ICC Tells Countries To Resist Exit Taxes On MNEs
The International Chamber of Commerce, in a policy statement on July 15, 2014, has advised countries not to adopt exit taxes, to ensure that double taxation is avoided and to promote the free movement of capital.
In its statement, entitled “Exit taxes: Serious obstacles for international business restructurings and movements of capital,” the ICC expresses concern that some jurisdictions are moving towards levying exit taxes as a means to increase state revenues.
The ICC said that its revised Policy Statement, updating one released in 2006, has been rewritten to take into account efforts by the international community to fundamentally restructure the international taxation system, noting the work of the Organization for Economic Cooperation and Development (OECD) on base erosion and profit shifting (BEPS), the release of 2013 OECD Transfer Pricing Guidelines, and changes to the OECD Model Income Tax Treaty.
The statement reads: “States should find means to protect their tax bases using the existing and the generally accepted tax rules to tax the recapture of previously tax deductible amortization or depreciation without resorting to additional exit taxes.”
The Policy Statement offers recommendations for minimum standards in the design and application of such measures that would take into account the arm’s length principle and avoidance of double taxation.
“If such regimes are enacted, ICC strongly believes that, in the interest of avoiding excessive or double taxation, at a minimum certain safeguards should be included to protect the free movement of capital and the efficient functioning of enterprises.”
The ICC said where the levy of exit taxes is appropriate, as the result of treaty negotiation between the respective countries, a taxpayer should always have the possibility to provide adequate guarantees to cover the future tax claim, rather than having to pay the tax immediately.
It concluded: “When the exchange of information and assistance in the collection of taxes due are agreed among the respective countries, a guarantee should not be required. In this case, the principle of non-discrimination should bar the country of origin from imposing extra costs on the restructuring. The taxpayer should only be required to make a yearly report on the assets that were transferred.”
“Compliance burdens connected with exit taxes must be minimized. There should be no obligation for the taxpayer to register in both the former and the new state, nor should third parties be obliged to report when a sale of assets takes place or to collect a withholding tax.”
