The Platform for Collaboration on Tax is a joint effort launched in April 2016 by the International Monetary Fund (IMF), the Organisation for Economic Co-operation and Development (OECD), the United Nations (UN) and the World Bank Group (WBG). The Platform is designed to intensify the cooperation between these organizations on tax issues. It formalizes regular discussions between the four international organizations on the design and implementation of standards for international tax matters, strengthens their ability to provide capacity-building support to developing countries, and helps them deliver jointly developed guidance. It also increases their ability to share information on operational and knowledge activities around the world.
This effort comes at a time of great momentum around international tax issues, and was welcomed by the G20 finance ministers at their February meeting in Shanghai. Amid the growing importance of taxation in the debate to achieve the UN Sustainable Development Goals (SDGs), a major aim of the Platform is to better frame technical advice to developing countries as they seek both more capacity support and greater influence in designing international rules.
Among the Platform’s tasks are to deliver a number of publications designed to help developing countries implement the measures developed under the G20/OECD Base Erosion and Profit Shifting Project (BEPS) among other international tax issues. The first publication, focusing on tax incentives, was delivered in November. A second, addressing capacity-building, was delivered in July.
There is an important link between this work and the BEPS implementation framework. Platform members hold regular meetings with representatives of developing countries, regional tax organizations, banks and donors. Consultations with business and civil society are organized as needed.
More information about the Platform for Collaboration on Tax is provided in the “Concept Note”, jointly developed by the four international organizations.
Scope of activities in tax
Technical assistance in taxation is one of the core functions of the IMF. Bi-lateral assistance on tax policy, revenue administration design, tax law drafting and capacity building has been provided to the Fund’s member countries on demand for over 50 years, through a headquarters staff that has grown to now total nearly 70 professionals from around the world, including administration, policy and legal experts. This expertise is supplemented by professional staff located in 10 IMF regional technical assistance centers, covering the vast majority of low income countries; and other long and short term experts drawn from governments and academia, working in countries under close supervision of headquarters staff. The Fund works with about 100 countries annually on aspects of tax policy, tax legislation and revenue administration. For lower income countries, such assistance frequently takes the form of comprehensive multi-year programs of reform.
IMF technical assistance is closely tied to the IMF’s surveillance and lending programs, with design drawing upon the staff’s deep understanding of the member countries’ macroeconomic frameworks. The overarching discussions of reform take place at the level of Ministers/Deputy Ministers of Finance and Commissioners of Revenue, based upon detailed technical work with their staffs. In addition to direct technical assistance, headquarters tax staff provide regular support to the IMF’s country teams in their core surveillance and assessments of fiscal situations.
Extensive analytic work draws on information gained and problems observed in TA, which in turn supports the development of solutions to problems newly or regularly encountered in the field. Publications include, for example, a handbook on revenue administration issues for the extractive industries, technical notes and manuals—for example, on Fiscal Analysis of Resource Industries: (FARI Methodology), a ’how to’ note on tobacco taxation; a 2016 book on International Taxation and the Extractive Industries (Daniel, Keen, Swistak and Thuronyi, 2016); a paper on leverage and debt bias in taxation and its effects; and work on compliance issues in revenue administration.
New tools for revenue administration and compliance
TADAT, the Tax Administration Diagnostic Assessment Tool: developed by the IMF and now operated through an independent, donor funded, secretariat housed there. Formally launched din 2015, more than 30 TADAT assessments have been conducted by trained TADAT assessors. Assessment results are increasingly being used as a baseline to prioritize and implement reforms in areas of identified weaknesses, which often include: inaccuracies in the taxpayer registration database, weak risk management approaches, poor on-time declaration and payment of tax liabilities, and inattention to accuracy of tax reported in declarations. Further information, and results for some countries that have chosen to publicize their reports, can be found at: www.tadat.org.
RA-GAP, a standardized methodology for measuring compliance gaps in particular taxes at countries’ requests. The heaviest initial focus has been on refining, and executing, this methodology for the VAT—with more than twenty RA-GAP assessments completed to date.
ISORA, the International Survey of Revenue Administrations: brings together the IMF, CIAT, IOTA and the OECD, and using the RA-FIT platform developed at the IMF, collects information on tax administrations’ performance on a variety of metrics, permitting greater standardization for analysis while avoiding burdensome duplication for member countries.
Other recent developments
Further integration of tax policy and administration issues into IMF surveillance for all member countries. In 2016-17, a two-part pilot project addressing: (i) revenue mobilization generally, in lower income countries; and (ii) international corporate tax issues across all levels of economic development and geographic regions is underway, designed to give these important issues even more salience in Minister-level discussions in the IMF’s regular macro-surveillance for all members. By mid-2017, 25 developing member countries will have participated in part (i), and extensive international tax analysis in connection with surveillance (part ii) will have been completed for 10 countries.
