, the penal code makes that very clear.
The win-win situation described by Cui differs a lot from an owner/manager deciding to keep some income off the books. While you may do that alone as owner/manager, the Cui win-win may only be established by recruiting someone to take part in the scheme. In addition, the owner knows that employers and employees from time to time end up with conflicting interests. Lay-offs are but one example. From my limited knowledge of the US penal system and tax legislation, I have the impression that an employee deciding to inform the IRS about the misdeeds of a corporation may get much more lenient treatment than the corporation and the owner/manager of that corporation. As a hypothetical owner/manager, I would at least think twice.
This is not saying that this kind of collusion does not happen. It does, but the human factor and a simple risk analysis informs me that it should be more the exception than the rule. Undeclared income is a much more likely scenario in the small corporations than manipulated TPIR. This result is not produced by the integrity of the corporation, which I believe has none, but is what you expect from human beings when acting based on the incentives present in the situation. The sum of these very human choices is what we may call a compliant corporation, sending the tax authorities high-quality TPIR.
As Cui correctly observes, even high-quality TPIR is pointless if it does not contribute to something useful. Tax authorities are collectors of revenue, not of data points. Why I do not agree when Cui concludes that TPIR is not useful will be the theme for a later blog post.
And again: This was about evasion, not avoidance.

Tagged as: compliance guest post information institutions tax gap

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Monday at McGill: Mason on the Illegality of EU Digital Services Taxes

Published Dec 01, 2018 - Follow author Allison: - Permalink

Ruth Mason, Class of 1957 Research Professor of Law, University of Virginia, will visit McGill next Monday to give a talk on her forthcoming work with Leopolda Parada on the compatibility of digital services taxes with EU law. In brief Mason and Parada posit that the focus of proposed EU digital services taxes on very large multinationals is intended to target US-based giants (Google, Amazon, etc) but in fact implicate EU treaty-based anti-discrimination provisions applicable to their EU-based subsidiaries. Here is the abstract:
This Article uses the example of company-size classifications to explore the role of disproportionate impact and legislative intent in judicial review of Member State laws for nationality discrimination. Our discussion of disproportionate impact is mostly descriptive—we explore how the Court has resolved questions of quantum and proof in the cases. Our discussion of intent is mostly normative—we argue, contrary to current doctrine, that courts should consider the legislature’s intentions as probative, but not dispositive, of discrimination. 
We chose company size for two reasons. First, discussion of company size as covert nationality discrimination is new to the literature. Second, Member States increasingly use company-size classifications in tax laws; Poland and Hungary recently used turnover (as opposed to net income) to determine tax rates; and Spain proposes to use turnover to establish liability for its new digital services tax. 
To illustrate how the Court of Justice might apply our approach to size discrimination, we consider whether the company-size thresholds in Spain’s and the EU’s recent proposals for a digital services tax constitute covert nationality discrimination. More generally, cooperative negotiations at the OECD towards reform that would appropriately tax the modern, digital economy must account for limitations imposed by EU law, and in particular its prohibition on nationality discrimination.
The tax policy colloquium at McGill is supported by a grant made by the law firm Spiegel Sohmer, Inc., for the purpose of fostering an academic community in which learning and scholarship may flourish. The land on which we gather is the traditional territory of the Kanien’keha:ka (Mohawk), a place which has long served as a site of meeting and exchange amongst nations. This fall the Colloquium explores a range of contemporary tax topics across three disciplines--law, economics, and philosophy. The complete colloquium schedule is below and more information is available here. The Colloquium is convened by Allison Christians, H. Heward Stikeman Chair in Taxation Law.

As always, the colloquium is free and open to all. Prof Mason will speak on Monday December 3 at 4-5:30pm, New Chancellor Day Hall, Room 102.




Tagged as: colloquium EU international law McGill tax policy TFEU

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Today at McGill Law: Singer on Remission Orders

Published Oct 22, 2018 - Follow author Allison: - Permalink

Today at McGill Law, Prof. Sam Singer of Thompson Rivers University will present his work in progress, entitled "Evaluating Canadian Tax Remission Orders: A Debt Relief Vehicle for Taxpayers," as part of the annual Spiegel Sohmer Tax Policy Colloquium at McGill Law.

