David Stewart 0:02

Welcome to the podcast. I'm David Stewart, editor in chief of Tax Notes Today International. This week: EU policy update. 2021 is shaping up to be a busy year for the European Commission as its tax directorate looks to tackle a range of international tax issues from the digital economy to tax avoidance in the EU. Here to talk more about what lies ahead for the European Commission is Tax Notes reporter Sarah Paez . Sarah , welcome back to the podcast.

Sarah Paez 1:28

Thanks for having me.

David Stewart 1:29

Now, you recently spoke with someone from the European Commission. Can you tell us who you spoke with and what you talked about?

Sarah Paez 1:34

So I talked with Benjamin Angel. He's the director of direct taxation at the Commission’s Directorate-General for Taxation and Customs Union. Mr. Angel is no stranger to government. He joined the commission in 1994, but he started working on tax only about a year and a half ago. So we discussed some of the big tax initiatives the commission plans to tackle this year, which include a proposed EU-wide digital levy , a carbon border adjustment mechanism, and a revision of the energy taxation directive.

David Stewart 2:05

Now , before we get to that interview, I should note for listeners that as we've been doing lately, we recorded this over Zoom. So please, excuse any background noises you might hear since we're kind of in uncontrolled environments these days. All right, let's go then interview.

Sarah Paez 2:19

Well, thank you so much for being here, Mr. Angel. To get us started, I was hoping you could tell us a little bit about yourself. How did you get into public service and come to lead direct taxation at the European Commission's Directorate-General for Taxation and Customs Union?

Benjamin Angel 2:35

Challenging question. I was always attracted by the public service and I've always been a true believer in the European cause. The best way to reconcile the two was to work with European Commission, which I joined a very long time ago in 1994. At that time we had only 12 member states and now we're 27, so it has changed quite a lot since then. I'm a relatively newcomer in the field of taxation where I arrived a year and a half ago. Before I built my career essentially on economic, monetary and financial issues. In my previous position, I was the director of the treasury and financial operation of the European Commission, but I do enjoy a lot of this field of taxation. And at the moment, I also enjoy [a double task]. I'm in charge not only of direct taxation but also indirect taxation, so the whole spectrum, basically.

Sarah Paez 3:23

So a newcomer to taxation, but not a newcomer to government. Just to launch right in on issues of taxation, the commission has had to delay the publication of a communication on business taxation, which according to the roadmap, will lay out a new vision for corporate taxation to meet the needs of this increasingly globalized economy. So I was wondering to hear from you, what can we expect from the upcoming communication on business taxation?

Benjamin Angel 3:50

This communication will normally analyze the main challenges we are facing. It will also announce policy initiatives in a number of fields [like] policy initiative to help support the recovery, policy initiative to help facing our global challenges, and lots of those which are OECD related, but also new actions to deepen or fight against tax avoidance, tax evasion, and to step up our effort to ensure tax transparency. So you will have a lot of big tickets actually in this communication, which is the reason why it takes time to prepare the recipe. We want to be sure that we deliver a savory dish for all the tax lovers and that should be the case. That will be an interesting reading. I can ensure you.

Sarah Paez 4:41

Absolutely. And we are looking forward to reading it. Well, speaking of the recovery, so one of the hot button issues facing the EU right now is how to propose and approve these new levies and taxes that we're referring to as new own resources to pay for the spending incurred during the coronavirus pandemic. So what can you tell us about the commission's expected proposals in June for an EU-wide digital levy , a carbon border adjustment mechanism, and the revision of the energy taxation directive?

