International Perspectives: BEPS, Transparency, Etc.

1. International Perspectives: BEPS, Transparency, Etc. Issues and challenges faced by Canada Ted Gallivan, Assistant Commissioner, International, Large Business and Investigations Branch of the Canada Revenue Agency (CRA)

2. Canadian context • Multilateral approaches via OECD • No major tax policy changes • Strong interest in attacking aggressive tax planning • Voluntary revenues, audit on an upward trend • Court cases, settlements, performance metrics not audit yield 2005 2025

3. Canada Revenue Agency (CRA’s) focus Commitment to improve “Service” in compliance: • Transparency • Timeliness • Technical accuracy and expertise

4. Tax Certainty – Why? Shared Interest • Good for tax administrations • Conflict is costly and slow • Conflict erodes trusts • Colours future interactions • Good for taxpayers (business) • Conflict is costly and slow • Conflict erodes trusts • Colours future interactions

5. FTA Large Business & International Programme BEPS / Tax Certainty … 2017-2019 2019… …2016 2016-2017 3 projects 2 handbooks 3 reports International Compliance Assurance Programme (pilot) Explore the feasibility of a multilateral cooperative risk assessment and assurance process for not high risk multinational groups (MNEs) Joint Audits Country-by-Country Reporting, Handbook on Effective Tax Risk Assessment • Prepare for BEPS 2020 stock take Cooperative Compliance • Institutionalize capacity • ICAP next phase • Risk register and map • Joint Audit Comparative Risk Assessment Examine how individual tax administrations risk assess in areas that lead to most disputes Country-by-Country Reporting, Handbook on Effective Implementation Tax Control Frameworks • Other? Joint Audits Assess experiences to date and examine obstacles and opportunities to increasing use • Reduce burdens • Enhance efficiencies • Increase tax certainty for tax administrations and taxpayers

6. Tax certainty • International Compliance Assurance Program (ICAP) • Comparative Risk Assessment (CoRA) • Joint Audit Project • Audit File Resolution Committee (AFRC)

7. Enhanced information sharing • Country-by-Country Reporting (CbCR) • Exchange of Rulings and unilateral APAs • Common Reporting Standard (CRS)

8. Canada and International Guidance • Adopted actions 8 to 10 on Transfer Pricing Guidelines • Consistent with historical approach to Transfer Pricing • Increasing commentary that our Transfer Pricing regulation is different from OECD Guidelines

9. Canada and the Multilateral convention (MLI) • Canada signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS, June 2017 • Introduced legislation in Parliament, May 2018 • When passed, Canada will deposit a notice of ratification with the OECD • The MLI has been signed by 87 countries • It will modify a number of Canada’s existing bilateral tax treaties

10. Principal purpose test rule(PPT) • MLI sets out the PPT • Exploring methods of promoting consistency in the application of the PPT within the Agency. Canada’s General Anti Avoidance Rule (GAAR) Committee may offer a useful model. • An advance tax ruling is the best way to verify if the PPT applies • Responses to requests for advance income tax rulings are provided as quickly as possible

11. Conclusion • Demonstrating/communicating international collaboration has a deterrent effect • Tax administrations at the forefront of BEPS implementation • Unilateral action creates risk of conflict, uncertainty and double taxation • Continued multilateral engagement critical • Shared interest with business: • Committed to making significant improvements • Transparency • Timeliness • Expertise • Less litigation and earlier resolution of disputes

12. Questions