Here is the abstract:

Remission orders, although rare, serve important functions in the Canadian tax system. This paper draws from a comprehensive study of federal tax remission orders issued between 1998 and 2017. It presents general findings about remission orders in that time period, including the number of remission orders issued, their reported costs, and the number of remission order applications. The paper identifies the five most common categories of reasons cited for granting remission orders. It then applies tax policy analysis to assess the two most frequent reasons for granting remission orders: to provide debt relief for financial hardship and/or extenuating circumstances, and to provide remedies for government errors and delays. This study also highlights concerns about the federal tax remission system, and provides recommendations for improving its fairness, transparency, and accountability.
For those not familiar with the practice of remission in tax, this is a regime under which the taxpayer can ask the tax authority to forgive their tax debts, manly due to hardship or extenuating circumstances. This was a new concept to me when I came to McGill in 2012 and learned about a rather generous remission order granted to Blackberry in what I assumed to be a last-ditch effort in the nature of industrial policy and national protectionism--but Prof. Singer's paper makes clear that the remission order is not only (or even primarily) for massive multinational companies. I am bothered by the idea that the tax authority has a more or less obscure power to forgive the tax debts of some taxpayers under unclear circumstances and using criteria that are not transparent or reviewable. This seems to me to be a tool which could create great distrust in the tax system, in terms of both procedural fairness for taxpayers who don't know about or get remission orders but also in terms of the opacity behind which some officials appear to have a tool to help selected individuals at their will. I look forward to the discussion of Prof. Singer's paper and the implications of this research for the big questions of tax governance.

The tax policy colloquium at McGill is supported by a grant made by the law firm Spiegel Sohmer, Inc., for the purpose of fostering an academic community in which learning and scholarship may flourish. The land on which we gather is the traditional territory of the Kanien’keha:ka (Mohawk), a place which has long served as a site of meeting and exchange amongst nations.

This fall the Colloquium will explore a range of contemporary tax topics across three disciplines--law, economics, and philosophy. The complete colloquium schedule is below and more information is available here. As always, the colloquium is free and open to all.

The Colloquium is convened by Allison Christians, H. Heward Stikeman Chair in Taxation Law.


Tagged as: colloquium McGill tax policy

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Canada implements the MLI on BEPS; Will Parliament Take a Nap?

Published Sep 20, 2018 - Follow author Allison: - Permalink

With the return of Canada's Parliament to business this week, debate theoretically should take place on Bill C-82, An Act to implement a multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting, a.k.a. the "Multilateral Instrument in Respect of Tax Conventions Act" (the official short title). But we can call it the BEPS bill since its job is to implement a set of consensus positions the OECD developed to eliminate "Base Erosion and Profit Shifting" by multinational taxpayers.

This BEPS Bill implements the OECD's MLI to Prevent BEPS, which is a multilateral treaty that amends existing bilateral tax treaties. The rationale is that countries were engaging in or at least facilitating BEPS, and they were often doing so through tax treaties, so a blanket change to a few thousand of these treaties was needed to prevent ongoing tax avoidance.

Given that the BEPS bill adopts one treaty to rule them all, Parliament might be expected to undertake careful scrutiny of its terms, but these expectations are not likely to be met. A study I completed with help from a very adept graduate student in 2016, entitled “While Parliament Sleeps: Tax Treaty Practice in Canada,” (published in the Journal of Parliamentary and Political Law / Revue de droit parlementaire et politique 10 (1) : 15-38, March / mars 2016 and available in draft form here), found that over a fifteen year period, Parliament has adopted legislation implementing 32 international tax agreements without a single standing vote occurring in the House of Commons at any point in the legislative process.

These 32 agreements collectively form over 750 pages of binding law in Canada, none of which was considered for more than two sittings at any stage of consideration in either the Senate or House of Commons.