Benjamin Angel 5:16

I'm in charge of only two of the three, so that's a preliminary warning. I'm not in charge of the emissions trading scheme. But first a word on the package. What has been agreed between the European Council, the European Parliament, and the commission is that we should have new own resources which covers the cost of repaying the debts that the commission will take on the market to finance next-generation EU. In concrete terms, it does mean that we need more or less €15 billion a year from the package. Then what has to come from each element of the package is obviously a delicate and highly political discussion. If you take the emissions trading scheme much will depend on the extension of the emission trading scheme to new fields. For instance, will there be an extension to transport? Will there be an extension to heating? For the carbon border adjustment mechanism, the key parameter will be first what sectors will be covered. Initially the commission has been clear that we will cover a limited number of sectors and exclusively raw material at the beginning to gain experience with the process, with the possible extension to a more complex product down the road. A second element that will be key is what happens with free allowances under the emission trading scheme. Today free allowances are given to producers as a way to reduce the risk of carbon leakage. That is a risk, that European industries might move out of the European Union to countries where carbon requirements would be far lower or the risk that we substitute domestic production with imports facing lower carbon requirements. If we establish a carbon border adjustment mechanism by definition, the first natural question that comes up is what happens to the free allowances in the sectors concerned. It's an issue for which the views tend to vary sharply. And you've probably seen that the European Parliament itself has been quite split last week in this issue, almost half-half. Depending on the base of this appearance of free allowances, if such a decision is taken, the money generated by the carbon border adjustment mechanism will be significant or less significant because by definition, we need to ensure for the carbon border adjustment mechanism full WTO compatibility. And the key principle is that we should under no circumstances treat better domestic producers than we would treat the foreign producers of the product we import. That is a natural limit to what we can do with the carbon border adjustment mechanism and to how much can be generated in this package. Then the third competent is a digital levy . It is absolutely a complex one in view of the long- standing ongoing discussion in the OECD and the new impetus given to those discussions by the change of U.S. administration. We are working on a proposal that will have a different narrative than the one of the OECD. The OECD work is clearly about trust . It's not about taxing, it's about sharing a taxable base primarily for the digital sector, even though there is a push now, again, to go for a much broader scope. Because we have difficulties traditionally to tax the digital sector while there is no physical presence. But for a number of reasons the OECD framework is affecting, at the end of the day, a very limited number of companies. The exact number will depend on the turnover threshold that is retained, but for Europe, for instance, with the current turnover threshold at €50 million, we're talking of something like 40 companies. And if ever the turnover threshold were raised , I don't know, for instance, to €5 billion, we would be talking of around nine to 10 companies. We have thousands of companies operating in the digital sector in Europe. And the digital sector is somehow the main winner of some kind of structural change in our economy. So it is our opinion that the issue of taxing the digital sector goes somehow well beyond what is being taxed and what's being discussed in OECD. What is being discussed with the OECD is extremely important and we are extremely supportive of this process. We want it to succeed, but it is not because it would be an agreement in the OECD covering a handful of companies. "That's it. No one else should ... do anything about any other company anywhere in the world." I think that would be an excessive view. We are therefore preparing a proposal that will be articulated with the OECD that will have different purposes, and that will help also addressing our requirement, which is to generate a sufficient number of own resource for the union budget, because this is a mandate that we have received from the head of state and governments, and ministers, and the European Parliament.

Sarah Paez 10:26

Thank you so much for that very detailed but also broad explanation of the digital levy. And I just wanted to ask a follow-up to that. So you, yourself and many member leadership of the European Union and the European Commission have said that, you know, if an agreement is not delivered on the two-pillar approach at the OECD level, that the EU will come forward with its own proposal. But from what you told me, it sort of sounds like now if the agreement is not to the EU's liking, or if it does not cover the amount of companies that the EU would like to see covered that you will in fact, still be coming forward with a proposal. And so I wanted to ask first of all, is that true? Did I get that right? And then second of all, how might that affect smaller businesses, businesses that have lower turnover than say these really large multinational corporations? Because I believe that there was some concern among these startup companies who felt that maybe that they would be threatened by a digital levy of some sort. What would you say to that?

