G.a.t.c.a.: A Practical Guide To Global Anti-tax Evasion Frameworks (global Financial Markets)

This book is a practical guide to global anti-tax evasion frameworks. Coverage includes base erosion and profit shifting (BEPS), the Common Reporting Standard (CRS), and the Automatic Exchange of Information (AEoI). It covers the practical operational issues these frameworks present and offers insight into practical compliance options and operational methodologies to reduce costs and risks. The book concludes with insights into how institutions can translate these complex obligations into effective client communications.-- Provided by publisher Foreword 6 Preface 9 Acknowledgements 11 Contents 12 Abbreviations and Acronyms 14 List of Figures 17 Part I Background and Principles 18 1 Introduction 19 2 Moral Outrage and Righteous Indignation 23 Context 23 FATCA 24 Avoidance or Evasion? 24 3 Background and Principles 31 Avoidance and Evasion 31 Detection not Prosecution 31 Reportability 32 Adding to the Burden 32 Exceptions and Exemptions 33 Different Strokes for Different Folks 34 The Framework Landscape 35 USA 35 OECD 37 The Elevator Test 38 Issues of Substance 39 Resource 39 Leadership and Ownership 39 Capacity 39 Risk 40 Technology 40 Principles 41 Part II US Foreign Account Tax Compliance Act (FATCA) 43 4 Introduction to FATCA 44 Understanding FATCA 45 Introduction 45 Background 45 Voluntary System 46 5 Principles of FATCA 51 Legal Basis and Structure 52 Main Provisions 53 Principles 53 How Does US Tax Evasion Happen 53 Accidental Americans 54 Principles 55 Intergovernmental Agreements (IGAs) and Reciprocity 56 Reciprocity 57 In Substance 57 Status 58 Structure 60 Global Vs Local 61 Identification 61 Reporting 62 Recalcitrance V Non-Participation 63 Withholding and Account Closure 64 Convergence 65 6 Identification and Documentation 67 Intermediaries 67 Identification 70 CIVs 73 NFFEs 74 Defining a US Person 75 Effective Control and Substantial Ownership 76 Actual Knowledge and Reason to Know 76 Man Walks into a Bar 77 7 Simplifying FATCA 79 Structural Simplification 80 Automation 81 Standardisation 82 Transparency 83 Regulatory Simplification 85 Accounts Exempt from Review 87 Low Value Accounts 87 Deemed Compliance 88 Types of Deemed Compliance 88 Registered Deemed Compliance 89 Local FFIs 89 Non-reporting Members of a P-FFI Group 90 Qualified Investment Vehicles 90 Restricted Funds 90 Certified Deemed Compliance 91 Non Registering Local Banks 91 Retirement Plans 92 Non Profits 92 Low Value FFIs 93 NFFEs 93 Practical Issues 94 Deemed Compliant FFIs 94 FFIs 95 Inter Governmental Agreements (IGAs) 95 8 FATCA Withholding 97 Penalty not a Tax 97 Reducing the Risk of FATCA Withholding 98 Recalcitrance and Non-Participation 98 Purpose 99 Withholding Issues 100 FDAP 100 Application of FATCA Penalties 101 Systems Issues 102 FATCA Withholding not a Tax 102 Passthru Payments 103 Passthru Payment Percentage 103 Non Duplicative Taxation 106 Deferral 107 Conclusion 107 9 Reporting 109 Report Routes 109 In Substance Risk 110 Technology 110 Report Data 110 Recalcitrant and Non Consenting Accounts 111 Overlap to Chapter 3 Reporting 112 Cybersecurity 113 Part III OECD Automatic Exchange of Information (AEoI) 115 10 Introduction to AEoI & CRS 116 11 Principles of AEoI-CRS 119 Legal Basis & Structure 119 Operational Issues 124 Cyber Security 135 Conclusion 136 12 The Common Reporting Standard 138 Actors in CRS 139 Account Holders 139 Financial Institutions 140 Tax Administrations 140 Implementing CRS 141 