Column: International Technical Column(s)

This article provides a critical analysis of the level of tax litigation and the appeal system in Pakistan. The author triggers a debate on the possible reasons for the increased tax litigation and the excessive pendency of tax appeal cases, especially in the high courts and the Supreme Court....

In the current turbulent tax landscape, a good way for a business to stay ahead of controversy is to adopt a global perspective everywhere it operates while establishing a global tax controversy strategy that is integrated with a strong tax risk and corporate governance framework. Businesses should have in place a documented tax strategy setting out their approach to compliance, planning, and interactions with tax administrations. The strategy should be put into action by a knowledgeable team that is integrated into the overall business. Embracing technology and digitalisation is key. The capability to directly submit accurate source tax information to the revenue authorities minimises potential tax controversy and tax uncertainty. In addition, having internal procedures on how to respond to requests for information from the tax authorities is important. As change is constant, businesses need to stay connected to global legislative, regulatory, and tax administration changes. Through managing tax controversies well, businesses will be able to avoid unexpected tax bills,...

Because of mounting public and political pressures, the G20 countries asked the Organisation for Economic Co- operation and Development (“OECD”) to develop an action plan on base erosion and profit shifting (“BEPS”) limiting opportunities for multinational enterprises (“MNEs”) to shift profits to jurisdictions with a lower tax rate. The 15 BEPS action plans the OECD produced are broad in nature and coverage. From the transfer pricing perspective, there are four action plans, Action Plans 8, 9, 10 and 13. Action Plans 8-10 predominantly address the issue of pro t shifting by MNEs through the use of a transfer pricing policy. On the other hand, Action Plan 13 deals with transfer pricing documentation, amongst which an MNE may need to prepare and submit to the relevant tax authority a country-by-country report, a master le, and a local le if certain thresholds are met. One item that would need to be analysed and disclosed in the master file and local file deals...

Bob Dylan may have said it best: “the times they are a-changin”. This statement is particularly relevant with regard to UK residential property tax over recent years, with a multitude of changes being made by the Conservative Government, resulting in a mishmash of tax law and layers upon layers of new rules being added, often affecting several areas of taxation that have competing priorities. These changes have increased the complexity of residential property tax and made compliance much more prone to error. In addition, further changes have already been earmarked for the next few years, one of which may radically change the way taxpayers deal with HM Revenue & Customs (“HMRC”), the UK tax authority, for UK tax compliance on their property rental businesses. This article provides a summary of the pertinent parts of each of the changes made, with a focus on how they have or will affect non-resident owners of UK residential property....

The digital economy has been booming in recent years following the advance and penetration of information and communication technology. Its impacts can be seen in retail, logistic, and financial industries as well as in manufacturing, education, and media industries. In accordance with Action 1 of the OECD’s final report on base erosion and profit shifting (“BEPS”), the digital economy has been fully integrated into the physical economy and cannot be singled out for tax purposes. Therefore, a better way to tackle the tax challenges of the digital economy would be to observe and analyse its key features and the business model adopted by multinational enterprises (“MNEs”)....

Nearly six years after its implementation, the Foreign Account Tax Compliance Act (“FATCA”) is continuing forward. The landscape of financial institution reporting is a maze of forms, intergovernmental agreements, dates, deadlines, and information. Here are some updates for 2017....

“On almost every measure of investment, Asia stands out as the world leader. Consider Asia’s share of global fixed asset investment: in 2014, the region accounted for 45% of the global total. Or consider foreign direct investment: in 2014, Asia attracted 33% of the global total. Clearly, the region is an attractive place for the world’s companies to deploy their capital.” Asia’s phenomenal economic growth and development in recent decades has predominantly been a result of trade and investment. While trade is not insignificant, economic growth in Singapore and Malaysia is largely attributable to investment and education. Legal and regulatory requirements can impede cross-border investment. Chief among these is taxation, particularly the interaction of domestic tax rules with tax systems and practices in other countries. The reduction of tax barriers to cross-border trade and investment is one of the primary purposes of tax treaties....

This paper is concerned with the split of jurisdiction of VAT on goods and services between a federation and its units. The majority of federations enforce VAT as a central tax whereas a few devolve it to the states or provinces to make federating units autonomous. This paper explores literature on intergovernmental taxation to ascertain the appropriateness of the devolution of VAT, particularly that on services. Later, the performance of the Sindh Revenue Board (SRB) is assessed vis-à-vis its claim to a substantial increase in tax collection after the transfer of jurisdiction of VAT on services to Sindh and other provinces in Pakistan under a major devolution plan. This paper finds that taxes that have mobile bases; and are required for macroeconomic stability and redistribution of income should rest with federations. Further, splitting the VAT base, particularly on the basis of a distinction between goods and services, could add to the complexity. This paper suggests that levying VAT on services...

Discretion is considered an integral component of an administrative system. However, striking a balance between discretion and the rule of law is challenging, particularly in developing countries like Pakistan where the immediate concern of the taxation authorities is to maximise revenues to balance the government’s budgets. In this article, the author discusses the discretionary powers of the tax administration in the general sales tax (“GST”) regime of Pakistan from a social perspective and highlights the necessity of rationalising them to ensure the rule of law and to uphold the principles of good tax policy. Strengthening control mechanisms is suggested as a means to prevent the misuse of discretionary powers....

The Foreign Account Tax Compliance Act (FATCA) came into effect in 20101. In addition to the many important changes FATCA brings to the financial and tax landscape, it is also important to understand the many pre-existing US tax obligations and requirements that the US is seeking to enforce through the information it obtains through FATCA. The technical definitions, requirements, and laws of US taxation can be difficult to navigate, even for the most informed tax professionals. Therefore, the primary purpose of this article is not to offer detailed legal analysis or recite the laws but rather to aid in ending some of the misconceptions, review key issues, inform taxpayers of their compliance obligations, and, perhaps most importantly, remove some of the mystique, confusion, and fear surrounding FATCA....