In Canada, tax-treaty implementing legislation is generally introduced in the Senate, studied very little there, and then sent to the House of Commons where it receives even less attention. Although tax scholars focus, rightfully, on scrutinizing the substance of tax treaties, we should not be lulled into ignoring the process by which Parliament discharges its role in legislating tax treaty implementation. To that end, some of the debate in Parliament is downright disappointing.

For example, consider the most recent exercise (written after my study), when the Senate was seized with Bill S-4, whose official summary reads:

 This enactment implements a convention between the Government of Canada and the Government of the State of Israel for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and an arrangement between the Canadian Trade Office in Taipei and the Taipei Economic and Cultural Office in Canada for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income. It also amends the Canada–Hong Kong Tax Agreement Act, 2013 to add to it, for greater certainty, an interpretation provision.
In a speech of only a few minutes on the bill, the Legislative Deputy of the Government Representative in the Senate stated:
 It is urgent that we move forward with the study of this bill because if we want the agreements on double taxation to go into effect in 2017, the bill must receive Royal Assent by the end of 2016. Therefore, I invite all honourable Senators who wish to speak to this bill to do so as quickly as possible so that the bill may be referred to a committee as soon as possible.
In total, the entire House Finance Committee's study took less than 15 minutes. The third reading debate in the Senate lasted less than 10 minutes and, after calling the bill a "no-brainer," a "marvellous bill," and "a continuity-of-government bill" that "does wonderful things for Canadian industry and consumers alike," the Senators continued with this exchange:
Senator Day: Should I tell anybody what this bill is about?
Some Hon. Senators: No.
Then followed a dubiously notable comment by Senator Plett that "I'd like to add my voice and simply say that this, again, is clear evidence that occasionally a good biscuit can be found in a garbage can."

The idea that Parliament should rush to meet the government’s preferred timetable in what the Senate characterizes as a "garbage can" of a bill (or of a government--I am not sure which) is highly problematic. If it takes longer to scrutinize a bill, so be it. The government – for its part – didn’t leave Parliament much time in this case, having only introduced S-4 in the Senate on November 1st, 2016.  By the time the Legislative Deputy of the Government Representative in the Senate got to make her speech on November 24th, the clock was ticking quickly toward the MPs' and Senators' winter break.

I single out this debate not only for the unprincipled concession to expedited timing, but particularly for the exchange that followed. A Senator asked the Legislative Deputy of the Government Representative in the Senate “In your opinion, does the bill before us pertain to our participation in the WTO?” The response: “I do not know much about this bill. However, I do know that it is important, that it is urgent that we move it along, and that it has significant consequences.”

Putting aside the carefree decision to speak to a bill one “does not know much about” and the apparent confusion about how the bill relates to the WTO (did the Senator mistake a tax treaty for a trade agreement?), it would be hard to characterize the limited early Senate Chamber debate as well-informed or thoughtful in any way. On the House side, the bill was fast-tracked – a motion passed by unanimous consent stipulated that “when the House begins debate on the third reading motion of the Bill, a Member from each recognized party, as well as a Member from the Bloc Québécois, may speak for not more than five minutes, with no question and comment period, after which the Bill shall be deemed read a third time and passed."

As such, in its last debate, the bill received less than 20 minutes of attention in the House with no questions –that is, each party spoke but there was no dialogue in substance. The bill received Royal Assent on December 15th, 2016.

This brings me back to the BEPS Bill, which actually bucks the trend by being introduced in the House of Commons instead of the Senate. This is important because even though Senate debates on tax treaty implementing legislation are limited (as evidenced above), the Senate is still the body that generally studies these matters and has nominally built up expertise. Because the general trend in Parliament is that the Chamber that receives a tax bill second is the one that studies it less, one is left to hope without confidence that the House will undertake its due diligence.

There is cause for concern with C-82. Unlike the other tax treaty implementing bills I studied, this was preceded by a ways and means motion that provided the text of the bill in advance. In other words, the Minister of Finance tabled a notice on May 28th that contained essentially what would become C-82. But, rather than debate the Notice, the House on June 19th deemed that motion agreed to and further deemed the BEPS bill formally introduced.

