IMF OECD 2019 - Progress Report On Tax Certainty

2019 Progress Report on
Tax Certainty
IMF/OECD Report for the G20
Finance Ministers and Central
Bank Governors
2019 Progress Report on Tax
Certainty
IMF/OECD Report for the G20 Finance Ministers

and Central Bank Governors
June 2019
This document, as well as any data and any map included herein, are without prejudice to the status of or sovereignty
over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or
area.
This work is jointly published under the responsibility of the Secretary-General of the OECD and the Managing Director
of the International Monetary Fund (IMF). The opinions expressed and arguments employed herein do not necessarily
reflect the official views of the OECD or the IMF or of the governments of their respective member countries.
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Please cite this publication as:

IMF/OECD (2019), 2019 Progress Report on Tax Certainty, Paris.
www.oecd.org/tax/tax-policy/g20-report-on-tax-certainty.htm
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ACRONYMS
ADR Alternative Dispute Resolution

AOA Authorised OECD Approach
APA Advance Pricing Agreement
ATAF African Tax Administration Forum
BEPS Base Erosion and Profit Shifting
BIAC Business Industry Advisory Committee
CbC Country-by-Country
CEMAC Central African Economic and Monetary Community
CIAT Inter-American Center of Tax Administrations
CIT Corporate Income Tax
CoRA Comparative Risk Assessment Initiative
CRS Common Reporting Standard
DRM Domestic Revenue Mobilisation
DST Digital Services Tax
EC European Commission
EI Extractive Industries
EM Emerging Market
FARI Fiscal Analysis of Resource Industries
FTA Forum on Tax Administration
FTE Fiscal Transparency Evaluation
G20 Group of Twenty
HTVI hard-to-value intangibles
ICAP International Compliance Assurance Programme
IGF Intergovernmental Forum on Mining, Minerals, Metals and Sustainable
Development
IMF International Monetary Fund
IOTA Intra-European Organisation of Tax Administrations
ISOCA International Survey on Customs Administration
LIDC Low Income Developing Country
LVAS low value-added intra-group services
MAP Mutual Agreement Procedure
MLI Multilateral Instrument
MNE Multinational Enterprise
MNRW Managing Natural Resource Wealth Thematic Fund
MTRS Medium-Term Revenue Strategy
OECD Organisation for Economic Co-operation and Development
PCT Platform for Collaboration on Tax
RA-FIT Revenue Administration Fiscal Information Tool
RA-GAP Revenue Administration Gap Analysis Program
RMTF Revenue Mobilisation Thematic Fund
TA Technical Assistance
TADAT Tax Administration Diagnostic Tool
TEA Tax Expenditure Assessment
TFDE Taskforce on the Digital Economy
TIWB Tax Inspectors Without Borders
TPAF Tax Policy Diagnostic Framework
TPG OECD Transfer Pricing Guidelines
TPSM transactional profit split method
TREAT Tax Risk Evaluation and Assurance Tool
UN United Nations
UNDP United Nations Development Programme
VAT Value Added Tax
WBG World Bank Group
WCO World Customs Organization
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Table of Contents
EXECUTIVE SUMMARY ............................................................................................................. 6

INTRODUCTION ........................................................................................................................ 8
UPDATE ON STATUS OF COUNTRY-BY-COUNTRY REPORTING IMPLEMENTATION ...... 11
UPDATE ON THE PROGRESS IN THE INTERNATIONAL COMPLIANCE ASSURANCE
PROGRAMME .......................................................................................................................... 13
ADVANCE PRICING ARRANGEMENTS.................................................................................. 15
TRANSFER PRICING DEVELOPMENTS .................................................................................. 16
TAX CERTAINTY THROUGH JOINT AUDIT ........................................................................... 21
DIAGNOSTIC FINDINGS FROM TADAT ................................................................................ 22
COMBATTING CORRUPTION IN TAX ADMINISTRATIONS ................................................ 25
IMPROVING TAX LAW SYSTEMS AND THEIR IMPLEMENTATION BY TAX
ADMINISTRATIONS................................................................................................................ 29
DISPUTE RESOLUTION: DEVELOPMENTS UNDER MUTUAL AGREEMENT
PROCEDURES AND ARBITRATION........................................................................................ 35
TAX CERTAINTY AS A COMPONENT OF TAX MORALE ...................................................... 39
HOW ADHERENCE TO RESPONSIBLE TAX PRINCIPLES BY BUSINESS CAN HELP TAX
CERTAINTY .............................................................................................................................. 42
PLATFORM FOR COLLABORATION ON TAX – TOOLKITS ................................................... 43
Appendix A.............................................................................................................................. 47
2019 PROGRESS REPORT ON TAX CERTAINTY © IMF/OECD 2019