If...then... 142 Structure of CRS 143 Segmenting CRS Strata 144 Application of Due Diligence 145 Report Data Gathering 147 Size Matters 147 Technical Delivery 147 Control and Oversight 148 Conclusion 149 A Wider Approach 150 13 Automatic Exchange of Information 151 Timing 152 Manner of Exchange 153 Transmission Standards 154 Conclusion 156 14 Operational Issues of AEoI 158 Understanding 158 Language and Currency 159 Focus 160 Packing and Unpacking 160 Packing 161 Unpack and Re-Pack 162 Competency 163 Part IV OECD Base Erosion and Profit Shifting 165 15 Introduction to BEPS 166 The OECD/G20 Inclusive Framework on BEPS 169 The BEPS Actions 170 Transfer Pricing 170 Hybrid Mismatches 171 Permanent Establishment 171 Tax Treaty Abuse 171 Controlled Foreign Company (CFC) Rules 172 Interest Deductions 172 The Multilateral Instrument 172 Implementation 173 Reaction to the BEPS Action Plan 174 BEPS Associate Countries (As of March 2017) 175 16 BEPS Actions Part I 178 Action 1: Address the Tax Challenges of the Digital Economy 178 What Impact Will This Have on Affected Businesses? 180 Action 2: Neutralise the Effects of Hybrid Mismatch Arrangements 181 What Impact Will This Have on Affected Businesses? 182 Action 3: Strengthen Controlled Foreign Company (CFC) Rules 183 What Impact Will This Have on Affected Businesses? 184 Action 4: Limit Base Erosion via Interest Deductions and Other Financial Payments 185 What Impact Will This Have on Affected Businesses? 186 Action 5: Counter Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance 187 What Impact Will This Have on Affected Businesses? 189 Action 6: Prevent Treaty Abuse 189 What Impact Will This Have on Affected Businesses? 191 Action 7: Prevent the Artificial Avoidance of Permanent Establishment (PE) Status 192 What Impact Will This Have on Affected Businesses? 193 17 BEPS Actions Part II 195 Action 8, 9 & 10: Assure that Transfer Pricing Outcomes Are in Line with Value Creation—Intangibles, Risks and Capital & Other High Risk Transactions 195 Delineation of Transactions 198 Intangibles 199 Risks 199 What Impact Will This Have on Affected Businesses? 200 Action 11: Establish Methodologies to Collect and Analyse BEPS Data and Actions to Address Said Data 201 What Impact Will This Have on Affected Businesses? 203 Action 12: Require Taxpayers to Disclose Their Aggressive Tax Planning Arrangements 203 What Impact Will This Have on Affected Businesses? 205 Action 13: Transfer Pricing Documentation and Country by Country Reporting 206 What Impact Will This Have on Affected Businesses? 207 Action 14: Make Dispute Resolution Mechanisms More Effective 208 What Impact Will This Have on Affected Businesses? 210 Action 15: Develop a Multilateral Instrument 211 What Impact Will This Have on Affected Businesses? 212 18 Impacts of BEPS 214 Key Talking Points 217 The Digital Economy 217 Hybrid Mismatches 218 Treaty Abuse 218 Permanent Establishment 218 Country by Country Reporting 219 What Should Companies Be Doing? 219 The BEPS Project—Long Term 223 Part V The Global Overview 226 19 Introduction 227 20 Cyber Risk 228 Location of Risk 228 Timing 229 Value of Data 230 Previous Experience 230 Intent 231 Intent 232 The Perpetrators 234 21 Challenges of GATCA 238 Summary 246 Awareness 247 Knowledge 247 Prioritisation 247 Approach 248 Resources 249 Policy 250 Procedure 250 22 Conclusions 253 Purpose 253 Detection 253 Deterrence 254 Prevention 255 Cost Benefit 255 Cyber 256 Ethics and Fairness 257 Proportionality 257 No Benefit 258 Appendix A: List of Abbreviations