Benjamin Angel 11:29

I think the way you put that in saying is the way we used to view it until the summer of last year. In the summer of last year, the head of state and governments have decided that the digital levy should be one of the competent for financing the union budget and in the autumn and in the interinstutional agreement it's been found mandating that we create a digital levy . So we are no longer operating under Plan A that is the OECD, and Plan B, let's do something if the OECD does not deliver. We are operating under a double Plan A, if I may, which is we want the OECD. It is extremely important that an international agreement is found on both pillars, but we also need for other reasons to construct some other form of taxation that would affect the digital sector for other reasons than the ones which are under discussion at the OECD for funding our budget. And this has nothing to do with whether the OECD will succeed or not. We are reasonably confident that OECD will succeed. Now I think the Biden administration is a game changer in this discussion. But the OECD agreement is about sharing a taxable base. It's not about generating income for the union budget. And with the level under discussion, it would not only affect a very small number of companies, it would also lead to a rather limited redistribution of taxable income. This is not a criticism. I think it is a major step and as such the step matters more than the initial level. But it does not fit the requests that we have received. The requests that we have received are that we need some form of taxation of the digital sector for financing the union budget. Today you have a very different form of taxation of the digital sector. You have a form that is related to the corporate income tax. And this is very much the heart of the discussion in the OECD. But there are other the taxes in the digital sector. For instance, some companies in the digital sector are subject in some member states to a digital levy on their turnover for financing artistic creation. Some member states today have a digital services tax. Everyone has a value added tax, which is also affecting the digital sector. So I think while defending and pushing as much as we can at the OECD, we should not fall into the trap of considering that the OECD is leading to the only form of taxation that exists in the world. That's not the case. It's a major progress to put in place a formulary apportionment. But obviously there is today and there will still be tomorrow different forms of taxation affecting these companies, being it turnover , being a taxation on the energy efficiency of their building, or their computers, or whatever you can think of. That's normal. And we have to keep in mind again that the number of companies potentially affected in Europe is considerably bigger than the ones under discussion at the OECD. So this has nothing to do with the digital levy with what you may have read a few years ago about the European [Union] wanting to tax the GAFA (Google, Amazon, Facebook, and Apple). This is not what we're discussing. Taxing the GAFA is what the OECD is about, or rather sharing the taxable base of the GAFA and the other key players. What we're discussing here is adding a fair taxation of the digital sector and its diversity so as to take into account the fact that it is a structural beneficiary of the economic transition that is ongoing. This has been even more highlighted in the recent period, but even before the pandemic, it was there already. Now the [pandemic] has just made it more visible. Will it affect small companies? Let's see. We have to wait for the final arbitrage of the commission first, and then member states when they see the proposal. But it is rather unlikely that we target SMEs and the startups, but in between the SMEs and the digital giants that are targeted by the OECD , there are actually a huge number of companies in Europe.

Sarah Paez 16:06

I think it will be a very interesting process to watch as the EU continues to look for new revenue sources for "Next Generation EU." So I wanted to switch gears just a little bit to tax evasion and tax avoidance and what the commission is doing to prevent those. So you've said that the EU code of conduct group for business taxation must be reformed to be more transparent and more effective in preventing distortive measures and tax regimes in EU member states. So I was wondering how will the commission spur this reform and what types of initiatives or proposals are planned?

Benjamin Angel 17:42

There are ongoing discussions covering both the domestic and international parts of the code of conduct. So if it was domestic part of the code of conduct, the one that applies to EU member states , the commission has proposed in July to reform the mandate to the code of conduct. The current mandate is very old. It's been established in 1997. It's never been revised in there. And it focuses primarily on preferential measures . What is meant is primarily treating for any better than the way you treat your domestic company so as to artificially attract them. The code has been very effective in addressing distortive tax regimes, which were producing a harmful effect. But somehow it has reached a bit of a limit of what it can achieve for a number of reasons, but also because some member states have learned with experience how design regimes, which can sometimes be very distortive, but without any preferential feature, which makes the code of conduct relatively powerless to address it. So we want to broaden the mandate of the code of conduct to the general aspect of the tax regime to make it possible to have a discussion among member states on whether a given regime is producing harmful effects even though it is not constructed in a preferential way. This discussion has started. We have had several rounds already with member states. It's a difficult discussion. It's not a surprise. So we did not expect this discussion to miraculously come to an overnight conclusion. So certainly it will still take many more months before we get there. But today the idea is already supported by the vast majority of member states. We need to move from the vast majority of member states to some form of consensus. And that's the challenge of the coming months. I don't think that anyone should fear anything because the discussion remains a collective discussion, but it would somehow lure more effective multilateral discussion of problematic tax regimes. And as such, it remains one of our priorities. As we get the external parts of the code of conduct, we have also a number of important changes which are coming up. First, we will need to start implementing new criteria, which we're already agreed on in principle. One of them is for instance, checking the presence of an accessible register of beneficial ownership in third countries. We are starting to send letters to some third countries. We will not start the exercise of asking third countries to take commitment now, because it has been agreed that as long as we are in the pandemic, we will refrain from requesting third countries to take new commitments. But we are flagging to the third countries that it's coming up. And we will start enforcing it once the pandemic is over and once all member states have also done their our work, because there is a standard principle that we always follow. We never ask third countries to do things that would not be asked to our member states first. Some of them are late in transposing unfortunately the requirement existing in the legislation. But it's coming up and it will be a big change. The other important change that is coming up is more attention to effectiveness. Our approach so far is a bit too legalistic. That is we look at the legal framework. We say, "Oh, there is this problem with the legal framework. Can you please change it?" And we ask third countries to subscribe to the international agreement on the exchange of tax information, which is a must-do. But somehow for the moment, we don't really pay attention to the question. By the way, when our member states make a request for tax information, do they get an answer? And that is certainly something we have to pay more attention to in the future. It is effectiveness of the implementation of the requirement. It will call for some effort, but it is also a step that we intend to take. Third, once there is an agreement on pillar 2, and once we have transposed pillar 2 into the European Union, the commission will certainly push for making a requirement on third countries to subscribe to the pillar 2 OECD common agreement. So we will use again , the mechanics of the listing, not to impose unilaterally our rules, but to encourage vigorously third countries to subscribe to good international practices. And in that sense, the experience we have is I think can be quite a powerful tool. The last thing that is coming up is a broadening of the geographic scope. So far, we are covering a little bit less than half of the planet, 95 countries. We will start the discussion next week on broadening the geographic scope. It doesn't mean that we will start approaching third countries, new third countries immediately because again because of the pandemic we take our time. But it means that we will start the discussion on what are the next countries that we will screen. And once we have an agreement and the pandemic is behind us, we will start screening them effectively.