6│
EXECUTIVE SUMMARY
Tax certainty for taxpayers is an important component of investment decisions and

can have significant impacts on economic growth. In 2016, the G20 Leaders called
on the International Monetary Fund (the IMF) and the Organisation for Economic
Co-operation and Development (OECD) to work on this issue.
Following an initial report in 2017 (the 2017 Report 1) and an update in 2018
(the 2018 Update 2), the G20 Leaders re-iterated the importance of this issue,
noting their continued support for enhanced tax certainty. The Buenos Aires Action
Plan called for “the OECD and the IMF to report to Finance Ministers and Central
Bank Governors in 2019 on progress made on tax certainty”.
This report provides an update on the work on tax certainty issues and shows
clearly that this remains a priority issue for taxpayers and tax administrations alike.
Moreover, the work on tax certainty covers a wide variety of issues in both tax
policy and tax administration, notably:
• A shifting focus from dispute resolution to dispute prevention: ensuring that
disagreements between tax administrations can be resolved quickly to avoid
double taxation will always be a core element of tax certainty, but with the
advances in tax transparency, cooperative compliance and the
implementation of the OECD/G20 BEPS Project, the opportunity for early
certainty is far greater. The availability of Country-by-Country reports allows
for more targeted audits and the practice of joint audits is becoming more
common, allowing for the highest levels of integration and coordination.
The International Compliance Assurance Program (ICAP), which has now
launched its second pilot, provides for a multilateral approach to early
certainty for eligible multinational enterprises.
• The demand and need for improvements to the integrity, efficiency and
accountability of tax administrations, particularly in developing countries.
The IMF has produced new results from its Tax Administration Diagnostic
Assessment Tool (TADAT) and the OECD has begun work on the link
between tax morale, namely the confidence that taxpayers have in a
country’s tax system, and tax certainty. Capacity building work by both the
IMF and OECD (and others) continued to support tax certainty on many
fronts, including new initiatives in relation to combatting corruption in tax
administrations given corruption is closely linked to tax certainty.
1
IMF/OECD (2017), OECD/IMF Report on Tax Certainty, Paris. www.oecd.org/tax/tax-policy/tax-certainty-report-
oecd-imf-report-g20-finance-ministers-march-2017.pdf
2
IMF/OECD (2018), OECD/IMF Report on Tax Certainty - 2018 Update, Paris. www.oecd.org/ctp/tax-policy/tax-
certainty-update-oecd-imf-report-g20-finance-ministers-july-2018.pdf

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• Work on ensuring that the tax rules are as clear and administrable as they
can remains a key component of tax certainty. There is considerable work
on-going to make the transfer pricing rules simpler and easier to administer.
The OECD continues to work on strengthening the OECD Transfer Pricing
Guidelines (TPG) and on the implementation of BEPS Actions 8-10 work
streams, including work on hard-to-value intangibles (HTVI), low value-
added intra-group services (LVAS) implementation, and in respect of
financial transactions and the application of the transactional profit split
method (TPSM).
• Several lessons (not all new) have emerged from the capacity building work
of both the IMF and OECD to inform the design and delivery of future
assistance to enhance tax certainty in developing countries. A key lesson is
that success in improving tax systems should be assessed not only by
revenue levels achieved, but also by the improvements in the quality of the
tax system to minimize economic distortions while ensuring predictability,
fairness and simplicity.
The current debates around the international tax agenda, and in particular how to
address the tax challenges arising from digitalisation, necessarily have a tax
certainty angle, and indeed, tax certainty is increasingly part of the policy agenda
for both G20 and OECD countries as well as developing countries. There is good,
concrete work going on in a number of areas and the IMF and the OECD will
continue to take forward the work on these fronts.

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INTRODUCTION
The work on international taxation over the past decade has focussed on enhancing
transparency and developing more coordinated rules to ensure that all taxpayers
contribute to the financing of vital public services and the policy priorities of their
governments, as well as capacity building for developing countries to ensure they
can contribute to and benefit from these advances. However, the need to ensure a
predictable and stable investment environment and international rules that
facilitate global trade remains a fundamental component of the international tax
architecture.
In that regard, tax certainty for taxpayers is an important influence on investment
and other commercial decisions and can have significant impacts on economic
growth. Improving tax certainty also cuts both ways, benefiting both taxpayers and
tax administrations. In 2016, the G20 Leaders called on the International Monetary
Fund (the IMF) and the Organisation for Economic Co-operation and Development
(OECD) to work on the issue of tax certainty. Following an initial report in 2017 (the
2017 Report 3) and an update in 2018 (the 2018 Update 4), the G20 Leaders re-
iterated the importance of this issue, noting their continued support for enhanced
tax certainty. The Buenos Aires Action Plan called for “the OECD and the IMF to
report to Finance Ministers and Central Bank Governors in 2019 on progress made
on tax certainty”.
The 2017 Report highlighted that tax uncertainty creates a risk of discouraging
investment and to enhance tax certainty, the report identified a set of concrete and
practical approaches and solutions. These range from improving the clarity of
legislation, increasing predictability and consistency of tax administration practices,
effective dispute prevention, and robust dispute resolution mechanisms. The basis
for much of the analysis in the 2017 Report was the 2016 OECD business survey on
tax certainty (2016 OECD Survey), which compiled information from more than 700
businesses, combined with a review of the formal analytical literature.
While the 2017 Report focused on G20 and OECD countries, it was noted that the
underlying concerns and suggested approaches have potential relevance to
developing countries as well. However, it was also recognised that developing
countries face different challenges than those in OECD countries, which could also
require alternative tools, having regard to their enforcement capabilities and
implementation capacity. The 2018 Update elaborated further on tax certainty in
developing countries, particularly the specific results for developing countries
3
IMF/OECD (2017), OECD/IMF Report on Tax Certainty, Paris. www.oecd.org/tax/tax-policy/tax-certainty-report-
oecd-imf-report-g20-finance-ministers-march-2017.pdf
4
IMF/OECD (2018), OECD/IMF Report on Tax Certainty - 2018 Update, Paris. www.oecd.org/ctp/tax-policy/tax-
certainty-update-oecd-imf-report-g20-finance-ministers-july-2018.pdf

