Competitiveness and Innovation Archives

Business Commends the OECD, G20 on the 2015 BEPS Package

Published on October 5, 2015

The Organization for Economic Cooperation and Development (OECD) released its long-awaited 2015 BEPS recommendations on October 5, concluding the two-year Base-Erosion and Profit Shifting (BEPS) project designed to rewrite global tax rules.

“The BEPS project needed to happen, and the OECD and G20 should be congratulated both for their hard work and for achieving high-level consensus across many issues,” said Will Morris, chair of the tax committee of the Business and Industry Advisory Committee (BIAC) to the OECD. “Moreover this high-level consensus was achieved while working to an exceptionally ambitious timetable.”

Morris added that the business community still has concerns that some of the BEPS recommendations may lead to double taxation of income, and “many important details remain to be worked out.”

For many years, the OECD has successfully promoted cross-border trade and investment by removing barriers – including significant tax barriers – to growth.  The task of the last two years has been to respond to legitimate public concern about double non-taxation.  In spite of the reservations raised, BIAC acknowledged that the BEPS process and the recommendations released today appropriately respond to those concerns.

Carol Doran Klein, USCIB’s vice president and international tax counsel, has worked closely with members, the U.S. government, BIAC and the OECD secretariat throughout the BEPS process.

In a statement released today about the 2015 BEPS package, BIAC noted two recent develops:

  • The growing acceptance among countries that mechanisms for resolving tax disputes need to be significantly improved: changes to the treaty-based Mutual Agreement Procedure will be important, but the moves of some key countries towards Mandatory Binding Arbitration will bring even more substantial benefits, as the risk of double taxation would be greatly reduced.
  • A potential monitoring mechanism on implementation of the BEPS recommendations to be overseen by the OECD: BIAC believes this is an important development that can help to ensure consistent application of the BEPS recommendations by countries, and we hope that business will be able to play a significant and constructive role in this monitoring process.

BIAC also welcomed the intention of G20 countries to remain part of this process for the foreseeable future, and we appreciate the commitment to ensure that the distinctive needs of developing countries will be also appropriately addressed.

The International Chamber of Commerce also released a statement today welcoming the conclusion of the BEPS project but underscoring significant implementation challenges in the near future.

 

USCIB Weighs in on Chinese Banking Regulations

Published on September 16, 2015

As President Obama and Chinese President Xi Jinping get set to hold their highly anticipated summit meeting next week, USCIB joined twelve business organizations in signing a letter to the Chinese Banking Regulatory Commission (CBRC), urging China to implement regulations that reflect global banking principles rather than localized solutions.

China’s proposed new banking regulations would require foreign technology companies to give source code and encryption keys to Beijing officials. The global business community has argued that these regulations discriminate against foreign providers of information and communications technologies (ICTs) and would effectively shut foreign firms out of China’s banking sector.

In a letter whose signatories represent companies from Asia, Europe and North America and do business across all industry sectors in China, USCIB and others encouraged China to “implement a prudential regulatory framework which reflects [internationally recognized] principles, allowing appropriate industry-level benchmarking and avoiding the pitfalls associated with mandating prescriptive mechanisms of technology and cybersecurity standard-setting.”

Read the full letter.

The letter summarizes a list of principles for enhancing IT security in the banking sector on which signatories encourage China to base its regulations. These high-level principles include:

  • Transparency in the policymaking process – together with sufficient time for consultation with industry on proposed approaches.
  • Polices that are flexible and adaptable to confront emerging threats while enabling companies to continue to innovate.
  • A risk-based approach to examining whole systems for cyber threats to foster a prudential regulatory framework that can be more efficient and more effective than focusing on individual functions or processes.
  • Reliance on global security standards based on consensus industry processes, which will ensure that the best practices from around the world are incorporated and that security requirements will be regularly updated to respond to evolving threats.
  • An important role for market-based approaches that achieve desirable outcomes.

“Use of such standards also avoids the insurmountable challenge of asking international firms with global platforms to comply with conflicting rules and regulations between markets,” the letter stated. “To that end, we urge the CBRC to consult with other national regulators for rules that avoid exclusive use of localized solutions, prescriptive technologies and restrictions on data flows.”

The signatories noted that the best approach for developing technology policies is “open and transparent formulation and implementation, which allows stakeholders to provide helpful input to regulators.” They urged China to base its banking regulations on internationally accepted principles to ensure that global financial systems are as secure as possible.

