CHINA’s BELT AND ROAD INITIATIVE AND TAX ADMINISTRATION
By: Euney Marie J. Mata-Perez on May 16, 2019
The Asia-Oceana Tax Consultants’ Association, as represented by its President, Atty. Euney Marie J. Mata-Perez, attended as an observer of the first Conference of the Belt and Road Initiative Tax Administration Cooperation Forum (BRITACOF) hosted by the State Taxation Administration of the People’s Republic of China on 18-20, April, 2019 in Wuzhen, Zhejiang Province, China. The forum was well-attended by 350 delegates from representatives of tax administrations or finance departments from 85 jurisdictions, 16 international organizations, and a number of academic institutions and businesses.
The forum also witnessed the birth of the Belt and Road Initiative Tax Administration Cooperation Mechanism (BRITACOM), a non-profit official mechanism participated by countries and regions, international organizations and other stakeholders supportive of the BRI, primarily aimed at strengthening tax administration cooperation and capacity building and operated on the basis of respecting sovereignty and laws of all participating countries and regions. AOTCA signed the Memorandum of Understanding as an “observer” of the BRITACOM.
China’s Belt and Road Initiative (BRI) is a development strategy adopted by the Chinese government involving infrastructure development and investments in various countries and international organizations in Europe, Asia, Middle East, Latin America and Africa. “Belt” refers to the overland routes for road and rail transportation, called “the Silk Road Economic Belt“. “Road” refers to the sea routes, or the 21st Century Maritime Silk Road.
The discussions during the BRITACOF focused on how to build a growth-friendly tax environment that would promote economic growth while ensuring tax revenue mobilization in jurisdictions that support the BRI. Topics focused on three main areas, namely, (1) the rule of law in taxation, (2) raising tax certainty, and (3) expediting tax dispute resolution. These topics are not only relevant to, but are very much needed and thus welcomed by taxpayers worldwide, as discussed below:
- Upholding the Rule of Law – It is recognized that a growth-friendly tax environment must be shored up by robust tax administration. Thus, upholding the rule of law is essential in fairness and impartiality in tax administration. To this end, BRITACOM exhorts its members to respect the spirit and letter of law in taxation and ensure that the tax system is administered fairly, transparently and with consistency. Tax laws and the tax treaties should thus be applied in a fair, predictable and consistent fashion.
- Raising tax certainty – Economic growth depends in part on the growth of cross-border trade and investment, which requires a high level of tax certainty. BRITACOM commits to improve tax certainty by enhancing the transparency and predictability of tax laws to build mutual trust between taxpayers and tax administrations. Thus, BRITACʘM participants are encouraged to enhance dialogue with taxpayers by exploring cooperative compliance approaches, providing guidance to taxpayers concerning the interpretation and application of the law, and making use of advanced rulings.
- Expediting tax dispute resolution – BRITACOM recognizes the importance for BRI jurisdictions to minimize and resolve cross-border tax disputes in a timely and principled manner to better protect the legitimate rights of taxpayers and to secure a domestic tax base for governments. Thus, it calls on BRITACOM members to respect and comply with international standards, particularly those relating to Base Erosion and Profit Shifting and to Transparency and Exchange of Information for Tax Purposes, as well as those in tax treaties signed by their governments.
- Streamlining tax compliance and digitalizing tax administration – It is also recognized that streamlined tax administration facilitated by digital technology helps to achieve the overarching objective of tax administrations to raise sufficient funds to finance public spending while responding to public demand for cost-effective and time-efficient services. Thus, efforts should be made in enhancing tax administration cooperation, improving taxpayer service, protecting taxpayers’ legitimate rights, and avoiding arbitrary decisions on taxpayers’ compliance status.
- Enhancing tax administration capacity – It was noted that there is a pressing need for tax administration capacity building among BRI jurisdictions. Thus, BRITACOM supports tax administration capacity building initiatives in a coordinated, cost-effective and sustainable manner, and tailors such initiatives to the real needs of emerging and developing economies.
What is most significant in all the foregoing is the recognition of the importance of promoting a tax environment that will foster economic growth, and not stifle it. BRITACOM recognizes that such environment will be created only when there is certainty, consistency, fairness and respect of the law in tax administration. A copy of the Wuzhen Statement, summarizing the action plans agreed and discussed during the BRITACOF, is attached.