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obtained from the 2016 OECD Survey, as well as from a consultative workshop that
was held in Dar-es-Salam, Tanzania in October 2017.
There is an important role that capacity building work can play to inform the
standard setting work. Co-operation among the international organisations active
in this area, including through the Platform for Collaboration on Tax (PCT), is also
vital.
A large part of the certainty agenda revolves around tax administration, which is at
the heart of the implementation of tax legislation and consequently a crucial
channel for delivering an appropriately certain tax system. Clear, coherent
legislation is critical, but does not guarantee tax certainty if it is not accompanied
by coherent, fair and efficient implementation. Uncertainty can also give rise to a
poor general relationship between business and the tax authority. In this context,
greater transparency with respect to the tax affairs of multinationals, coupled with
a more cooperative approach to tax compliance has great potential to reduce
uncertainty for low risk companies, assist tax administrations to better focus their
resources and promote a culture of greater trust.
The OECD/G20 Project on Base Erosion and Profit Shifting (BEPS) has made
significant progress in bringing more substance, coherence and transparency to
the international tax system, but most of the fundamentals of the international
corporate tax system remained unchanged.
Today, strains on the current system for taxing multinational enterprises in the face
of the digitalisation of the economy have become more salient than ever, leading
to an increased need to continue the focus on certainty in tax matters, with
uncoordinated measures jeopardising the considerable co-operation that the BEPS
project has achieved. For some countries, addressing the challenges arising from
digitalisation seems to be a political imperative, given domestic perceptions of
under-taxation and pending some longer-term global solution. These strains in
international tax relations may heighten tax uncertainty.
Addressing the tax challenges of digitalisation is the subject of extensive
discussions in the OECD/G20 Inclusive Framework on BEPS, which is working to
deliver a long-term, consensus-based solution to the G20 by 2020 5. The IMF has
also contributed to the debate with a paper on the broad directions for reform (IMF
(2019) 6. The OECD’s TFDE and Inclusive Framework embody a cooperative
multilateral approach and IMF (2019) specifically stresses the need to maintain and
build on the progress in international co-operation on tax matters that has been
achieved in recent years. This strong urging towards international co-operation has
already arguably had an immediate impact with a number of countries now actively
5
www.oecd.org/tax/beps/programme-of-work-to-develop-a-consensus-solution-to-the-tax-challenges-arising-
from-the-digitalisation-of-the-economy.pdf
6
www.imf.org/en/Publications/Policy-Papers/Issues/2019/03/08/Corporate-Taxation-in-the-Global-Economy-
46650

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engaged and focused on the multilateral process. For example, Australia

announced in March 2019 that it had decided to continue to focus its efforts on
engaging in the OECD multilateral process and not to proceed with an interim
measure, such as a DST.
Tax certainty is increasingly part of the policy agenda for both G20 and OECD
countries as well as developing countries. There is good, concrete work going on
in a number of areas and the IMF and the OECD will continue to take forward the
work on these fronts.
This report provides an update on the tax certainty agenda by building on the 2017
Report and 2018 Update in two dimensions 7: firstly, it reports on further progress
made to enhance tax certainty, including with respect to the work the IMF and
OECD have taken forward; and secondly, it describes some new initiatives in
relation to combatting corruption in tax administrations, and identifying and
building tax morale, particularly given corruption is closely linked to tax certainty,
and tax certainty is a component of tax morale.
7
There have also been some relevant analytical contributions: Davig and Foerster (2018) show how the possibility
of ‘fiscal cliffs’—pre-announced large changes in tax policy—can depress economic activity (“Uncertainty and
fiscal cliffs,” Federal reserve Bank of San Francisco Working Paper 2018-12); Keen and Hines (2018) characterise
circumstances in which ex ante tax rate uncertainty reduces/increases expected profits, output and input (“Certain
effects of uncertain taxes,” National Bureau of Economic Research Working Paper 25388).

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UPDATE ON STATUS OF COUNTRY-BY-COUNTRY

