October 20, 2022 OECD and UN | Tax Inspectors Without Borders publish Annual Report 2022
Executive summary On 6 October 2022, the 2022 Annual Report on the Tax Inspectors Without Borders (TIWB) initiative was released at the 14th Meeting of the OECD/G20 Inclusive Framework on BEPS. The Report takes stock of the work undertaken under the TIWB initiative, providing an update on TIWB's achievements from July 2021 to June 2022 and its objectives going forward. This Alert highlights key aspects of the Annual Report. Detailed discussion Background TIWB is a joint initiative of the Organisation for Economic Co-operation and Development (OECD) and the United Nations Development Program (UNDP). TIWB was launched in 2015 to address what was seen as one of the principal constraints on developing countries as they seek to raise tax revenues: lack of capacity. Its focus areas are Africa, Asia and the Pacific, Eastern Europe, and Latin America and the Caribbean. Under the initiative, experts are deployed to developing country tax administrations to provide practical, hands-on assistance on current audit cases and related international tax issues. Host tax administrations that are requesting TWIB assistance can learn from experts deployed from the TIWB's network of partner tax administrations and international experts from the UNDP-managed roster of tax professionals who help tax officials in host administrations cope with day-to-day challenges and ensure processes are in place to administer relevant tax legislation. TIWB's main activity is to assist developing countries through its audit support programs. The TIWB initiative has also been expanding to fill the gap with respect to more focused initiatives in global tax topics that are growing in prevalence, such as automatic exchange of information and the BEPS 2.0 project. This is intended to help to achieve the enforcement of tax legislation and improve the effectiveness of tax administrations – through improvements in staff skills, competencies, international tax knowledge and confidence in conducting international tax audits. Update on programs and operations As of 30 June 2022, TIWB programs have spanned 54 jurisdictions, with 56 completed programs and 50 current programs. Over the reporting period, TIWB launched 16 new programs mostly in Africa. The Annual Report provides an overview of the TIWB initiatives that have supported host administrations in addressing several capacity-building needs in the last year, including: Tax audits TIWB provides support on risk assessment and case selection, transfer pricing audits, industry and sector specific issues and Advance Pricing Agreements and Mutual Agreement Procedures. Since 2012, TIWB's audit assistance has included anonymized casework conducted during joint workshops with the African Tax Administration Forum, the OECD and the World Bank Group. Criminal Tax Investigations TIWB designed a pilot program setting out a structured approach for host tax administrations to conduct criminal tax investigations, consisting of a self-assessment through a Tax Crime Investigation Maturity Model (based on the OECD publication Fighting Tax Crime - The Ten Global Principles) and assistance with casework and related capacity building. In February 2022, after receiving positive feedback from pilot jurisdictions, the program transitioned out of the pilot phase to regular programs. Effective use of automatic exchange of information (AEOI) The program builds capacity around the use of data received under the Common Reporting Standard, including searching and filtering data, integrating third-party data sources, automated crosschecking and data analytics, risk assessments, compliance interventions, notifications to taxpayers, audit policy and tax assessments. The Report notes that operational developments in the reporting period included simplification of procedures to request TIWB assistance, enhanced engagement with UNDP Country Offices, expansion of the network of partner administrations, a new expert facilitator program, a new e-learning module and a recently launched mentorship program. Results The Annual Report indicates that TIWB participating countries have seen increased tax revenues and tax assessments with a total of US$1.7 billion in additional tax collected and US$3.9 billion in additional tax assessed. Moreover, the Report notes that TIWB initiatives have impact beyond revenue, citing a positive impact on staff skills and competencies and multinational enterprise voluntary compliance. In addition, the TIWB initiative contributes to knowledge sharing and alignment of developing countries within the broader international tax landscape, which is important given the increased controversy activity and evolving tax landscape globally. Going forward The Annual Report includes plans to continue the growth of its operations for the coming year, including commencing a minimum of 15 new TIWB programs, implementing eight criminal tax investigation programs, piloting two effective use of AEOI data programs and two digitalization of tax administration programs, and securing support from at least two additional partner tax administrations willing to deploy experts on TIWB programs. Furthermore, the Report describes action plans around increasing visibility of the program and the intention to support countries to address the tax challenges arising from the digitalization and globalization of the economy, including: Digitalization of Tax Administrations A pilot program is proposed that offers confidential management-level advice on strategic topics related to digitalization, such as change management, strategy development, budgeting and program management. The program will focus primarily on management-level dialogue, with assistance given in the form of upstream, strategic and confidential advice. Pilot programs are being prepared to assess its feasibility, potential value and fit with the TIWB concept. Implementation of the BEPS 2.0 Two-Pillar Solution According to the Report, TIWB can play a valuable role in helping countries tax the digital economy and with the practical implementation of new rules developed in the BEPS 2.0 project. Opportunities will be explored to extend TIWB assistance based on country needs and priorities. With respect to Pillar One, the Report indicates that support may be needed in applying the new rules to expanding the tax base in market jurisdictions and in applying the simplified approach to transfer pricing. With respect to Pillar Two, the Report indicates that support may be needed in applying rules to implement the global minimum tax rate, applying new treaty provisions agreed with low-tax jurisdictions and re-examining tax incentives.1 Implications The Annual Report indicates that in the 2021-2022 reporting period, TIWB has helped to deliver additional revenue and build audit skills that improve the overall performance of developing country tax administrations in the longer term. Through its collaboration with development partners that provide funding and expert resources, TIWB continues to expand in scope and reach and stands ready to assist an increasing number of tax administrations in developing countries. Initiatives, such as TIWB, that help build the capacity of tax administrations in developing countries through the sharing of international best practices can have positive implications for business taxpayers operating in countries that receive this assistance. _________________________________________ For additional information with respect to this Alert, please contact the following: Ernst & Young Solutions LLP, Singapore
Ernst & Young LLP (United Kingdom), London
Ernst & Young LLP (United States)
_________________________________________ ENDNOTE 1 See EY Global Tax Alert, OECD releases report on interaction of Tax Incentives and Pillar Two, dated 13 October 2022. | ||||
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