INTERNATIONAL COOPERATION IN TAX MATTERS, ROLE OF TAXATION IN DEVELOPMENT AMONG ISSUES RAISED IN SECOND COMMITTEE PANEL DISCUSSION

INTERNATIONAL COOPERATION IN TAX MATTERS, ROLE OF TAXATION IN DEVELOPMENT

AMONG ISSUES RAISED IN SECOND COMMITTEE PANEL DISCUSSION

Coordinated, sustainable cooperation in tax matters was needed to effectively manage the rapid growth in cross-border mergers and acquisitions, leasing, financing, multinational corporations, and electronic commerce spurred by the technological age, the Second Committee (Economic and Financial) was told this afternoon during a panel discussion on the issue.

William McCloskey, Assistant Commissioner of the Directorate General of Fiscal Policy and Legislation of the Customs and Revenue Agency of Canada, discussing international tax cooperation in the context of follow-up to the Monterrey Consensus, said effective domestic and international tax collection systems provided the necessary revenue for sustainable development in education, health, infrastructure and social services.  However, under-funded tax administrations, corrupt tax officials and the growth of tax havens in many developing countries were thwarting progress.

Moreover, he added, electronic commerce made it difficult to track transactions and to assess suitable tax rates.  Greater cooperation of the international aspects of the some 1,600 domestic tax laws in effect was needed, as were technical assistance, the sharing of best practices, and strategic international tax work.

Jorge Cosulich Ayala, Executive Secretary of the Inter-American Center of Tax Administrations of Panama, said that high rates of tax evasion in Latin America and the Caribbean were distorting regional integration.  He called for  new tax designs to strengthen the collection and management capacities of tax administrations and to improve their human resources and information technology systems.

Latin American nations were doing their part through concerted effort to reform tax rebate and exemption systems, he said.  Many were following the example of Japan, Sweden and Canada to give national tax administrations freer technical and budgetary reign to apply tax norms and effectively manage human resources. Still, Latin American and other developing regions’ tax administrations lacked simplified regimes for small taxpayers, sufficient legal authority to enforce tax collection and penalize tax evaders, and effective sanctions for money laundering. He also stressed the need for eliminating banking secrecy laws and increasing information-sharing authority.

Echoing that issue, Shuresh Shende, Interregional Adviser on Tax Matters, United Nations Department of Economic and Social Affairs, said globalization had made tax systems increasingly complex, but developing countries had acutely failed to modernize their tax administrations.  Taxation played an important role in development, he said, stressing the need for political will and administrative cooperation for effective and efficient tax compliance.  He urged nations to  share national taxation experiences and tax norms, improve standards for tax administration and tax reporting, promote and increase voluntary tax contributions, and increase technical assistance.

Moderating the panel, Guido Bertucci, Director, Division for Public Economics and Pubic Administration of the Department of Economics and Social Affairs, said greater international tax cooperation was needed, particularly to help developing countries and economies in transition achieve fiscal sustainability and effective tax administration.  He urged countries to make use of the Model Tax Conventions published by the United Nations and the Organization of Economic Cooperation and Development (OECD), when formulating national and international tax policies and cooperation agendas.

Responding to a question during the ensuing discussion as to how the United Nations could better forge closer working ties with the international committee of tax administrations, Mr. McCloskey urged the Organization to participate in meetings of the International Tax Dialogue and the Inter-American Center of Tax Administrations, whose membership mainly comprised developing countries.  That exchange would make developing countries more visible and would encourage greater inclusion of their views in establishing rules and sanctions.

In response to a question regarding the feasibility of a tax on transnational corporations in developing countries, Mr. Shende said under bilateral tax treaties of the United Nations and the OECD, corporations should have a branch office in developing countries, which, as a permanent establishment, could be taxed.  It was also possible for developing countries to get their due share from income earned by a group of corporations, but that required close coordination between the headquarters in the home country and group offices in subsidiary countries.  In some cases, corporations had non-cooperative tax jurisdictions.  Proper training for officers dealing with corporations in developing countries was needed.

Also speaking this afternoon were the representatives of Mexico, Malaysia and Barbados.

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