Sarah Paez 22:59

Just a note for our listeners, the pillar 2 agreement would be on a global minimum effective tax rate so just wanted to put that out there. But yes, that sounds like a very full plate in terms of the EU blacklist for non-cooperative jurisdictions and the code of conduct group for business taxation. One thing I wanted to follow up on with that as well is there has been some talk in the European Parliament, as I'm sure you're aware of, of holding member states accountable in a similar way that third countries are held accountable for harmful tax practices. Has there been any discussion or movement on that within the commission in terms of say a country like Malta, for example, having not met the benchmark of clearing better tax practices. Is there any sort of discussion about maybe not sanctioning member states, but somehow holding them accountable to make sure that they're not engaging in any type of harmful tax practices?

Benjamin Angel 23:56

Malta has received a partially compliant note from the Global Forum [on Transparency and Exchange of Information for Tax Purposes] on issues related to the easiness of access to the information contained in register for beneficial ownership. The concerns of the global forum were not on the willingness of Malta to answer the requests, but rather on the timeliness of the answers. We take it very seriously. And as soon as we receive the information that there was such a rating from the global forum, which is unprecedented for one of our member states, and the commission has organized discussion with Malta to make sure that the problem identified are addressed. You have to know also that the global forum rating is very backward looking now, so de facto when a rating comes up usually it relates to a situation which is at least a year and a half, if not two years old. Meanwhile, many things have been already implemented in Malta . I cannot guarantee the situation is perfect. I don't speak on behalf of the Maltese authority certainly, but what I can tell you is that we will monitor it very closely. Now we are, I'm aware obviously that the European Parliament would like some kind of system of scoring in the state on tax practices, which is something NGOs do on a regular basis. There has been discussion between Commissioner [Paolo] Gentiloni and the competent committee in the European Parliament where the commissioner has expressed openness to examine the question. We will assess what is possible. We have also a new kid in town this year, which is the recently created EU tax observatory, which is a new body created by the commission with a financing from the European Parliament, but which operates on a completely independent base and which would be aided by a well-known leader of the tax world, which is Gabriel Zucman, an expert in wealth tax. And one possibility could be that this independent body is entrusted with this task if such a decision is taken. I cannot make any promise at this stage. We're looking into it, but what I always recall to the European Parliament when I get the question is that we never ever ask third countries to do things that are not mandatory on our member states. It doesn't mean that the situation in our member states is perfect. It may happen that some of them are in the situation where they breach some part of the union legislation. When it is a case we open infringement procedure and if need be we bring them to court. But we are not in a situation where we would be more demanding for third countries than we are domestic. Nevertheless, the situation is not perfect in the European Union. There are clearly practices here and there that we deem problematic. And the European Commission is pointing at them regularly via the process of the so-called country-specific recommendations under the European Semester. While the Council of Ministers itself as endorsed for six countries that there are practices which are qualified as aggressive tax planning. So clearly it is not a secret. It is a method. You will find EU document endorsed by member states saying that there is a problem in this member state. We want them to change. We are using also the process of establishment of the national plan under the recovery and resolution fund to engage with those member states to incentivize them also do the right thing. And we will continue this cooperative discussion with member states to make sure that they adjust their tax practice where need be. Some, for instance, like the Netherlands, I've already announced important changes to the tax legislation. We are not in a situation where we preach in the middle of the desert and no one listens. Certainly wish the six would address the aggressive tax planning issues that have been identified quickly. There is good progress for most of them, but insufficient progress at the same time. And that's the reason why the discussion continues.

