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Key International tax developments: what lies ahead?

Sarah Fahy - Vice President , Sony Global Tax Office , Europe Guy France – Senior Director, Sony Global Tax Office, Europe Joy Svasti-Salee - Executive Director, Ernst and Young LLP - Visiting Prof. Queen Mary University of London 26 January 2011.

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Key International tax developments: what lies ahead?

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  1. Sarah Fahy - Vice President , Sony Global Tax Office , Europe Guy France – Senior Director, Sony Global Tax Office, Europe Joy Svasti-Salee - Executive Director, Ernst and Young LLP - Visiting Prof. Queen Mary University of London 26 January 2011 Key International tax developments: what lies ahead?

  2. Outline for discussion The principles of international tax Key influencers to-date Issues faced by MNE’s today Key influencers in the future What lies ahead?

  3. Global fundamental principles? • Separate entity approach • An entity is taxed based on its residence • Source countries may tax income and gains – PE threshold • Withholding tax may be deducted at source on passive income • A parent company can only tax dividends from, and not profits of, a subsidiary • Interest is deductible and dividends are not

  4. Emerging global principles?

  5. Key influencers to date • “Individually powerful” countries, e.g. • USA • Japan • The OECD • Europe and the ECJ

  6. The OECD and Europe

  7. Traditional outbound parent jurisdictions • Tax rules of parent dictate the structure • Continuing strong global powers: • Complex legislation • Anti-inversion rules • CFC rules and GAARs • Restrictions on interest deductibility • But recognition of some that they need to be competitive ....

  8. UK CT reform: delivering a more competitive system • Delivering a more competitive system: • Creating the right conditions for business investment and growth • Responding to business concerns over instability and unpredictability • Reversing the trend of business leaving the UK • Principles: • Lowering rates while maintaining the tax base • Maintaining stability • Being aligned with modern business practices • Avoiding complexity • Maintaining a level playing field for taxpayers

  9. Issues faced by MNE’s today • Cost Speed Globalisation Technology • Centralisation of functions • Rapid growth in emerging markets • Increased tax transparency • Complex regulation and aggressive tax authorities

  10. Future – “go East”? • Large populations attract activity • Trading “in” or “with” large markets • Increasing experience of international taxation • Pick and choose rules? • Tax a “toll” to do business?

  11. Key influencers in the future • The new “individually powerful” countries • India • China • Brazil • Russia • Others ... • G20 • Campaigners ......

  12. Fundstalk.co.uk

  13. What lies ahead? • More competition to be the country of the parent? • A shift back to taxation at source? • CCCTB in (part of) Europe? • MNE’s recognised for their role as collectors of taxes? • What should the global fundamental principles of international tax law be?

  14. What lies ahead - in the medium term? • Little cohesion? • MNE’s need to find new ways to engage with Governments particularly in relation to: • Transfer pricing • The avoidance of double taxation

  15. Thank you

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