Without venturing too far into the procedural weeds, it is perhaps sufficient to observe that there could have been a debate on that ways and means motion. Instead, the decision in June deemed this motion adopted ‘on division’ – that is, dissent is indicated for the record but we don’t know who disagreed or on what basis because there was no actual debate on the record.

This leads me to wonder whether we’ll see an actual debate occur on the merits of C-82 if even its introduction was fast-tracked through deeming. I doubt it. After all, MPs (and Senators alike) often find tax matters confusing and technical. Maybe in this case especially, the whole things seems like a foregone conclusion since we are talking about an OECD initiative in which Canada has been involved over many years. Moreover, Canada's undertakings in the MLI are modest to say the least. Even so, that doesn’t mean these bills don’t deserve careful study since it is agreed that certain tax arrangements erode Canada’s tax base (cf: the recently decided Alta Energy case). It is much harder (and more costly) to re-negotiate and re-legislate (if need be) a treaty than to get things right the first time (for a discussion, see See Charlie Feldman, “Parliamentary Practice and Treaties” (2015) 9 J. Parliamentary & Pol. L. 585). Adopt in haste, repent at leisure ought to be a mantra for tax treaties.

Unfortunately, Canada's Parliament has limited involvement in the treaty process and only so much influence over treaty-implementing legislation. An additional concern is that there is only so much time left in the legislative calendar with an election a year away. The government has important pieces of legislation moving – including implementing the TPP, adopting the first-ever national legislation on accessibility, and an election law overhaul that the government has already tried to fast-track. Moreover, of the 366 commitments the Trudeau government has made, the government’s own analysis indicates that just 96 have thus far been met. Many others also require legislation, for example, the specific commitments to “introduce proactive pay equity legislation for federally-regulated workers"; to modify Canada’s oath of citizenship to reflect Canadian and Indigenous history; to introduce an Indigenous Languages Act; and to reform the Canada Labour Code to help precarious workers.

Moreover, Parliament already has many bills to consider which have yet to complete the legislative process. Parliament's Legislation-at-a-glance page shows just how much each House has before it already, including criminal justice and family law reforms, firearms regulation, and military justice changes remaining in the House, and many big legislative matters before the Senate including bills on sustainable development, access to information, and fisheries reform. While the BEPS bill could be a step ahead of bills yet to come, it is easy to imagine easier-to-debate matters (such as labour reforms) getting much more debate in the House and, if and when it does get to the Senate, that body will be even more pressed for time given all the other items from the House being added to its plate.

With all these bills anticipated, and little experience in tax treaties, will the House give the BEPS bill its due? Unlikely. It is more likely that as far as Canada is concerned, C-82 will be a Bill Evading Parliamentary Scrutiny.

Tagged as: BEPS Canada MLI scholarship

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2018 Tax Policy Colloquium at Mcgill Law

Published Aug 29, 2018 - Follow author Allison: - Permalink

I'm very happy to announce the 2018 McGill Tax Policy Colloquium, which will take an interdisciplinary approach to tax policy analysis. The colloquium is made possible by a grant from Spiegel Sohmer. The land on which we gather is the traditional territory of the Kanien’keha:ka (Mohawk), a place which has long served as a site of meeting and exchange amongst nations. The distinguished speakers who will contribute to this year’s colloquium include:

  • Oct 22: Sam Singer, Assistant Professor, Faculty of Law, Thompson Rivers University. Prof. Singer's research focuses on tax dispute resolution, the policy rationales underlying tax measures, and the regulation of charities and charitable giving.
  • Nov 12: Lindsay Tedds, Scientific Director of Fiscal and Economic Policy and Associate Professor, Department of Economics, University of Calgary. Dr. Tedds’ research focuses on tax policy and she has done extensive work with the Government of Canada in the areas of public economics and policy implementation.
  • Nov 19: Laurens van Apeldoorn, Assistant Professor of Philosophy, Leiden University. Prof. Van Apeldoorn’s research examines the nature and prospects of the sovereign state, with a special focus on the normative aspects of international taxation rules in relation to the global justice.
  • Nov 26: Frances Woolley, Full Professor, Department of Economics, Carleton University and President, Canadian Economics Association. Prof. Wooley’s expertise and research focus on economics of the family, gender and intra-house inequality, taxation and benefits for and of families, and feminist economics. 
  • Dec 3: Ruth Mason, Full Professor, School of Law, University of Virginia. Prof. Mason’s research focuses on international, comparative, and state taxation. Her work on tax non-discrimination laws’ effect on cross-border commerce has been cited extensively, including by the U.S. Supreme Court.
As always, colloquium presentations are open to all, and I will post more information closer to each date.


Tagged as: colloquium McGill scholarship tax policy

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Does a country's willingness to exchange tax info alter the character of its trade in services?

Published Oct 21, 2017 - Follow author Allison: - Permalink

Delimatsis and Hoekman have posted National Tax Regulation, International Standards and the GATS: Argentina—Financial Services, of interest especially in light of ongoing discourse about what kinds of tax competition are approved versus harmful in OECD terms. Here is the abstract:

Can a WTO Member discriminate against foreign suppliers of services located in jurisdictions that refuse to share information with a government to permit it to determine if its nationals engage in tax evasion? Does it matter if the Member uses standards developed by an international body as the criterion for deciding whether to impose measures? In Argentina—Financial Services the WTO Appellate Body held that services from jurisdictions that share financial tax information may be different from services provided by jurisdictions that do not cooperate in supplying such information. It overruled a Panel finding that measures to increase taxes on financial transactions with non-cooperative jurisdictions were discriminatory. We argue that the AB reached the right conclusion but that an important opportunity was missed to clarify what WTO Members are permitted to do to enforce their domestic regulatory regimes, and how international standards could have a bearing on this question. By giving consideration to arguments that the likeness of services and service suppliers may be a function of prevailing domestic regulatory regimes, the AB increased the scope for confusion and future litigation.

Tagged as: scholarship tax policy WTO

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Update: The Price of Entry: Latest Research plus Infographic

Published Apr 18, 2017 - Follow author Allison: - Permalink



* September update: I've found some more information on Russia's program, which brings it closer to the global averages instead of being a glaring outlier. I've also now uploaded my working paper, Buying in: Residence and Citizenship by Investment, and would welcome comments. Here is the abstract:
States have complex and often conflicted attitudes toward migration and citizenship. These attitudes are not always directly expressed by lawmakers, but they may be reflected quite explicitly in tax regimes: for the world’s most prosperous individuals and their families, multiple states extend a warm welcome. Sometimes prospective migrants are offered fast track to physical residence which can lead to citizenship if the migrant desires it. Others are offered a mere commercial transaction, with citizenship granted to applicants with the right credentials and a willingness to pay. Migrants might seek to obtain residency or citizenship for personal, family, economic, or tax reasons, or some combination of them. For the granting country, the tax significance of obtaining new residents or citizens will vary depending on domestic policy goals. However, the consequences of residence and citizenship by investment programs could be severe for the international tax regime: the jurisdiction to tax and the allocation of taxing rights among countries are commonly based on residence and citizenship factors. This article accordingly surveys contemporary residence and citizenship by investment programs on offer around the world and analyzes their potential impact on international tax policy.

* update: I've found a couple of additional programs (e.g. France has a lower cost program, making it less of an outlier)--thank you twitterverse) and I've corrected a few currency conversion errors. This is still a work in progress as previously noted, and I expect to be revising again in the coming weeks.

----

I've been working on residence and citizenship by investment programs, and thanks to some stellar research assistance by Jake Heyka, have developed a set of data comprising what I believe is a fairly thorough look at the residence and citizenship by investment programs currently on offer around the world. I made the above infographic to show the lowest cost program per country for all countries that offer either residence or citizenship by investment.

