Lower-Income Countries Fire a Broadside at Tax-Avoidance “Piracy”

Swashbuckling volunteers are helping poorer countries fend off threats to their national treasuries from aggressive corporate tax planning. Although income inequality is very real for many small island nations and other developing economies around the globe, there is an existing perception that profit shifting alone is compounding their revenue shortfalls. However, there are also other significant factors attributing to this condition.

In Jamaica, for example, some international firms “find ways to shelter profits using the British Virgin Islands and other nearby tax havens,” according to a recent article in The Economist. The country’s national tax authority, Tax Administration Jamaica (TAJ), has turned to the unpaid volunteer auditors of Tax Inspectors Without Borders (TIWB), a joint initiative of the OECD and the United Nations Development Program, to address the issue. Although country size has nothing to with this, we should bear in mind that many of these same Caribbean nations until very recently were once tax havens themselves, also known as a “fiscal paradise.” Now, in order to deal with the complex rules of the OECD’s Inclusive Framework on Base Erosion and Profit Shifting (BEPS) initiative and retain some of these profits, they desperately need the help of global tax experts.

Training from the TIWB experts has helped the administration’s auditors learn and apply complex cross-border transfer pricing rules.

Jamaica is not the only country seeking assistance. Since 2015, TIWB has answered 52 calls for help in Africa, Asia, Latin America, the Caribbean and eastern Europe. The OECD estimates that treasuries worldwide lose between $100 billion and $240 billion a year to corporate tax avoidance, and an International Monetary Fund (IMF) study puts the total even higher, at more than $600 billion.

While the article has fun with the notion of corporate tax-avoidance “piracy,” “reclaiming the plunder” and so on, it carefully explains the Jamaican initiative within the context of the OECD’s BEPS, noting the OECD has “floated the idea of ‘reconsidering’ transfer-pricing rules.” That’s an important shift, according to Alex Cobham of the Tax Justice Network, quoted in the article: “We’re closer now than ever before to the kind of open, global discussion of tax rules that could finally redress some of the glaring inequalities in the distribution of taxing rights that lower-income countries face.”

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George L. Salis, Principal Economist and Tax Policy Advisor at Vertex Inc.  Vertex's Chief Tax Office (CTO) provides insight regarding the impact of tax regulations, policy, enforcement, and emerging technology trends on global tax department operations.

George L. Salis

Chief Economist and Senior Tax Policy Director

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George L. Salis is Chief Economist and Senior Tax Policy Director. He is an economist, lawyer, and tax professional with 29+ years’ experience in international taxation and trade compliance, tax planning and controversy, fiscal regulation, and tax economics consulting. He is responsible for analysis of economic, fiscal, legal, trade, and development issues in countries, as well as tracking and analyzing the rapid change in tax policies and regulations, and inter-governmental organizations, and tax administrations around the world.

George is the recipient of the Advanced Certificate in EU Law from the Academy of European Law, European University Institute in Florence, and the Executive Certificate in Economic Development from the Harvard Kennedy School of Government.

George received his BSc in economics and political science, an LLB (Honours), an MA in legal and ethical studies, and an LLM (Honours) in international tax law. He also holds the PhD in international law and economic policy, and the SJD in Taxation from The University of Florida, Levin College of Law. George is a Certified Business Economist (CBE- NABE).

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