Presentation by:
Yuji MIYAKI Public Management Specialist
(Taxation) Asian Development Bank
April 2017, Tax and Corruption,
Sydney
ANTICORRUPTION POLICY:
Enhancing the role of the Asian Development Bank in Relation
to Tax Transparency
1. TAX TRANSPARENCY - The Changing Global Landscape
2. Challenges in implementing Exchange of Information
3. ADB’s Role - Updated Anticorruption Policy
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TAX TRANSPARENCY The Changing Global Landscape
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20%
Global Tax Agendas and ADB operations
Base Erosion and Profit Shifting (BEPS)
Automatic Exchange of Information (AEOI)
Sustainable Development Goal 17.1
Addis Tax Initiatives
ADB support (Loans, Grants, Technical Assistance (incl. Knowledge sharing)
Strengthen DRM
Weak Tax Administration
Poor Tax System Design
Total Tax to GDP Ratio (%) in 2013 of Selected Countries in Asia
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GLOBAL DEVELOPMENTS The “End of Bank Secrecy” (2009)
G20 leaders state that they “stand ready to take agreed action against those jurisdictions that do not meet international standards for tax transparency.”
Exchange of Information upon
Request (EOIR)
Automatic Information
Exchange (AEOI) Panama Papers
Addressing Base Erosion and Profit Shifting “BEPS” (2013)
G20 endorses BEPS Action Plan
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Challenges in implementing Exchange of Information
Global Forum on Transparency and Exchange of Information for Tax Purposes
• Enact legislation to facilitate AEOI
• Satisfy confidentiality and data safeguard requirements
• Capacity and resources to fully use the information they receive under AEOI
• Capacity and resources to make requests of other jurisdictions under EOIR
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Coherence
Action 2
Neutralise the effects of hybrid mismatch arrangements
Action 3
Strengthen CFC rules
Action 4
Limit interest deductibility
Action 5
Counter harmful tax practices
Substance Transparency
Action 6
Prevent treaty abuse
Action 7
Prevent the artificial avoidance of PE status
Actions 8 - 10
Aligning transfer pricing outcomes with value creation:
Intangibles; Risk and capital; and
Other high-risk transactions
Action 1
Digital economy
Action 11
Data analysis
Action 12
Mandatory disclosure rules
Action 13
Re-examine transfer pricing documentation
Action 14
Dispute resolution
Action 15
Develop a multilateral instrument
BEPS Actions
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ADB’s Role Challenges for ADB’s DMCs in responding to global developments
1. Participation in the Global Forum 2. Challenge to comply with EOIR standard 3. Commitment to AEOI 4. Joining the Multilateral Convention on Mutual Administrative Assistance in
Tax Matters 5. Enacting AEOI required legislation and satisfying the Global Forum’s
requirements relating to confidentiality and data safeguards 6. Expertise and resources in implementation of EOIR and AEOI 7. Participation in the BEPS inclusive framework 8. Expertise and resources in implementation of BEPS measures
Increasing TAs
(i) Broaden and protect their domestic tax base, (ii) Enhance the capacity of their tax administrations, (iii) Improve domestic tax compliance, and (iv) Improve tools and procedures to stem both cross-
border and domestic tax evasion and avoidance
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ADB’s RISK BASED APPROACH Seeks reasonable assurance on structure
Detects indicators of tax evasion
• Unknown UBO • Lacks business
reasons • Opaque
structures • Global Forum -
non/partially compliant rating
ADB makes certain disclosures to the Board
Seek to identify the ultimate beneficial owners of ADB’s client
Satisfy themselves regarding the transparency of • the clients’ shareholding structure, • the business reasons for any complex
ownership structure, • and the use of offshore jurisdictions in the
shareholding structure.
Project teams are required to:
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Updated Anticorruption Policy Rationale
• Support competitive markets and efficient, accountable, and transparent public administration
• A lack of tax integrity and a culture of low tax compliance increase the risk of corruption
• Seek to ensure that projects financed and administered by ADB comply with the highest ethical standards and are not used for the purposes of corruption, tax evasion, money laundering, financing of terrorism, or other illicit purposes
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Updated Anticorruption Policy Country level – Promoting Global Tax Integrity
Support and promote international tax integrity, including the work of lead organizations such as the Global Forum, FATF, and the UN in this area
Supports tax integrity
initiatives in Asia and the Pacific
by increasing TA operations
Encourage the inclusion of tax integrity issues in the policy dialogue with DMCs
assist DMCs in promoting their domestic resource mobilization by enhancing their ability to protect themselves against tax evasion and BEPS
develop the capacity of DMCs to become members of and participate in the work of the Global Forum
support DMC participation in BEPS initiatives promoted by lead organizations
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Updated Anticorruption Policy Project level – Tax Integrity Principle
Continue risk-based approach to IDD – seek to avoid non-compliant jurisdictions, not facilitate tax secrecy and tax evasion
Enhanced vigilance – where client or its significant shareholder are in intermediate jurisdiction
Ascertain the sound business reasons - for use of intermediate jurisdictions
Provide tax integrity information to the Board
Strengthen legal documentation as appropriate
Reasonable assurance - where material related party transaction may inappropriate transfer of asset
Address tax integrity issues during project approval
it has conducted enhanced tax IDD to ascertain that the tax integrity risks are low and acceptable
satisfied a sound policy objective for financing the transaction than not financing
Not finance a transaction - where client is in the intermediate jurisdiction classified as noncompliant, UNLESS:
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ADB’S RESPONSE – Tasks
Engagement of Tax Experts for Tax Evasion and BEPS
Revise Relevant Procedures
Training in Tax Transparency in ADB
Robust Implementation of the Guidelines
Review of the Policy
Questions? Please contact:
ADB’s Governance Team
w: http://www.adb.org/sectors/governance/main
f: https://www.facebook.com/GovernanceTG/
t: https://twitter.com/adb_governance