REPORTING IMPLEMENTATION
Improved and better-coordinated transfer pricing documentation will increase the
quality of information provided to tax administrations, which aims to boost tax
authorities’ risk-assessment capabilities and help reduce tax uncertainty for tax
administrations. More targeted audits and standardised documentation will also
limit the compliance burden on businesses. OECD/G20 BEPS Action 13 on Country-
by-Country (CbC) reporting establishes a three-tiered approach to transfer pricing
documentation, comprising a master file with an overview of an MNE’s business
and transfer pricing policies, local files with more detailed information on specific
transactions with a particular jurisdiction, and a CbC report containing information
on the global spread of an MNE’s activities, results, and where it pays tax.
OECD/G20 BEPS Action 13, which is one of the BEPS minimum standards,
recommends that CbC reports be required for the fiscal years of multinational
enterprises (MNEs) beginning on or after 1 January 2016. But it also recognises that
some jurisdictions may need more time to make the necessary adjustments to their
law. Fifty-eight of the OECD/G20 Inclusive Framework members required or
permitted CbC reports to be filed by MNEs for fiscal years commencing in 2016,
and almost 80 Inclusive Framework members have already introduced a CbC
reporting filing obligation into law. Around 25 further members currently have draft
laws to introduce an obligation in the near future.
In total, over three quarters of Inclusive Framework members have introduced or
are in the process of introducing a CbC reporting obligation, including all G20
countries. As a result of this progress, substantially every MNE above the
consolidated group revenue threshold of USD750 million is already within the
scope of CbC reporting, and the remaining gaps are rapidly being closed.
The exchange of CbC reports is generally facilitated through the automatic
exchange of information. There are currently in excess of 2,000 bilateral
relationships for the exchange of CbC reports in effect. Further work is needed to
support jurisdictions, in particular those with limited capacity, in putting exchange
relationships in place and in meeting the conditions for obtaining CbC reports, but
already tax administrations have access to unprecedented information on foreign
MNEs that pose the greatest potential BEPS risk to their jurisdictions.
It is vitally important that tax administrations use the information in CbC reports
effectively in the assessment of transfer pricing and other BEPS-related risks. The
OECD Forum on Tax Administration (FTA) has undertaken a number of initiatives
to support tax administrations in using CbC reports to provide greater certainty to
MNEs, which will benefit all Inclusive Framework members receiving CbC reports
from resident entities or from other tax administrations. These include:

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• CbCR risk assessment workshops: Since January 2017, a series of risk

assessment workshops have been held to consider how CbC reports can be
best used in risk assessments. These include a September 2018 workshop in
the People’s Republic of China, co-hosted with the State Tax Administration,
attended by representatives of 21 tax administrations and 10 MNEs and
business groups.
• Handbook on the Effective Use of CbC Reports in Tax Risk Assessment:
This handbook considers how CbC reports may be used within different
approaches to tax risk assessment, the key risk indicators that may be
detected and what a tax administration should do if a CbC report suggests
a tax risk may be present.
• Comparative Risk Assessment initiative (CoRA): Building on the
increasingly common information available to tax administrations for tax
risk assessment, CoRA is an initiative to drive greater convergence in the
perception of risk by tax administrations, and in the understanding of how
key risk indicators can be detected, including through an MNE’s CbC report.
• Tax Risk Evaluation and Assurance Tool (TREAT): TREAT is a tool under
development to support tax administrations, in particular those in
developing countries, in interpreting an MNE’s CbC report to identify where
further enquiries may, or may not, be needed. TREAT will incorporate
training materials drawing on experience in ICAP and CoRA, to assist tax
administrations in the risk assessment of MNEs.

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UPDATE ON THE PROGRESS IN THE

INTERNATIONAL COMPLIANCE ASSURANCE
PROGRAMME
The OECD’s International Compliance Assurance Programme (ICAP) is a voluntary
programme for a multilateral co-operative risk assessment and assurance process.
It is designed to be an efficient, effective and co-ordinated approach to provide
MNEs willing to engage actively, openly and in a fully transparent manner with
increased tax certainty with respect to some of their activities and transactions.
ICAP does not provide an MNE with the same degree of legal certainty as may be
achieved through an advance pricing agreement (APA), but the spirit of both are
similar. APAs provide an opportunity for both tax administrations and taxpayers to
consult and cooperate in a non-adversarial spirit and environment. The opportunity
to discuss complex tax issues in a less confrontational atmosphere than may be the
case in an audit context can stimulate a free flow of information among all parties
involved for the purpose of coming to a legally correct and practicably workable
result. Similarly, ICAP gives comfort and assurance where tax administrations
participating in an MNE’s risk assessment consider a covered risk to be low risk.
Where an area is identified as needing further attention, work conducted in ICAP
can improve the efficiency of actions taken outside the programme, if needed.
There are six key drivers behind the development of the ICAP risk assessment and
assurance process, which are: 1) providing a pathway to improved tax certainty for
MNEs 2) more effective dispute resolution 3) well-established MNE compliance
frameworks 4) advances in international collaboration 5) better and more
standardised information for transfer pricing risk assessment and 6) capitalising on
greater opportunities for multilateral engagement to provide improved assurance
for tax administrations and taxpayers. Some of these aforementioned drivers
concern the imperative for mechanisms to provide greater certainty for MNEs and
tax administrations, building on the outcomes of the OECD/G20 BEPS project and
the establishment of the OECD/G20 Inclusive Framework on BEPS. Others concern
the trend for greater collaboration and co-operation between different tax
administrations, and between tax administrations and MNEs, which supported the
development of such mechanisms.
As tax administrations and MNEs enter an era of increased transparency, new
opportunities arise to use the increased flow of information to support open, co-
operative relationships between taxpayers and tax administrations, providing
routes towards greater comfort or certainty, and a more effective use of resources.
The benefits of ICAP include helping tax administrations reach early decisions
about the level of tax risk, if any. It may also improve consistency in the
understanding of MNEs with similar transactions in multiple jurisdictions. ICAP will

