A joint initiative between the Organisation for Economic Co-operation and Development (OECD) and the United Nations Development Programme (UNDP) has helped retrieve lost income by helping countries to close tax loopholes, improve transparency, and most critically, reduce tax avoidance by multinational enterprises.
It is paying off.
The OECD and UNDP programme called Tax Inspectors without Borders (TIWB) has been such a success that it has spurred interest in expanding it into other areas including tax crime investigations, joint audits, automatic exchange of information, tax treaty negotiations and dispute resolution.
Pilot programmes are already underway in some of these areas, according to the OECD TIWB Annual Report 2018/19 that was released at the end of September.
TIWB efforts have added nearly $500-million in revenue to the fiscal wallets of developing countries up to April 2019, following its launch in July 2015.
Among the partner, administrations are those engaged in South-South co-operation – India, Kenya, Mexico, Morocco, Nigeria and South Africa. TIWB programmes are also supported by a UNDP roster of more than 50 experts.
According to the annual report, the programme was designed to improve the ability of developing countries to tax multinationals and boost domestic revenue collection.
The drive now covers jurisdictions across Africa, Asia, Eastern Europe, Latin America and the Caribbean and includes 98 completed, ongoing and upcoming actions in 55 countries and jurisdictions worldwide, and is on track to meet a target of 100 deployments by 2020.
TIWB also reports that various tax authorities have managed to raise several significant assessments with its support, which are at various stages of dispute resolution and will likely result in substantial tax yield in 2019/20.
In a UNDP press release following the launch of the report, OECD secretary-general Angel Gurría said:
“The concept of TIWB is simple: expert tax auditors are sent to help interested tax administrations in developing countries, where they work side-by-side with local auditors to strengthen their capacity.
“Tax officials around the globe are gaining the knowledge they need to identify when their big taxpayers are not paying the correct amount, as well as the confidence and skills to engage with them to ensure correct taxes are collected.”
Speaking of which, at the end of October the OECD released a new substantial activities standard as part of the organisation’s action plan around what is termed base erosion and profit shifting (BEPS), specifically relating to “curbing harmful tax practices”.
It contains guidance on the timelines for the exchange of tax information between jurisdictions in accordance with an international legal framework and “clarifications on the key definitions in order to make sure that jurisdictions receive coherent and reliable information on the activities of the entities in no or only nominal tax jurisdictions and their owners,” the OECD states.
It is expected that exchanges will begin in 2020.
Meanwhile, the African Tax Administration Forum (ATAF)’s executive secretary, Logan Wort, says the synergies between TIWB programmes and other international/bilateral tax audit assistance programmes are leading to effective capacity building.
“This programme has yielded some good results,” he says.
He says the TIWB initiative has largely been in Africa and only recently spread to the rest of the world, and that ATAF has lead most of the missions on the continent.
“TIWB Africa has its own technical support programme,” Wort adds. ” We have assessed just over $1-billion in eight African states in the last four years, of which $300-million has already been collected.”
Taxes are collected by the World Bank, the OECD and ATAF respectively.
According to the annual report, TIWB further developed its close partnership with ATAF in the delivery of support programmes in Kenya, Nigeria, Uganda, Zambia and Zimbabwe and full programmes in Botswana, Eswatini, Liberia, Uganda, Zambia and Zimbabwe.
“A significant number of ATAF member countries attest to the positive impact of ATAF support on international tax capacity-building complemented by TIWB programmes,” adds Wort.
Funding for South-South TIWB programmes comes primarily from the UNDP-managed TIWB fund, with the seconded TIWB Experts continuing to receive their regular salaries from the Partner Administration.
OPINION: Ruan Jooste