As a new decade gets under way, the tax world is being reshaped by a series of major trends and developments.  Fallout from the financial crisis, the emergence of new economies as global players, a focus on transparency and effective tax administration, and increasingly close international cooperation are just some of the currents affecting tax systems and taxpayers alike.

Against this backdrop, USCIB, the OECD and BIAC convened their latest annual tax conference in Washington, D.C., June 7 and 8.  The event brought together top officials from the U.S. and other governments, OECD representatives, corporate executives and other experts to discuss how the Paris-based OECD, which groups the world’s major market democracies, influences tax policies worldwide, and how business can work with it.

The challenges facing tax professionals in both the public and private sectors are many and varied.  According to Bill Sample, corporate vice president for worldwide tax with Microsoft, and chair of USCIB’s Taxation Committee, the dispersal of key corporate functions across borders increases the number of international transactions just in the course of ordinary operations.  “With the rise of the service economy, and the prevalence of intangible goods like software, it can be a real challenge for policy makers to keep up,” he said.

Add to the mix the OECD’s recent enlargement and engagement with non-OECD economies, and the picture becomes even more multifaceted.  “The myth of the OECD as an insular ‘rich man’s club’ is being shattered as a new wave of members lines up to join, and as we deepen our engagement with other major new economies,” said Jeffrey Owens, director of the OECDs Center for Tax Policy and Administration.

IRS Commissioner Douglas Shulman, who chairs the OECD’s Forum on Tax Administration (FTA), said the already close cooperation between tax authorities in manor economies would increasingly give way to cross-border coordination on key issues.

“As chair of the FTA, I am working with my international counterparts to build greater cooperation between tax authorities across the world,” Mr. Shulman stated.  He said FTA members could “speak with a unified voice on such critical maters as offshore compliance, corporate governance and high net-worth individuals.”

Mr. Shulman said a priority area for such international coordination is joint audits, where the United States and other jurisdictions would collaborate closely to avoid duplication of effort and agree on basic facts in a company audit and the appropriate treatment.  He predicted such audits would be less intrusive and burdensome for taxpayers, and he said the FTA would draft a how-to guide to ensure best practices and uniformity across borders.

Conference panels tackled a number of issues that can bedevil even the most astute tax planners at global companies.  Take transfer pricing, the system under which companies and tax authorities account for intra-company sales across borders.  “Transfer pricing disputes involving intangible goods tend to be among the most contentious and high-stakes international tax controversies companies face,” said Lynda Walker, USCIB’s vice president and international tax counsel.

The OECD is about to undertake a review of how its Transfer Pricing Guidelines apply to intangibles.  A panel at the conference looked at whether consensus can be reached on what exactly constitutes an intangible.

Another set of issues revolve around international efforts to curtail climate change.  Tradable permits are likely to be one of the principle instruments used to reduce emissions of greenhouse gases, according to Chris Lenon, global head of tax with Rio Tinto, and chair of BIAC’s Tax Commitee.  “Yet little systematic study has been undertaken of the tax treatment of such permits or of whether the interaction between national tax systems might impede the efficient operation of a cap-and-trade regime,” he said.

Panels at the conference also addressed information exchange between national tax authorities, value-added taxes, the OECD’s Model Tax Convention, secondment of employees and the “arm’s-length” principle, which was set forth by the OECD in 1995 to guide transfer-pricing matters but which is under increasing scrutiny.

All told, some 300 people attended the two-day conference.  Many presentations and other conference materials are available at www.uscibtax.org.  The dates of next year’s conference have been set for June 6-7, 2011.

Staff contact: Lynda Walker

Text of Commissioner Shulman’s remarks (IRS website)

More on USCIB’s Taxation Committee

OECD Center for Tax Policy and Administration website

BIAC website