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also facilitate an efficient use of resources and a faster, clearer route to multilateral
tax certainty with a process overall to be completed within 24-28 weeks following
delivery of the main documentation package.
This is a novel approach to tax administration, and as such there is a need to run
pilot projects in order to test different ideas and approaches with a small number
of tax administrations and MNEs. The first ICAP pilot was launched in Washington
D.C. in January 2018 where a pilot handbook was introduced. 8 It brought together
eight tax administrations, from Australia, Canada, Italy, Japan, the Netherlands,
Spain, the United Kingdom and the United States, with a number of MNEs
headquartered in these jurisdictions. The ICAP process has since been updated to
reflect the experience and feedback of these tax administrations and MNEs,
gathered as the first pilot progressed. A second ICAP Pilot (ICAP 2.0) was
announced in March 2019 at the OECD Forum on Tax Administration Plenary held
in Chile and a second ICAP handbook was released9, which includes an assessment
of the learnings from the first ICAP pilot and how this influenced ICAP 2.0. The tax
administrations participating in ICAP 2.0 are from the following jurisdictions:
Australia, Austria, Belgium, Canada, Denmark, Finland, Germany, Ireland, Italy,
Japan, Luxembourg, Netherlands, Norway, Poland, Spain, United Kingdom, United
States and others are actively considering joining at a later stage.
8
ICAP pilot handbook available at: www.oecd.org/tax/forum-on-tax-administration/publications-and-
products/international-compliance-assurance-programme-pilot-handbook.pdf.
9
ICAP 2.0 pilot handbook available at: www.oecd.org/tax/forum-on-tax-administration/publications-and-
products/international-compliance-assurance-programme-pilot-handbook-2.0.pdf

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ADVANCE PRICING ARRANGEMENTS

Advance Pricing Agreements (APAs) can improve certainty for businesses and tax
authorities. An APA between a given taxpayer and tax administration(s) determines,
in advance of controlled transactions, an appropriate set of criteria (e.g., method,
comparables and appropriate adjustments thereto, critical assumptions as to future
events) for the determination of the transfer pricing for those transactions over a
fixed period of time.
APAs often require considerable time and effort to conclude and—as with
cooperative compliance programs—countries with limited capacity need to think
carefully before entering into them, particularly if limited resources would be
diverted away from other core activities (such as compliance efforts). They can also,
for instance, take several years to negotiate, and issues of asymmetric information
can pose significant risks to the tax authorities. However, such upfront diligence
and costs can result in future time-savings and prevent disputes from arising in the
first place. For example, some MAP-intensive jurisdictions deal with the vast
majority of their caseloads via APAs while MAP is only required for a fraction of
such cases. Therefore, the more that jurisdictions are willing to expend the initial
effort to conclude APAs in the first place, the more certainty will be provided to
taxpayers and tax administrations later on down the road.

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TRANSFER PRICING DEVELOPMENTS

The interpretation and application of transfer pricing rules can be a significant
source of uncertainty in tax matters, as well as be at the origin of international tax
disputes. Using APAs is one approach to reduce uncertainty in this area, but there
is also considerable work on-going to make the transfer pricing rules themselves
simpler and easier to administer. The OECD continues to work on strengthening
the OECD Transfer Pricing Guidelines (TPG) and on the implementation of BEPS
Actions 8-10 work streams, including work on hard-to-value intangibles (HTVI), low
value-added intra-group services (LVAS) implementation, and in respect of
financial transactions and the application of the transactional profit split method
(TPSM). The OECD is also studying variations in the application of the authorised
OECD approach (AOA) to attribution of profits to a permanent establishment or
non-AOAs to provide clarity/certainty on country approaches.
In June 2018, the G20/OECD Inclusive Framework issued guidance on the
application of the approach to HTVI and the TPSM, which have been formally
incorporated to the TPG. The revised guidance on the TPSM clarifies and
significantly expands the guidance on when the TPSM may be the most appropriate
method. In addition, the guidance elaborates on how the TPSM should be applied.
Numerous examples have also been included to illustrate the implementation of
the new guidance.
The HTVI guidance for tax administrations is aimed at reaching a common
understanding and practice among tax administrations on how to make
adjustments resulting from the application of the approach to HTVI. The guidance
includes a number of examples to clarify the application of the HTVI approach in
different scenarios and addresses the interaction between the HTVI approach and
the access to the mutual agreement procedure under the applicable tax treaty.
Further, the OECD/G20 Inclusive Framework has put in place a monitoring process
of the implementation of the HTVI approach by jurisdictions, which will also feed
into a future revision of the guidance in 2020.
The OECD/G20 Inclusive Framework is also currently developing guidance on the
transfer pricing aspects of financial transactions. The project, which started in 2016,
produced a discussion draft that was released for public consultation in July 2018.
That discussion draft, which did not represent a consensus position of the Inclusive
Framework or its subsidiary bodies at that time, clarified the application of the
principles included in the TPG, in particular, the accurate delineation analysis under
Chapter I to financial transactions. The work also addressed specific issues related
to the pricing of financial transactions such as treasury function, intra-group loans,
cash pooling, hedging, guarantees and captive insurance. Significant progress has
been made on this project, completion of which is expected by end-2019.

