MultiState– INSIGHT: Covid-19 and the Future of Taxation—What Role for Cooperative Compliance?

Professor Jeffrey Owens of the Global Tax Policy Center at the Institute for Austrian and International Tax Law, WU, suggests that the disruption caused by Covid-19 may provide an opportunity to adjust the ways in which multinational enterprises and tax administrations interact, by the use of cooperative compliance programs.

Covid-19 offers governments an opportunity to overcome the barriers that tend to block ambitious tax reforms and changes to the way that taxpayers and tax administrations interact. 

Nowhere is this more evident than in the way multinational enterprises, which in most countries are taxed , especially developing countries, account for the bulk of corporate tax revenues. 

Cooperative Compliance Program

Cooperative compliance programs first got onto the international agenda after the 2007–08 financial crisis.

Cooperative compliance programs are tax compliance programs primarily designed for large business taxpayers. They represent a shift from retrospective control based on a comprehensive tax audit to a cooperative relationship between tax administration and taxpayers based upon the discussion of the tax issues in real time or even prospectively. 

The program can be defined by description of the capabilities required of tax administrations wishing to put in place a cooperative compliance program and the implications for taxpayers wishing to enter into a cooperative relationship with those tax administrations.

Obligations on Tax Administration

Within the framework of a cooperative compliance program the tax administration is expected to offer: 

  • Commercial awareness 
  • Impartiality
  • Proportionality 
  • Openness and transparency
  • Responsiveness
  • Governance 

Read the complete article here.

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Bloomberg Tax
By Jeffery Owens
June 9, 2020