1. 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
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?
1987
CFC rules regarded as acceptable / encouraged by OECD
1990’s
Thin capitalisation rules become commonplace
1992
LOB concept starts (NL/US DTT) + anti conduit rules
1995
Transfer pricing – OECD guidelines (major revision in 2010 )
2005
Focus on exchange of information (Art 26 updated)
2010
Update to MTC (including new Art 7)

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

6. The OECD and Europe OECD Both European Australia Austria Poland
Bulgaria
Canada
Belgium Portugal
Cyprus
Chile (2010)
Czech Republic Slovakia
Estonia
Iceland
Denmark Slovenia
Latvia
Israel (2010)
Finland Spain
Lithuania
Japan
France Sweden
Malta
Korea (1996)
Germany United Kingdom
Romania
Mexico
Greece
New Zealand (1994)
Hungary
Norway
Ireland
Switzerland
Italy
Turkey
Luxembourg
United States
Netherlands

7. Traditional outbound parent jurisdictions
Powerful countries
Listed
Incorporated
resident
Complex domestic tax rules
OECD members
Operating globally
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
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. People getting wealthier
Future – “go East”?
Emerging Markets
OECD “outreach”
People getting wealthier
New Stock Exchanges
Low cost of labour
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

14. Fundstalk.co.uk

16. 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?

17. 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

18. Thank you