│ 17
The OECD is also engaged in monitoring the application of the TPG and the
recommendations resulting from the BEPS Actions 8-10 and 13. Accordingly, the
OECD has gathered and published Transfer Pricing Country Profiles 10 containing
information on the key features of countries’ transfer pricing systems. Further
analysis of the information collected from tax administrations in more than 50
OECD/G20 Inclusive Framework members has been conducted with a view to
assessing the effectiveness of the measures adopted as well as the impact on both
compliance by taxpayers and proper administration by tax authorities.
On 10-12 October 2018, a workshop on the use of safe harbours in transfer pricing
was organised jointly by the OECD and the Ministry of Finance of Slovakia in Velky
Meder, Slovak Republic. This event presented the opportunity for transfer pricing
policy experts responsible for design and implementation of transfer pricing rules
as well as transfer pricing methodology to explore and discuss the benefits and
concerns related to the use of safe harbours in transfer pricing. It also allowed them
to exchange views on the necessary steps to take and the practical aspects of
designing a transfer pricing safe harbour regime. A number of jurisdictions
expressed interest in further practical guidance on safe harbours to better inform
their decision to adopt safe harbours and guide them in their development.
Other events were organised and delivered by the OECD on Transfer Pricing
Documentation and Risk Assessment:
• Transfer Pricing Documentation and Country-by-Country Reporting
(China, 26-30 March 2018).
• Implementing documentation and reporting obligations and performing
risk assessment analyses (Ankara, 11-14 September 2018).
• Transfer Pricing Documentation and Country-by-Country Reporting
(Malaysia, 11-15 March 2019).
Finally, the OECD is also conducting a survey on how the transfer pricing rules can
be made simpler, with a view to identifying and formulating specific best practices
of simplification measures. The OECD will also engage with the business
community on their experience with existing transfer pricing simplification
measures and to gather ideas on potential measures that could be further explored,
including in respect of transfer pricing documentation that gives rise to uncertainty.
10
www.oecd.org/ctp/transfer-pricing/transfer-pricing-country-profiles.htm

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Box 1. Tax Inspectors Without Borders

Tax Inspectors Without Borders (TIWB), a joint-OECD/United Nations Development
Programme (UNDP) initiative, which was launched in Addis Ababa in July 2015, has further
strengthened and expanded its reach across the globe in the past year. With
54 programmes currently underway or completed and over 26 upcoming programmes,
TIWB audit assistance continues to provide tax administrations in developing countries with
much needed assistance in building capacity to implement BEPS solutions and generate
more revenues, in many cases with respect to transfer-pricing audits.
To date, cumulative increases in revenue collected since 2012 amount to approximately
USD 470 million. On average, for every USD 1 spent on TIWB activities between 2013 and
2018, there was a more than USD 100 increase in tax revenues collected by Host
Administrations (see Box Figure 1 on regional reported revenue increases). Beyond the
increase in tax revenues collected, TIWB programmes have been a major confidence builder
for tax administrations, and a deterrent against tax avoidance strategies by MNEs, helping
to create behavioural changes and a culture of voluntary compliance as well as an
environment where businesses know what to expect from tax administrations.
Box Figure 1. Regional Reported Revenue Increases from TIWB Assistance
The TIWB initiative has continued to evolve to meet the needs of developing countries. One
of those needs has been for greater input from industry experts, e.g. from the diamond,
floriculture, oil and gas, forestry and mining sectors. The enhanced sectoral focus of TIWB
on the mining sector will be bolstered by the OECD’s strengthening partnership with the
Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF).
IGF will provide industry experts, raise demand for TIWB programmes among its
71 members and promote inter-agency co-operation in the host countries undertaking
TIWB programmes in the mining sector. The TIWB initiative also places an increasing
emphasis on enhancing South-South co-operation to help ensure developing country
perspectives remain at the forefront in the audit assistance provided.
TIWB is currently looking into further areas where its model can apply. For instance, five
pilot programmes on tax crime are due to begin in 2019. Other areas being explored
include the use of TIWB for joint audits and support for Common Reporting Standard (CRS)
data interpretation.

│ 19
Direct assistance to developing countries on transfer pricing
The OECD has been actively building capacity through demand-led bilateral
programmes in 2018, to support the application of the BEPS actions and international
transfer pricing norms and standards through tailored country-level assistance. In
many cases, this support was provided in partnership with ATAF, the EC and the WBG.
These programmes, while typically focussed on transfer pricing (regularly a top
international tax priority for developing countries) also address other BEPS-related
issues, so that a holistic approach is taken to building capacity and improving tax
collection in the international area. These programmes continue to evolve to meet the
needs of developing countries. For example, in 2018 greater use was made of industry
experts, as an understanding of the industry concerned and its value chain is an
important element in complex transfer pricing cases. These initiatives have, in some
cases, also built a more collaborative and productive relationship between tax
administrations and businesses that have shown a willingness to comply.
Some of the major impact indicators for these bilateral programmes include; 90% of
the recipient countries are in the process of, or have enacted, legislative changes to
address BEPS risks, particularly in the areas of transfer pricing and limiting excessive
interest deductibility. These laws are helping governments to better protect their tax
bases in ways which accord with international tax norms. Countries are also
increasingly issuing guidance for taxpayers and tax administrations on the
implementation of the new rules, increasing tax certainty.
Box 2. Country Examples

In 2018, Zambia published new Transfer Pricing Regulations and a Transfer Pricing Practice Note
to supplement its existing legislation and regulation. The new regulations provide rules on a
wide range of transfer pricing issues, as well as documentation requirements for taxpayers. The
Practice Note sets out the Commissioner-General’s interpretation of Zambia’s transfer pricing
rules. Together these provide Zambian taxpayers with much greater clarity on how to comply
with Zambia’s transfer pricing rules.
Over the last year in Nigeria, businesses reported a remarkable improvement in the skills of
auditors of the Federal Inland Revenue Service and that, as a result, audits are now being
conducted in a much more efficient and collaborative manner.
The knowledge and experience from these programmes is having a major impact on
the standard-setting work of the OECD/G20 Inclusive Framework, increasing
developing countries’ confidence that international standards are indeed fit for
purpose given the specific challenges they face and encouraging greater participation
by such countries in the further development of those standards.
The effectiveness of these programmes has led to increased demand from other
countries for similar assistance. Since 2012, over 30 developing countries have received
OECD support on transfer pricing and other BEPS related issues.