The lowest cost residence by investment programs are offered by Panama and Paraguay, each coming in at about USD$5,000, while the most expensive is Russia, at over USD$5 million now Austria, at about $3.3M. The average price for all residence and citizenship by investment programs that we found is about $1 million, but this number isn't perfect because some programs are based on job creation rather than investment (e.g., Portugal, Turkey, UK), some involve having entrepreneur/angel investment support rather than a direct investment (e.g. Australia, Canada), and some involve annual amounts (Italy and Switzerland).

One of the things I wondered about in looking over the programs is the inequality factor at play--that is, how much can richer/larger countries demand in terms of higher prices and more stringent requirements (such as actual residence) for entry, and how much must poorer/smaller countries be satisfied with smaller investments and fewer commitments by the applicant? The answer seems to be that there appears definitely a "rich get richer" quality to the distinctions among programs, but there are lots of details in the programs that require further thought.

The paper itself is still in progress but here is an explanation of what I am looking at:
International law and political theory scholars have long wrestled with the normative implications of commodifying citizenship and access to immigration with pay-to-play visa programs, but the analysis does not typically consider the role the tax system plays or could play in these schemes, nor how such schemes might impact the tax regime in terms of gross revenue or distributional effect.  Yet governments increasingly view their tax systems as a means of potentially increasing the value of residence and citizenship in their countries, whether intrinsically or in relation to the treatment of those who gain such status by other means.  Given the cost involved in reducing revenue from those arguably most able to pay, whether the programs actually produce the predicted outcomes is one obvious question to be asked.  Even if the programs in fact achieve their goals, a second question surely arises regarding the normative justification for using the tax system to lure the wealthy away from other countries in this manner. Does the normative case differ when applied to humans as opposed to companies? Does it differ when the luring state is richer or poorer relative to the countries of origin of prospective immigrants? To sketch out a framework for analyzing these questions requires a sense of the various competing programs on offer. This essay takes the first step by comparing national programs that use their taxing power in some manner in order to attract immigration, and highlights some of the factors that raise normative questions about the appropriate design and uses of a tax system. 
Comments welcome.

Tagged as: migration research tax policy

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Shu Yi Oei: The Offshore Tax Enforcement Dragnet

Published Mar 31, 2017 - Follow author Allison: - Permalink

Shu Yi Oei (Tulane) has posted an important new paper on U.S. offshore tax enforcement, of interest. Here is the abstract:

Taxpayers who hide assets abroad to evade taxes present a serious enforcement challenge for the United States. In response, the U.S. has developed a family of initiatives that punish and rehabilitate non-compliant taxpayers, raise revenues, and require widespread reporting of offshore financial information. Yet, while these initiatives help catch willful tax cheats, they have also adversely affected immigrants, Americans living abroad, and “accidental Americans.”  
This Article critiques the United States’ offshore tax enforcement initiatives, arguing that the U.S. has prioritized two problematic policy commitments in designing enforcement at the expense of competing considerations: First, the U.S. has attempted to equalize enforcement against taxpayers with solely domestic holdings and those with harder-to-detect offshore holdings by imposing harsher reporting requirements and penalties on the latter. But in doing so, it has failed to appropriately distinguish among differently situated taxpayers with offshore holdings. Second, the U.S. has focused on revenue and enforcement, ignoring the significant compliance costs and social harms that its initiatives create.  
The confluence of these two policy commitments risks creating high costs for the wrong taxpayers. While offshore tax enforcement may have been designed to catch high¬-net-worth tax cheats, it may instead impose disproportionate burdens on those immigrants and expatriates who have less ability to complain, comply, or “substitute out” of the law’s grasp. This Article argues that the U.S. should redesign its enforcement approach to minimize these risks and suggests reforms to this end.
The paper provides a thorough review of the panoply of offshore enforcement programs and mechanisms and documents the harms of their dragnet approach, especially on the most vulnerable and least likely targets. A significant contribution to the literature.



Tagged as: CRS FATCA FBAR offshore tax policy u.s.

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