 

 

USCIB “Very Concerned” with Proposed Changes to US Model Income Tax Treaty

Published on September 15, 2015

USCIB sent a letter to the U.S. Treasury on September 14 expressing concern with proposed U.S. model tax treaty changes, which in part attempt to prevent double non-taxation of income between tax treaty partners.

While acknowledging that the treaty provisions address legitimate concerns, USCIB said that the draft provisions “tilt too far in their attempt to prevent inappropriate claims of treaty benefits.”

USCIB argued that because tax treaties are designed to promote cross-border trade and investment, if treaty benefits aren’t granted to legitimate claimants, then the treaty will fail in its fundamental purpose.

The letter also said that the draft provisions aren’t clear, raising questions about how the changes will be interpreted, and noted that clarity is important to taxpayers, tax authorities and treaty negotiators and legislatures.

USCIB also raised concerns about how the proposed changes will be implemented, and said that “these rules may be unacceptable to a substantial number of existing U.S. treaty partners.”

Read USCIB’s letter.

The letter concludes that the proposed changes to U.S. model income tax treaties are not a good way to address concerns about double non-taxation, and the changes may also have the unintended consequence of making tax treaties more difficult to negotiate.

USCIB, U.S. Take Lead on Alternatives to Forced Localization at APEC

Published on August 28, 2015
L-R: Trudy Witbreuk (OECD); Ken Schagrin (USTR) and Ed Brzytwa (ITIC)

Demonstrating thought leadership on trade facilitation and global value chains (GVCs) in the Asia-Pacific, USCIB participated in a half-day trade policy dialogue during the third Asia Pacific Economic Cooperation (APEC) Senior Officials Meeting (SOM III) in Cebu, the Philippines on August 28. The event titled, “APEC Best Practices to Create Jobs and Increase Competitiveness,” was organized by the APEC Committee on Trade and Investment and convened private sector representatives and officials from the United States and the OECD for a discussion of the impacts of forced localization policies and how best trade practices can serve as sound alternatives to these policies.

Helen Medina, USCIB’s vice president for product policy and innovation attended SOM III and led the session on best practices as alternatives to localization policies in the APEC region during the dialogue. USCIB members participating at the event included Jeffrey Hardee (Caterpillar), Jennifer Mulveny (Intel) and Ed Brzytwa (Information Technology Industry Council).

The event reviewed the APEC Best Practices to Create Jobs and Increase Competitiveness, which were endorsed by the APEC economies in 2013, and highlighted how those practices can be alternatives to local content requirements (LCR). Often LCRs are put in place to deal with one aspect of the economy at the expense of hurting the wider economy. Trudy Witbreuk (OECD) discussed the detrimental impacts that LCRs have had and offered other approaches for policymakers. Namely, the OECD recommends that economies to identify the domestic problem and work on a horizontal approach to resolves the issues. For example, skill shortages are best resolved through targeted training and education policies instead of local labor requirement. The OECD recommended that policies targeted at the regulatory environment, trade and investment barriers, innovation policy and infrastructure development will lead to trade outcomes that are more sustainable over the long run.

“It is not surprising that the private sector panelists echoed the OECD’s recommendation,” Medina said. The private sector participants shared their own stories about why their investments in certain APEC Economies have  flourished.  They highlighted reasons such as good investment environment, highly skilled local labor, and efficient infrastructure. The private sector also unanimously stated that the free flow of data is key to all industries.

The discussion also highlighted possible next steps that APEC can take, such as new guidance on internal coordination of regulatory work.  A summary of the meeting will be circulated to the APEC Committee on Trade and Investment so that further action items can be taken to address LCRs.  It was agreed that APEC economies have economic challenges and that what are needed are sustainable long term solutions.

USCIB and APEC economies have endeavored to make global value chains top-of-mind at APEC dialogues. At last year’s APEC CEO Summit in November, USCIB organized an event on global value chains that gave members an opportunity to discuss obstacles that APEC economies must overcome in order to leverage the benefits of GVCs as well as corresponding policy recommendations to promote economic integration within the region. You may read the outcome document of the November event online.

You may read the outcome document of the November event online.

USCIB has been advocating an APEC work stream on promoting global value chain coordination in the region, including the development of the APEC Strategic Blueprint on GVCs from the 2014 Leaders’ Declaration, which highlights how understanding global value chains is crucial for realizing a more effective policy and regulatory infrastructure for global trade. Following the blueprint, USCIB has been working with the U.S. government to address trade and investment issues that impact GVCs within APEC.

Additionally, USCIB has circulated an ICC Policy Statement on localization barriers to trade.