20 │
The IMF, in its technical assistance, also frequently supports developing countries in
strengthening their tax law framework to improve the implementation of transfer
pricing rules, commonly in the context of broader based tax reforms (discussed further
in the section dealing with improving tax law systems and their implementation by tax
administrations).

│ 21
TAX CERTAINTY THROUGH JOINT AUDIT

The report Joint Audit 2019 – Enhancing Tax Co-operation and Improving Tax Certainty 11
was published in March 2019 at the Forum on Tax Administration (FTA) Plenary in Chile.
This report focuses on the most advanced form of audit-related tax co-operation with
the highest levels of integration and coordination. It identifies both the benefits that can
arise from the greater use of joint audits as well as the challenges that need to be
overcome to ensure that those benefits can be realised as effectively and efficiently as
possible for both tax administrations and taxpayers.
A number of key benefits of joint audits have been identified. More specifically, a joint
approach to fact finding involving the participating tax administrations and the taxpayer
helps to:
• avoid misunderstandings, different versions of reality and ensuring that there is
one conversation, rather than several conversations with potentially different
outcomes.
• achieve a holistic overview of taxpayers’ business structures as well as cross-
border transactions due to a better quality of information that is exchanged
during a Joint Audit procedure that allows more targeted examinations in the
future.
• ensure more efficient and faster processes compared to separate audits followed
by MAP.
• reduce burdens for taxpayers and tax administrations compared to separate
audits, especially where they subsequently result in a MAP case.
• prevent the need to undo decisions that have already been taken.
Furthermore, joint audits offer the ability to leverage the auditing experience and
expertise of other tax administrations that can also support the improvement of each tax
administrations’ own case selection and auditing methods. They also provide a better
understanding of the differences in legislation that can subsequently support better risk
assessment and a better allocation of resources. Moreover, joint audits enhance the
compliance of MNEs when early tax certainty can be achieved and a higher tax risk
posture becomes increasingly unattractive.
The report identified a number of best practices to support international co-operation
and in particular the conduct of Joint Audits. In this context the participants of the Joint
Audit Project 2018/2019 developed a Joint Audit Implementation Package that includes
relevant templates and model agreements that can facilitate and streamline any practical
aspects of the conduct of a Joint Audit. This will be kept up to date on a regular basis.
11
OECD (2019), Joint Audit 2019 – Enhancing Tax Co-operation and Improving Tax Certainty: Forum on Tax Administration, OECD
Publishing, Paris, https://doi.org/10.1787/17bfa30d-en

22 │
DIAGNOSTIC FINDINGS FROM TADAT

As described in the 2018 Update, the Tax Administration Diagnostic Assessment
Tool (TADAT) can be used to evaluate the tax dispute resolution process of
countries. With assessments now available for an additional thirteen countries (Box
3), the broad conclusions remain as before (see Box 7 of the 2018 Update). The
design of the systems is good overall. Generally, a three-tiered approach is
adopted: (i) administrative management of disputes; (ii) appeal to a quasi-judicial
body or committee at the second level; and (iii) appeal to a judicial level for
interpretation of the law, and increasingly, considering facts of the dispute as well.
However, systems seem to falter during implementation—evidence available
suggests that it takes too long to address disputed cases even though the
processes may be in place. Additionally, monitoring of case-status appears to be
generally poor. Causes of delay may be a combination of issues that may include:
caution exercised by tax officials who may perceive that quick resolution may result
in errors and taxes given away; cases may be complex and take longer than
anticipated; inadequate numbers or skill levels of tax administration staff; or the
inadequacy of the facilities (and related infrastructure) necessary to dispense
justice.

│ 23
Box 3. TADAT – Updated Dispute Resolution Scores, for 65 countries
The figure reflects a four-point ‘ABCD’ rating scale where ‘A’ represents adherence to good
international tax administration practice and ‘D’ suggests that the fundamentals are either
not in place or the evidence required is unavailable or unreliable.
The figure summarises performance in three TADAT dimensions:
• P7-19: Existence of an independent, workable, and graduated resolution process.
For this indicator three measurement dimensions assess: (1) the extent to which a
dispute may be escalated to an independent external tribunal or court where a
taxpayer is dissatisfied with the result of the tax administration’s review process; (2)
the extent to which the tax administration’s review process is truly independent;
and (3) the extent to which taxpayers are informed of their rights and avenues of
review.
• P7-20: Time taken to resolve disputes. This indicator assesses how responsive the
tax administration is in completing administrative reviews.
• P7-21: Degree to which dispute outcomes are acted upon. This indicator looks at
the extent to which dispute outcomes are taken into account in determining policy,
legislation, and administrative procedure.
See Box 7 of the 2018 Update for more detail.
Preliminary results from a May 2019 TADAT Impact Evaluation Survey 12 across the
range of tax administration stakeholders provide useful insights into tax
administrations’ reform effort, bearing directly on assuring improved tax certainty:
12
A full survey report will be published by end 2019.