Sarah Paez 28:10

And speaking of what member states can do to crack down on aggressive tax planning within their own borders, I wanted to ask you a little bit about the commission's work on the eighth directive on administrative cooperation and taxation known as DAC8, which expands information exchange to crypto assets and electronic money. The commission just had opened a consultation into DAC8. So I wanted to ask what is the status of DAC8? And why do you think it's important for the EU's fight against tax fraud and tax evasion?

Benjamin Angel 28:44

We are trying to improve year after year the exchange of tax information between member states for us [ to] better equip them to fight tax evasion and tax fraud, and each year bring a new dimension. So last year, for instance, with DAC7, we have foreseen an obligation on internet platforms to communicate information on the activities of the seller , which can be you and I on Airbnb or an Uber driver or whatever, which is important from a taxation point of view. Now, what we want to address in DAC8 is a growing segment of the financial activity, which is cryptoassets. And that is a segment for which there is insufficient transparency on the activity at the moment. There is an important ongoing work in the OECD. The commission has also proposed a legal framework for crypto assets, whereas the so-called MiCA [Markets in Cryptoassets Regulation] proposal. So what does it mean in terms of the calendar? First, we have the public consultation as you rightly point, which is ongoing and I encourage all those that listen to the podcast to participate to this public consultation. It's an important step for us in the establishment of any legislation. And once we have the result of this public consultation, but also once there is let's say a stabilization of the OECD discussion at a point which is very clear and likely to move in a relatively stable point also in the discussion on the new MiCA regulation, then we will propose a new directive which will build on what is agreed in the OECD and potentially complement it. Because very often we do the "OECD-plus," that is we take the OECD as a basis and we add a level of ambition. That's what we have done for DAC7 for instance. DAC7 for the activity of the sellers on internet platforms. You have an OECD agreement that covers services. We have covered goods and services, so we have gone beyond. We might do the same for DAC8. The other thing that DAC8 will do is harmonize sanctions. Because in the seven directives that exists today, there is usually a formula which is member states must foresee dissuasive and proportionate sanctions. And while we do have this proportionate sanction in the majority of cases, we have identified a number of cases for which we have legitimate questions. We have evidence of some member states, to give you an example, which foresee fines on banks of €5,000. Spontaneously, I have some doubts on whether a €5,000 fine is dissuasive and proportionate for a bank. So we clearly need to clarify a bit further the sanction and bring some kind of harmony on a practice which is a bit too divergent at the moment. And that would be also the second target of DAC8 . We may have others because we use each new DAC each year to fix also some problems that were experienced in the practice of the existing DAC. That has been the case with DAC7, for instance, where we have clarified joint audits, foreseeable relevance, and stuff like this. We'll see. It's a work in progress.

Sarah Paez 31:59

Thank you for that update on DAC8. I'm looking forward to seeing the proposal once it comes out. So again, switching gears a little bit, I wanted to talk about this concept of unanimity in tax voting matters and what some see as this push from the commission for ending unanimity in tax matters. So I believe it was last year, the EU proposed the creation of a value-added tax comitology committee in December. And that would give the commission power in overseeing the adoption of some VAT areas. So some officials and observers have said this could mean that some VAT issues effectively will be agreed through qualified majority voting. What do you think of this assessment? And do you think the comitology committee will be a step forward in tax matters?