Business Urges U.S., China to Minimize Tech Economy Barriers

Published on August 12, 2015

Computers_loresNew York, N.Y., August 12, 2015 – The United States Council for International Business (USCIB) has joined leading American business and technology groups in urging President Obama to use his upcoming summit with Chinese President Xi Jinping to improve the bilateral relationship for the U.S. information and communications technology (ICT) sector.

In a joint letter, the groups noted that the two countries have, for nearly four decades, “consistently pursued a mutually beneficial policy of encouraging economic openness and reducing barriers to bilateral trade and investment, including in the ICT sector.” But they said the benefits of that cooperation “are now at risk, as a result of increasing and proliferating threats to national cyber-security as well as China’s approach to defining its national security interests.”

The business groups said that, since the last U.S.-China summit in November 2014, China has “increasingly pursued policies that have adversely affected the ability of U.S. ICT firms to do business in China.” They called on the two countries to reaffirm their commitments to open markets, particularly in the ICT sector.

The groups also urged the U.S. and China to ensure that measures to protect national security affecting the ICT sector are necessary, narrowly-focused and minimize disruption to open trade and competition.

The full text of the industry letter is available at https://uscib.org/uscib-content/uploads/2015/08/2015_08_11_china_ict_letter.pdf.

About USCIB:

USCIB promotes open markets, competitiveness and innovation, sustainable development and corporate responsibility, supported by international engagement and regulatory coherence. Its members include U.S.-based global companies and professional services firms from every sector of our economy, with operations in every region of the world. With a unique global network encompassing leading international business organizations, USCIB provides business views to policy makers and regulatory authorities worldwide, and works to facilitate international trade and investment. More at www.uscib.org.

Contact:
Jonathan Huneke, USCIB
+1 917.420.0039, jhuneke@uscib.org

USCIB’s Klein to Speak in Canada as OECD Plans Release of BEPS Deliverables

Published on August 10, 2015
Carol Doran Klein (USCIB) at the 2015 OECD International Tax Conference.
Carol Doran Klein (USCIB) at the 2015 OECD International Tax Conference.

As governments and the business community get ready for the release of the OECD’s proposed national actions in its controversial Base Erosion and Profit-Shifting (BEPS) initiative, USCIB Vice President and International Tax Counsel Carol Doran Klein has agreed to be a keynote speaker at a October 15-16 conference in Toronto on global transfer pricing and related tax issues, including BEPS.

The conference is being organized by Bloomberg BNA and Baker & McKenzie. Klein is expected to provide a business insider’s assessment of the BEPS deliverables.

The OECD has announced that it plans to unveil the proposed BEPS deliverables at this October’s G20 finance ministers meeting in Lima, Peru. Last month, USCIB and two other associations sent a letter to letter to U.S. Treasury Secretary Jacob Lew citing concerns with BEPS and noting the threat of double taxation to global trade and investment. The BEPS project was a primary focus of USCIB’s annual tax conference with the OECD in June.

BIAC, the Business and Industry Advisory Committee to the OECD, said its member organizations fully appreciated that this is only the end of the “first half,” of the BEPS project, with national implementation constituting the “second half.”

“It is crucial that recommendations not only protect countries’ tax bases, and the ability of governments to raise revenue, but also protect and encourage cross border trade and investment by providing a predictable fiscal environment, that will help create jobs and growth,” BIAC said.

USCIB Opposes Stringent Chemicals Regulations in China

Published on July 30, 2015

Test_tubesOn July 30, USCIB submitted comments to China’s Ministry of Environmental Protection expressing concern with draft language in China’s recently revised guidance on new chemical substances. New language suggests that any new chemical substance in an article that could potentially result in exposure to the environment or humans will be subject to full chemical notification obligations.

USCIB noted that this new requirement would be unnecessarily burdensome, imposing exorbitant costs on importers of articles. Importers would face challenges in obtaining information about the presence of chemicals in articles in order to assess potential compliance. This requirement would be imposed even if there is no corresponding benefit to the protection of human health or the environment.

“In others countries, chemical registration or new chemical notification requirements are much more limited with respect to chemicals in articles,” said Helen Medina, USCIB’s vice president for product policy and innovation. “It is not technically or economically feasible to test every article for every chemical that might be contained in each article.”

USCIB members support efforts to protect human health and the environment, and comply with a variety of national regulations including those specific to chemicals.  For this reason, USCIB is actively engaged in the Strategic Approach to International Chemicals Management (SAICM), chemicals and green economy discussions at the United Nations Environment Program (UNEP), and chemicals deliberations at the Organization for Economic Cooperation and Development (OECD) and at the Asia-Pacific Economic Cooperation (APEC) chemical dialogue.

