(New York, May 29, 2013)
Statement by H.E. Mr. Néstor Osorio, President of the Economic and Social Council at the ECOSOC Meeting on International Tax Cooperation
Ms. Shamshad Akhtar, Assistant Secretary-General for Economic Development
Ladies and Gentlemen,
I am pleased to welcome all of you to this one-day meeting of the Economic and Social Council to consider international cooperation in tax matters, including institutional arrangements to promote such cooperation.
This meeting is organized in follow-up to ECOSOC resolution 2012/33, which recognized the need for continued consultations to explore options with regard to the strengthening of institutional arrangements to promote international cooperation in tax matters. The resolution also recognized the need for enhanced dialogue among national tax authorities and greater coordination of the work of the concerned multilateral bodies and relevant regional organizations dealing with cooperation in tax matters.
On behalf of the Economic and Social Council, I wish to extend a special welcome to the national tax authorities represented here today. I would like to thank the International Tax Compact for funding the participation of twenty representatives of national tax authorities from developing countries.
It's also a pleasure to welcome members of the Committee of Experts on International Cooperation on Tax Matters, representatives of international and regional organizations dealing with international tax cooperation, as well as representatives of academia, civil society and private sector. This meeting is a valuable opportunity for a broader dialogue among stakeholders in the area of international tax cooperation and development.
Ladies and gentlemen,
The members of ECOSOC have recognized the work of the Committee of Experts on International Cooperation in Tax Matters in the past. The Committee has provided a framework for dialogue with a view to enhancing and promoting international tax cooperation among national tax authorities. It has assessed the impact of new and emerging issues on international tax cooperation, giving special attention to the impact on developing countries and countries with economies in transition.
The Committee is also responsible for making recommendations on capacity-building in the area of international tax cooperation, and providing technical assistance to developing countries and countries with economies in transition.
At this point, we should refer to the main contributions of the Committee which have underscored the prominent role of the UN in the area of international cooperation in tax matters. These contributions are the revision of the UN Model Double Taxation Convention between Developed and Developing Countries and the approval of the UN Practical Manual on Transfer Pricing for Developing Countries, which I'm very glad to announce, will be officially launched at today's meeting.
A double tax treaty allocates taxing rights over income between two countries, preventing or eliminating double taxation of income, which has a significant impact on a country investment climate.
Transfer pricing refers to setting of prices in international transactions between companies, which are members of a multinational enterprise group. Today, it is one of the most important topics in international taxation, as a significant share of global trade takes place within multinational enterprises.
Transfer pricing in itself is a normal incident of operations of multinational enterprise groups. However, if the price of such transactions does not reflect their true value, profits might effectively be shifted to low-tax or no-tax jurisdictions and losses and deductions to high-tax jurisdictions. This unfairly deprives a country of tax revenue, and developing countries are especially likely to suffer from such profit shifting.
Both the UN and OECD have followed the same test of whether transfer pricing has occurred at a proper price, namely whether it has occurred at an "arm's length price", the price that would be paid in a market with each participant acting independently in its own interest. However, the practical application of this principle relies on the availability of data and expert skills, posing special difficulties for developing countries.
On this regard, I would like to underscore the importance of the new United Nations Practical Manual on Transfer Pricing for Developing Countries, which was finalized at the Committee's annual session last October. The Manual provides assistance in explaining the meaning of "arm's length price" for developing countries, and how it can be applied in practice in a way that responds to their priorities and realities. The presentation of the Manual will be followed by a panel discussion on "Transfer pricing challenges for developing countries", featuring presentations by several countries, including developing countries with significant experience in implementing viable approaches to applying the "arm's length" principle despite the common challenges faced by these countries.
Ladies and gentlemen,
The Council will broaden its discussion on tax avoidance and evasion to include other issues of tax base erosion and profit shifting. In view of the growing international concerns that governments lose substantial tax revenue because of tax planning schemes, significant efforts are currently being made at the international level to address in a systematic way cases of tax evasion and tax avoidance, including improper use of tax treaties, tax base erosion and profit shifting to low tax jurisdictions, and tax fraud. This topic will be addressed by an interactive discussion on "Current issues in countering international tax avoidance and tax evasion". The panelists will include representatives of the OECD and the European Commission, as well as academia, including Prof. Hugh Ault and Prof. Philip Baker.
In order to broaden the discussion even further, we will also have a panel discussion on "International tax cooperation: Capacity development", with participation of the major international and regional organizations active in this area. I hope that this discussion will result in concrete proposals and recommendations on how to enhance the collaboration of the Committee with other international organizations.
Let me also mention that this meeting was preceded by an expert group meeting on taxation of the extractive industry sector, which is one of the new agenda items selected by the Committee for its 9th session to be held in Geneva on 21-25 October 2013. Several Committee members and some other experts, who participated in this expert group meeting yesterday, are also present here today as observers.
Following this ECOSOC meeting, the Financing for Development Office is organizing, jointly with the International Tax Compact (ITC), a Technical Meeting on Tax Treaty Administration and Negotiation, in which many representatives of the relevant authorities present here, will also participate.
This makes it a full "UN week of international cooperation in tax matters" and demonstrates the important role that the United Nations plays in this area.
Ladies and gentlemen,
An effective strategy of financing for sustainable development will require domestic resource mobilization, the fulfilment of all official development assistance commitments and the use of innovative mechanisms of financing. Effective domestic resource mobilization to key areas for sustainable development in developing countries will need modernized tax systems, more efficient tax collection, the broadening of the tax-base and the effective combating of tax evasion. On this regard, international tax cooperation could play an important role in terms of the strategy of financing for sustainable development.
The United Nations has a leading role in the area of international cooperation in tax matters. On this regard, it should continue to enhance cooperation and collaboration with relevant international organizations dealing with international cooperation in tax matters in order to fulfill greater coordination of the various initiatives and reduce differences of approaches, and should pursue also the capacity-building effort. I encourage the Committee to continue its discussions on environmental tax related issues and resource extraction issues, which could have a special relevance for developing countries.