Benjamin Angel 32:46

Let me start with a general question. Yes, there is no top. The commission would strongly prefer that taxation is treated like any other field in the treaty that is ordinary legislative procedure. The fact that we still use unanimity and that the parliament has virtually no rule is an anomaly. Taxation is a bit of a dinosaur of the treaty. There is no quick fix to this. I am probably anticipate your next question, which is the possible use of Article 116 of the Treaty [on the Functioning of the European Union], which is under ordinary legislative procedure, that is, qualified majority and most considered in parliament. The commission has flagged its intention to make a proposal making use of Article 116, but there is a lot of misreading of this article. This article is not allowing to circumvent unanimity requirement existing on taxation. If I may add, unfortunately this article just allows us to address some problem in some member states stemming from regime that would produce distortive effects or practices that would produce distortive effects. So we could not adopt a DAC8 or a digital levy or whatever you can think off using this article. The only way to move away from the unanimity requirement would be to change the treaty. I guess it's fair to say that the appetite for treaty changes anywhere in Europe is pretty low today. The reason being that the number of member state treaty changes call for referendums, and the experience with referendums has not been always the easiest one to put it mildly. Now on your specific question, I would not link it, this issue of the VAT committee to the issue of unanimity versus QMV. VAT rules are adopted by unanimity. They will remain adopted by unanimity. The problem that we are trying to address is very technical and narrow somehow, which is the existence of different interpretation of some element of the existing VAT directive . We have a VAT committee, which take interpretation, which are not binding and therefore some member states follow them, some don't . And we ended up with another launch of court cases and the ECJ [European Court of Justice] having sometimes to enter into a really nitty gritty field, which may be relevant for specific plaintiffs of the case, but not necessarily of a general nature. So the idea behind the proposal of the commission is not to push for QMV. It is just to facilitate the adoption of binding common interpretation. It would still need to be endorsed by member states. It is true that the mechanics for endorsing it by member states would not be based on unanimity, but would be based on the ordinary procedure existing for comitology, but that's really not the issue. This is not our grabbing. This is not trying to push QMV at all costs. I t's just trying to make sure that it's extremely complex piece of legislation, which is t he VAT today, which is almost a thousand-page piece of legislation [that] we equip ourselves collectively. When I say we, I say the European Union, the member states, [equip ourselves] with a mechanism that allow us [to] come up with common interpretation to the benefit of those which have to apply the rules, be it the companies or the member states themselves because t he member states suffer also in all cross-border cases where they implement different interpretations o f the same rule.

Sarah Paez 36:19

So we've covered upcoming and current initiatives that the commission is working on related to taxation. Are there any others that the commission is planning specifically this year? You don't have to go into extensive detail, but just anything that we might've missed in our conversation.

Benjamin Angel 36:35

I think you've got the gist in our conversation. We will also have an important revision of the energy taxation directive, which is coming up in June. So at the same time as a digital levy and the carbon border adjustment mechanism. It is an extremely important piece of legislation because taxation of energy de facto affects the whole economy in one go. And the existing directive is horribly outdated. It sets minimum rates of taxation and those minimums have never been indexed since 2003 . So you can imagine how relevant those minimums are today. So there is a need for reshaping this directive and also making it fit better with the priorities of the [European] Green Deal. Since this directive gives also today indirect subsidies to fossil fuels, which is not exactly the priority of the moment if I may. We want to make it more effective and smarter from a green point of view. And that is, and all the big rendezvous coming up in June.

Sarah Paez 37:38

With the end of the coronavirus pandemic at least on the horizon, I wanted to ask you for fun: What's a place you've always wanted to visit?

Benjamin Angel 37:47

It's a bit difficult to answer for a reason which is not the one you think. The reason is I'm a compulsive traveler. So I have already visited more than 100 countries, which I guess is more than the average. So my to-do list is shrinking year after year, but there are still places which I would like to visit, obviously some which I have dreamed of visiting for decades, but somehow it's never the right moment like Yemen, for instance. It looks like a very beautiful country, but unfortunately it never reached a situation where it's safe to visit. I will have to wait patiently for the end of the pandemic and look at the countries which will allow vaccinated people to travel. But rest assured that as soon as I have as the possibility, I will enjoy traveling again because like everyone I miss it a lot.

Sarah Paez 38:39

Yes. I very much understand that. Well, thank you again so much for joining us on the podcast, Mr. Angel. I really appreciate your time with us.

Benjamin Angel 38:46

Thank you very much.

David Stewart 38:47

And

Coming Attractions with Janelle Julien

David Stewart 38:51

now, coming attractions. Each week, we highlight new and interesting commentary in our magazines. Joining me now from her home is Acquisitions and Engagement Editor in Chief Janelle Julien. Janelle, what will you have for us?