and Acronyms 260 Appendix B: US Model 1 Reciprocal IGA Template 264 Index 288 Front Matter ....Pages i-xix Front Matter ....Pages 1-1 Introduction (Ross K. McGill, Christopher A. Haye, Stuart Lipo)....Pages 3-6 Moral Outrage and Righteous Indignation (Ross K. McGill, Christopher A. Haye, Stuart Lipo)....Pages 7-14 Background and Principles (Ross K. McGill, Christopher A. Haye, Stuart Lipo)....Pages 15-26 Front Matter ....Pages 27-27 Introduction to FATCA (Ross K. McGill, Christopher A. Haye, Stuart Lipo)....Pages 29-35 Principles of FATCA (Ross K. McGill, Christopher A. Haye, Stuart Lipo)....Pages 37-52 Identification and Documentation (Ross K. McGill, Christopher A. Haye, Stuart Lipo)....Pages 53-64 Simplifying FATCA (Ross K. McGill, Christopher A. Haye, Stuart Lipo)....Pages 65-82 FATCA Withholding (Ross K. McGill, Christopher A. Haye, Stuart Lipo)....Pages 83-94 Reporting (Ross K. McGill, Christopher A. Haye, Stuart Lipo)....Pages 95-100 Front Matter ....Pages 101-101 Introduction to AEoI & CRS (Ross K. McGill, Christopher A. Haye, Stuart Lipo)....Pages 103-105 Principles of AEoI-CRS (Ross K. McGill, Christopher A. Haye, Stuart Lipo)....Pages 107-125 The Common Reporting Standard (Ross K. McGill, Christopher A. Haye, Stuart Lipo)....Pages 127-139 Automatic Exchange of Information (Ross K. McGill, Christopher A. Haye, Stuart Lipo)....Pages 141-147 Operational Issues of AEoI (Ross K. McGill, Christopher A. Haye, Stuart Lipo)....Pages 149-155 Front Matter ....Pages 157-157 Introduction to BEPS (Ross K. McGill, Christopher A. Haye, Stuart Lipo)....Pages 159-170 BEPS Actions Part I (Ross K. McGill, Christopher A. Haye, Stuart Lipo)....Pages 171-187 BEPS Actions Part II (Ross K. McGill, Christopher A. Haye, Stuart Lipo)....Pages 189-207 Impacts of BEPS (Ross K. McGill, Christopher A. Haye, Stuart Lipo)....Pages 209-220 Front Matter ....Pages 221-221 Introduction (Ross K. McGill, Christopher A. Haye, Stuart Lipo)....Pages 223-223 Cyber Risk (Ross K. McGill, Christopher A. Haye, Stuart Lipo)....Pages 225-234 Challenges of GATCA (Ross K. McGill, Christopher A. Haye, Stuart Lipo)....Pages 235-249 Conclusions (Ross K. McGill, Christopher A. Haye, Stuart Lipo)....Pages 251-257 Back Matter ....Pages 259-291 This book is a practical guide to global anti-tax evasion frameworks designed for financial institutions and multi-national corporations. It covers the US Foreign Account Tax Compliance Act (FATCA), base erosion and profit shifting (BEPS), the Common Reporting Standard (CRS), and the Automatic Exchange of Information (AEoI). It includes general descriptions of the principles of each of these frameworks and the practical operational issues they present, such as detection, documentation, reporting, control and oversight. The authors also offer insight into practical compliance strategies and operational methodologies to reduce costs and risks. The book concludes with insights into how institutions can translate these complex obligations into effective client communications Annotation A practical guide to global anti-tax evasion frameworks. Coverage includes base erosion and profit shifting (BEPS), the Common Reporting Standard (CRS), and the Automatic Exchange of Information (AEoI). It covers the practical operational issues these frameworks present and offers insight into practical compliance options and operational methodologies to reduce costs and risks. The book concludes with insights into how institutions can translate these complex obligations into effective client communications