The IMF is heavily involved with Platform partners in developing eight “toolkits” on cross-border tax issues of relevance for developing countries. The first of these was published in November 2015, on Effective and Efficient Use of Tax Incentives for Investment; soon to be completed is another on taxation of “Offshore Indirect Transfers of Interest.”
Recent additional analytic work includes: tax issues in innovation and technological development; further studies on aspects of leverage and debt bias (e.g., on the financial sector; on non-financial corporations); work for the G20, with the OECD, on the effects of uncertainty in tax systems and administration under way.
Scope of activities in tax development for lower income countries; methods of assistance delivery
The OECD seeks to improve global tax systems through the development of standards and norms and their effective implementation. Capacity building is an integral part of this work, and information sharing and problem analysis from that work in turn feeds back into further refinement and development of standards. The OECD also produces internationally comparable statistics on both development assistance and taxation.
The primary methods by which the OECD contributes to capacity building are through:
(i) Bringing experts together to share experience and practices--the Global Relations Program holds over 60 multilateral and bilateral events each year with some 2000 tax officials from over 100 countries; the International Academy for Tax Crime Investigation brings together officials from tax and other agencies, promoting both international and inter-agency cooperation on tax crimes; the Forum on Tax Administration enables revenue agencies to work together toward increasing the efficiency, effectiveness and fairness of tax administration, as well as producing comparative data on 56 tax administrations.
(ii) Building technical capacity through practical instruments and mechanisms—the Task Force on Tax and Development works with the European Commission and World Bank to deliver intensive support on relevant tax matters to over 20 countries; the Tax Inspectors Without Borders project, in collaboration with UNDP, provides experts to work on international tax audits and its pilot phase between 2012 and 2014 assisted in the collection of an extra $185million in revenue; the Global Forum on Transparency and Exchange of Information for Tax Purposes (to which the OECD serves as secretariat) provides guidance and training to developing countries in adopting international standards in exchange of information.
(iii) Integrating developing countries into international processes – Over 80 developing countries and other non-OECD/non-G20 countries to participated in the BEPS process through a combination of direct engagement in technical working groups, regional consultations and thematic global fora, this engagement shaped the outcomes, and increased awareness and understanding by developed countries of developing countries’ issues; the Inclusive Framework on BEPS takes this integration further and is open for all interested countries to join on an equal footing.
Recent Tools and Developments
(i) A new purpose code has been introduced to the OECD’s Development Assistance Committee’s Official Development Assistance reporting to enable donor support on tax projects to be tracked in the OECD’s regular development statistical collection. Donors are now using this coding for 2015 spending, and the first reports will be available next year.
(ii) Developing countries are being supported to produce revenue statistics in an internationally comparable basis, in a long term project. 2016 saw the first publication of Revenue Statistics in Africa, covering 8 countries in Africa, joining comparable publications for OECD, Latin American and Caribbean, and Asian economies.
(iii) Extractive industries case studies on mineral product pricing practices are being produced to assist developing countries improve their understanding of mineral product transactions and pricing. The first three drafts were provided for public consultation with several more to come.
Scope of activities on tax and development: methods of assistance delivery
The UN capacity development programme on international tax cooperation is focused on the needs and priorities of developing countries, especially least developed ones. It is carried out through a collaborative engagement of tax officials from developing countries, members of the Committee of Experts on International Cooperation in Tax Matters (the Committee), relevant international and regional organizations and prominent academics. This multi-stakeholder approach aims at ensuring that all activities are demand-driven and effectively address the needs of developing countries.
The programme consists of training activities, delivery of technical assistance, and production of publications and other capacity development tools. Presently, the work focuses on three main areas: double tax treaties; transfer pricing; and tax base protection for developing countries. The programme largely draws on the outputs of the Committee, with a view to disseminating and operationalizing them for the benefit of developing countries. These include the United Nations Model Double Taxation Convention between Developed and Developing Countries, the United Nations Manual for the Negotiation of Bilateral Tax Treaties between Developed and Developing Countries, and the United Nations Practical Manual on Transfer Pricing for Developing Countries.
Courses on both double tax treaties and transfer pricing are normally delivered in regional settings, in cooperation with regional organizations of tax administrations. These courses combine theoretical and practical aspects and feature small-group discussions of real-life examples and case studies. In addition, regional and country experts are invited to provide practical insights and share relevant experiences from their country practice, with a view to facilitating South-South collaboration. In order to allow for broader accessibility to training materials, online courses are also being developed to complement the offering of face-to-face training.
Recent tools and publications
(i) The United Nations Handbook on Selected Issues in Administration of Double Tax Treaties for Developing Countries and Papers on Selected Topics in Negotiation of Tax Treaties for Developing Countries are two recent publications aimed at strengthening the capacity of developing countries to negotiate and apply double tax treaties.