Janelle Julien 39:00

Thanks, Dave. In Tax Notes Federal, Monte Jackel considers subchapter K, arguing that it’s time for Congress to simplify it. Andrew Blair-Stanek and Benjamin Van Durme demonstrate an artificial intelligence tool that can complete analogies in tax law and provide evidence-based guidance on how Congress can renumber IRC sections in tax reform efforts. In Tax Notes State, Brian Hamer reviews the MTC’s revisions to its statement of information regarding P.L. 86-272 and reactions to its proposal. Robert Plattner discusses proposed New York legislation that would impose an excise tax on the collection of data about New York consumers for commercial use. On the Opinions page, Martin Sullivan discusses how South Korea annually enlists the support of its nation’s popular celebrities to promote tax compliance and what that says about taxpayer morale as an intangible asset. Marie Sapirie examines the requirements for information sharing from digital platforms to their gig workers under the American Rescue Plan Act of 2021. Nana Ama Sarfo argues that unwinding digital services taxes will be easier said than done, particularly in developing countries. And now, for a closer look at what’s to come in Tax Notes International, here is Tax Notes Executive Editor Jasper Smith.

In the Pages Sneak Peek

Jasper Smith 40:18

Thanks, Janelle. I'm here with Nicholas Kuria, counsel with Conyers Dill & Pearman in the British Virgin Islands. We're going to discuss his recent Tax Notes International piece suitably titled, “Tax and the British Virgin Islands: Separating Myth From Reality.” Welcome to the podcast, Nick.

Nicholas Kuria 40:34

Thanks for having me on.

Jasper Smith 40:35

So to begin, can you just tell us a little bit about your article?

Nicholas Kuria 40:38

It's essentially the practitioner's view of offshore financial centers and the BVI in particular. The premise there is trying to present sort of more balanced view as to how the jurisdiction of BVI in particular international financial centers operates in reality and in practice, balancing out some of the things that people may have heard about offshore financial centers from the press. So it's an exposition and explanation of how we operate the legal framework and the reasons for using BVI vehicles in the first place. So that's sort of the thrust of the article.

Jasper Smith 41:11

Can you tell us a little bit about what led you to write on this particular topic?

Nicholas Kuria 41:15

I think it's driven by wanting to correct some of the misunderstanding that's out there in relation to international financial centers, focusing on the BVI in particular, and just wanting to ensure that when practitioners in other jurisdictions are considering structuring issues around transactions or corporate holding structures that they are making a decision based on an informed view of how things operate in offshore jurisdictions . So the idea really came from wanting to have that redress , that balance. In the article, there's sort of three main themes to it. There's a discussion on tax neutrality, which is in reality how the BVI and jurisdictions like BVI operate and what that means in practice. The second sort of theme in the article is the international standards to which the BVI adheres and complies with, with regard to regulation in particularl on money laundering and terrorist financing, which will run counter to what people may have understood from what's in the press. And the third theme is really around ownership of BVI entities, beneficial ownership. Again, the sort of popular misconception is that it's obscured and shrouded in mystery, which isn't quite correct in terms of how the ownership and visibility of ownership with BVI entities really operates in practice. So those are the three main themes. As I said, I'll round off with an explanation as to why people would even be considering BVI entities and what are the benefits of doing so.

Jasper Smith 42:44

Thank you so much. We certainly appreciate you choosing Tax Notes as your publication forum. And we appreciate you taking your time out today to talk with us. Can you tell listeners where they can find you online?

Nicholas Kuria 42:56

Sure. To contact me, you can do so by email. My email address is nicholas.kuria@conyers.com. We have a website which is www.conyers.com. And people can also find me on LinkedIn. I'm certainly here to help answer questions, discuss any of the points raised in the article, and generally advise on sort of structuring issues or specific issues relating to BVI or offshore financial centers in general.

Jasper Smith 43:30

Excellent. And of course you can find Nick's article at taxnotes.com. And be sure to subscribe to our YouTube channel Tax Analysts for more in-depth discussions on what's new and noteworthy in Tax Notes. Again, that's Tax Analysts with an S. Back to you, Dave.

David Stewart 43:45

You can read all that and a lot more in the pages of Tax Notes Federal, State, and International. That's it for this week. You can follow me online @TaxStew, that's S-T-E-W. And be sure to follow @TaxNotes for all things tax. If you have any comments, questions, or suggestions for a future episode, you can email us at podcast@taxanalysts.org. And as always, if you like what we're doing here, please leave a rating or review wherever you download this podcast. We'll be back next week with another episode of Tax Notes Talk.