The CFA of the OECD meet next week to discuss how to take this project forward from the initial paper to deliver a progress report to G20 in Q1 2013. The report lists six keys areas:
Treaty concepts re digital goods
Related party financial transaction
None of this is new of course but I thought I would focus on International mismatches today ahead of a conference in Vienna which will discuss this.The EU also has this in their sights. Mismatches and hybrids are not new and have been around for a while, but they’ve proved difficult to deal with as countries struggle to take bilateral action and unilateral action hasn’t been effective. So how could bilteral and/or multilateral action work and who should facilitate it? The obvious facilitators are multilaateral institutions like OECD and the EU, but the countries have to want to participate. Its like the old joke about a light bulb. How many therapists does it take to change a light bulb? As many as you can afford, but the light bulb’s got to want to change.
From a practical perspective how could this happen? I would suggest that instead of a vague “grand projet” a more practical approach would be to start with bilateral consideration of well known mismatches by the governments involved looking at how they can change their domestic rules to remove the mismatch in a way which is consistent with their overall national tax policies. This could be facilitated by international institutions and then consulted on with business and civil society. Such a process would make clear which mismatches were being reviewed with the aim of closure and which were considered aggressive. One could even develop a timeline for a programme of mismatches to be reviewed .
Now this does put the onus on governments to review and remove mismatches, but they are the only ones who can do this – I don’t think taxpayers can make proposals given the knock on policy effects. It won’t be easy or glamourous, but I think its the most sensible approach. Business should be able to support such an approach.