(ii) The main tool in the area of tax base protection for developing countries is the United Nations Handbook on Selected Issues in Protecting the Tax Base of Developing Countries, which is intended to support developing countries in increasing their potential for domestic revenue mobilization. In order to complement and further operationalize this Handbook through more in-depth and hands-on practical guidance, a series of Practical Portfolios on Protecting the Tax Base of Developing Countries is now being developed, including on base-eroding payments for services, interest, rents and royalties.
(iii) The joint UN-CIAT publication entitled Measuring Tax Transaction Costs in Small and Medium Enterprises presents an empirical methodology to assess the costs borne by taxpayers when complying with their obligations, as well as the costs faced by the tax administration for ensuring compliance by taxpayers, with a view to identifying potential measures to reduce these costs and achieve greater compliance, while realizing sustainable increases in government revenues.
For more information, please visit the UN’s Capacity Development web page.
Scope of activities in tax development for lower income countries; methods of assistance delivery
WBG support for client countries to build the capacity of their tax systems is provided through a range of instruments, which ensures support throughout their lifecycle, from diagnosis to analysis of causes ad solutions of tax issues, design of a program of capacity building, implementation, and, finally, evaluation.
Specifically, WBG provides financial support in the form of loans to IBRD countries and IDA credits and grants, including:
(i) Investment Project Financing for building physical and social infrastructure, such as Information Management Information Systems and business process re-engineering for tax administrations;
(ii) Development Policy Financing for a program of policy and institutional actions, such as changes in tax laws and arrangements for providing tax incentives to foreign investors; and
(iii) Program-for-Results operations that link disbursements directly to the delivery of defined results. Presently, some 9 countries have lending projects with significant tax components, adding to about $400 million in support, including $50 million for technical assistance.
In addition, Advisory Services and Analytics (ASA) provide WBG clients with customized expertise and analytics, either as stand-alone services or as a complement to financial support programs. This includes Economic Sector Work, involving diagnostic and analytical reports aiming to influence policy choices and programs; Non-Lending Technical Assistance to assist clients building capacities or strengthening institutions through events and reports; and impact evaluation and training. On-going ASA support is provided to some 39 countries. Funding for these activities is through WBG’s own resources, including from the International Development Association, donor-provided trust funds, and clients themselves may also reimburse the WBG for advisory services.
Expertise on tax is mostly focused in the Equitable Growth, Finance and Institutions (EFI) Vice Presidency. EFI has some 30 tax experts on staff, and an additional 80 or so staff members who are substantially involved with tax in their work programs. EFI’s 9-member Global Tax Team is responsible for global engagement on tax issues, contributing guidance, tools and research, and supporting country engagement on tax issues. Other tax experts are in regional units, and provide direct support for capacity building in client countries. Other WBG units work on specific tax issues, including extractives revenue management, and carbon and sin taxes, among others.
WBG support for capacity building in the area of taxation covers tax administration, policy and international tax issues. This support is provided within the context of country programs, reflecting local circumstances and needs. Tax administration reforms addressed through WBG engagements include reform of laws and regulations; organizational reform, such as shifting from an organizational structure by tax type to a function-based structure, and reform of large taxpayer offices; functional review and reforms, such as improvements in arrangements for taxpayer registration and audit business; process re-engineering and improving IT systems; and human resources training and reform (including in Afghanistan, Colombia, Ghana, Pakistan, Peru, Vietnam).
In tax policy, on-going and recent work includes support to comprehensive tax reforms (Armenia and Colombia), natural resource tax reforms (Burkina Faso), tobacco excise reform (Ghana and Botswana), technical dialogue (Philippines), equity impact scenarios for tax reform (Chile), tax incentives rationalization and simplification (Gabon), and revenue forecasting (Pakistan). The international tax work stream supports countries to design and implement instruments and administrative procedures to address key sources of base erosion, such as transfer mis-pricing, tax treaty application issues, detecting and adjudicating aggressive tax planning structures and other methods of profit shifting, and tax transparency through exchange of information. Examples of support include Vietnam recovering over $150 million in the first two years of doing transfer pricing audits and the Philippines recovering over $1 million through its first two requests for information.
Recent tools and developments:
(i) During the first six months of 2016, consultations on transfer pricing (with the IMF) and on proprieties for tax CD in Africa (in Tanzania) and East Asia and the Pacific (in Korea).
(ii) Publications on ‘Transfer Pricing and Developing Economies: From Implementation to Application’ and ‘Transfer Pricing in the African Mining Industry’ (both forthcoming).
(iii) Modular tools for detailed assessment of tax administration.
For more information, please visit the World Bank’s page on domestic resource mobilization.