International Tax Agencies Conference

1. International Tax Agencies Conference Mapping US and UK Returns Raj Rajagopal, MITRE

2. Current International TaxData Exchange Characteristics • Problem Areas • Proprietary formats • Custom code used to process exchanged tax data • Proprietary formats primarily designed to exchange only text data • Full potential of COTS tools not used in processing tax data • Formats changes cause extensive code changes and testing support • Potential Solution: Use of XML technologies

3. Using XML for InternationalData Exchange • Two potential approaches: • A global tax vocabulary and schema. Some problems: • Underlying tax codes are significantly different • Difficult to meet timing constraints on updates • Each country decides on its own vocabulary and schema • Permits flexibility • Need mapping rules and software to exchange data • Permits coexistence of XML and non-XML formats

4. Approach to International Tax Data Exchange - Identify Common Elements U.K. Unique Elements U.S. Unique Elements Australia Unique Elements Canada Unique Elements Common Elements . . . Netherlands Unique Elements . . . U.S Tax XML = U.S Unique Elements + Common Elements

5. Develop Mapping Software to Handle Unique Elements U.S Unique Elements U.K Unique Elements Canada Unique Elements Mapping Software Common Elements Common Elements Common Elements U.S Tax Return U.K Tax Treaty Data Canada Tax Treaty Data

6. Scenario • Multinational Company - Tentex Toys • Tentex Toys (USA) files US tax return • Using Tax XML format • Tentex Toys (UK) files UK tax return • Using Inland Revenue (XBRL) format • Subset of the data from Tentex Toys (UK) tax return is sent to US • Tax data sent to US is in Tax XML format

7. Tax Data Exchange Overview State Tax Data US IRS UK IR Federal Tax Data Federal Tax Data International Tax Data International Tax Data Map Map US Tax Return UK Tax Return Tentex Toys

8. Map Software • Functional Overview • Replace tags for one to one mappings (e.g. - Company Name --> Complete Name) • Perform necessary computations for other mappings • Resolve standards differences (e.g. - date formats) • Develop Proof-of-concept • Feasible only if business mapping rules are developed and available

9. Proof-of-Concept Processing Flow UK Corp. Tax Return XSL Script FDF MSXML 4.0 UK -> US Map rules US->Adobe Map Perl 5.6

10. Next Steps • Is this approach worth pursuing to the next step? • If so, • Business Steps • Determine common elements • Develop mapping rules • Determine frequency, content, and process for updating rules • Technical Steps • Analyze different ways of implementing mapping software - PERL, XSL, C++, etc. • Education, Shared repository, Testing mechanisms

11. Backup Charts

12. Need for International Tax Data Interchange • International Tax Data Interchange Instances: • Multinational corporations accounting for sales and profits in different countries • Executives of multinational corporations working away from home country • International company mergers and acquisitions • Foreign tax credits and GST refunds allowed by different countries • Acquisition, ownership, and disposal of foreign stocks and other assets • Covered by international tax treaties between the countries