ICC: New Anti-Corruption Guide for SMEs

Published on July 28, 2015

new-guide-smes_sourceThe International Chamber of Commerce (ICC) has released “Anti-corruption Third Party Due Diligence,” a new guide to help small- and medium-sized enterprises (SMEs) assess and manage corruption risks associated with engaging third party suppliers.

SMEs are often on the receiving end of burdensome due diligence procedures. The new ICC anti-corruption tool inspires businesses to engage in due diligence by creating achievable and manageable goals.

“Corruption hinders economic growth and erodes trust in both businesses and governmental institutions,” said Viviane Schiavi, senior policy manager of the ICC Commission on Corporate Responsibility and Anti-corruption, and co-chair of the B20 Anti-corruption Task Force Training Work Stream. “It remains a major barrier that impacts businesses negatively by increasing the costs of doing business -especially for SMEs – and undermining the quality of both products and services. SMEs are drivers of economic growth in many economies yet often they need relevant training to do their part for responsible supply chains and sustainable growth.”

The ICC guide addresses SMEs’ need for capacity building on integrating global supply chains in an ethical and responsible way. It provides practical advice on how SMEs can cost-effectively conduct due diligence on third parties they engage to perform services on their behalf.”

This new anti-corruption tool is a direct response to the Turkish G20 and B20 efforts to implement concrete actions for private sector integrity, especially to empower SMEs in their fight against corrupt activities. It also supports one of the key United Nations Sustainable Development Goals, to be adopted during the UN’s General Assembly in September, which will work towards substantially reducing corruption and bribery in all its forms.

ICC has been a pioneer in the business fight against corruption, and is at the forefront of the development of ethics, anti-corruption and corporate responsibility advocacy codes and guidelines. The new guide will complement ICC’s robust suite of anti-corruption tools, which includes the Ethics and Compliance Training Handbook .

Preparing for WSIS+10: ICTs Needed for Sustainable Development

Published on July 13, 2015

WSIS+10As United Nations Member States prepare for the General Assembly’s 10-year review of the World Summit on the Information Society, USCIB participated in a stakeholder consultation in New York on July 2 during which members emphasized that information and communication technologies (ICTs) facilitate the implementation of the UN Sustainable Development Goals. USCIB members also pointed out that private sector investment is critical for the continued roll-out of Internet access, so it is imperative for governments to create an environment that encourages investment in broadband and ICTs.

USCIB members had important speaking roles in the July 2 program, which featured three panels aimed at exploring (1) progress made in implementation of the WSIS outcomes, (2) ICT technology gaps and areas for continued focus in bridging the digital divide; and (3) harnessing ICTs for development going forward. Members included Joseph Alhadeff, ICC digital economy commission chair and USCIB ICT policy committee vice chair (Oracle); Carolyn Nguyen (Microsoft); Cheryl Miller (Verizon); and Chip Sharp (Cisco).

Each panel included speakers from business, civil society, and the technical community, as well as respondents from governments and stakeholder groups. The speaker’s remarks and subsequent rich commentary provided by respondents and the interactive Q&A will serve as important inputs to the UN Secretariat’s development of a “non-paper” – to be released at the end of August 2015 – which will serve as the substantive foundation for the final outcome document to be endorsed by the UN General Assembly at the High-Level Meeting in December.

USCIB Adds Its Voice to Concerns with BEPS

Published on July 10, 2015

taxes-portUSCIB joined the Software Finance & Tax Executives Council and the National Foreign Trade Council in signing a letter to U.S. Treasury Secretary Jacob Lew citing concerns with the OECD’s Base Erosion and Profit Shifting (BEPS) project. The letter notes that the threat of double taxation will have a negative impact on global trade and investment.

The BEPS project is an effort by the OECD to rewrite global rules that tax profits where economic activity is generated, without imposing undue compliance costs on taxpayers.

“Throughout the BEPS process, U.S. business has been pressing for clarity,” the letter states. “The lack of clarity and threat of double taxation will create uncertainty which will have a negative impact on global trade and investment.”

Read the letter.

L-R: Grace Perez-Navarro (OECD), Carol Doran Klein (USCIB), David Camp (PwC), Pascal Saint-Amans (OECD)
L-R: Grace Perez-Navarro (OECD), Carol Doran Klein (USCIB), David Camp (PwC), Pascal Saint-Amans (OECD)

Last month, USCIB hosted its tenth annual OECD International Tax Conference in Washington, D.C., which took stock of BEPS and its impact on international trade and investment.