24 │
• Entities observed using the TADAT framework to implement reforms. The

TADAT framework (and related principles) is being used in various
settings—predominantly in tax administrations, but also in customs
administrations, subnational tax administrations and some government
departments that are not of a tax/revenue administration nature.
• Key reform areas countries are focusing on. The reform of processes and
procedures appears to be the predominant thrust, particularly for taxpayer
registration, risk management, filing for declarations and payment of taxes,
and in efficient revenue management/accounting. Legal and regulatory
reform focus appears to be more in the dispute resolution area and not
unsurprisingly, customer outreach and support under voluntary compliance
initiatives.
• Areas in which reform initiatives are still a challenge. Challenges are
experienced where the ‘leadership’ does not seem to be committed or does
not prioritise, and therefore allocate resources, to the areas being focused
upon. Other slow progress areas include: (i) entrenched policy, such as tax
amnesties; (ii) management of the taxpayer register; (iii) risk
management/analysing available data; and (iv) following up the timely
payment of taxes and related collection enforcement.
• Improvements in the exchange of information within and outside of the tax
administration. Most respondents (83 percent) indicate that the concepts of
TADAT have helped improve the exchange of knowledge and experiences
within the tax administrations (intra-organisational). This response confirms
that the TADAT framework provides a holistic view on the functions of a tax
administration. However, only 35 percent of the respondents indicated that
the concepts espoused by the framework have been used to strengthen
networks or interactions with other tax administrations. For those who have
interacted with other tax administrations, the common channels used have
been WhatsApp groups, email, LinkedIn, and face-to-face in workshops—in
that order. Facebook and Twitter platforms were also mentioned.

│ 25
COMBATTING CORRUPTION IN TAX

ADMINISTRATIONS
Corruption—the abuse of public office for private gain—weakens key functions of
the public sector, including the ability to collect and enforce taxes or to make
expenditure choices in a fair, efficient and certain way. The widespread
acknowledgment that tackling corruption is critical for macroeconomic
performance and economic development has also led to its inclusion in the United
Nations Sustainable Development Goals; it has also prompted several initiatives,
including the Framework for Enhanced IMF Engagement in Governance (IMF
2018) 13 and the OECD’s work through its Forum on Tax Administration (FTA) to
examine tax administration governance arrangements in place in FTA countries
(Box 4).
To reduce opportunities for corruption, institutions need to be upgraded
continuously, to keep pace with new challenges as technologies and opportunities
for wrongdoing evolve. It is necessary to ensure integrity of processes, especially
in higher-risk areas (for example, procurement, tax administration, public
enterprises), and to promote effective internal controls. The chances of success are
higher when countries improve several, mutually supporting institutions. For
example, reforms to tax administration will have greater payoff if tax laws are
simplified with more certain application and the scope for discretion by tax officials
is reduced. Other features that can promote better governance include institutional
efforts to promote integrity. Appendix A describes the key features of good
governance in revenue administration to reduce vulnerability to corruption and
promote integrity, thereby contributing to—indeed providing a prerequisite for—
tax certainty.
The April 2019 Fiscal Monitor 14 of the IMF focused on corruption, emphasising tax
aspects. One finding, for example, is that both advanced and low-income countries
in the top quartile in terms of control of corruption raise 4 percent of GDP more in
tax revenue than do those in the lowest. There are thus strong signs that measures
which reduce vulnerabilities to corruption in tax policy and tax administration can
make a real contribution to revenue mobilisation. Indeed, corruption can harm
revenue collection at both the legislative and collection stages. For example, the
introduction of tax exemptions or other tax loopholes in exchange for bribes
reduces revenue potential. Furthermore, a complex and opaque tax system enables
corruption by requiring more discretion in its administration. The distortion of tax
13
https://www.imf.org/en/Publications/Policy-Papers/Issues/2018/04/20/pp030918-review-of-1997-guidance-
note-on-governance
14
Fiscal Monitor: Curbing Corruption (www.imf.org/en/Publications/FM/Issues/2019/03/18/fiscal-monitor-april-
2019)

26 │
laws and the corruption of tax officials, by reducing trust in the state, weaken the
culture of tax compliance.
The IMF has built up comprehensive diagnostics on the quality of fiscal institutions,
supplying a wealth of information on many aspects of fiscal governance, including
public financial management and revenue administration. These tools have been
part of the IMF’s capacity-building work across its membership. They help
strengthen core institutional processes, promote integrity and certainty in public
administration, and promote fiscal transparency. This work has been undertaken in
co-operation with other international institutions (for example, the World Bank)
and donors.
Fiscal Transparency Evaluations (FTEs) assess fiscal transparency practices against
the principles outlined in the Fiscal Transparency Code with a focus on four pillars:
(1) fiscal reporting; (2) fiscal forecasting and budgeting; (3) fiscal risk analysis and
management; and (4) resource revenue management for specific needs of
resource-rich countries. As of February 2019, 25 FTEs were publicly available.
Tax Expenditure Assessment (TEA) helps to improve transparency. Governments
should devote the same attention to controlling financial support to the economy
through the tax system, as they devote to outlay expenditures. Tax expenditures
are alternative policy means, and they do not appear on the expenditure side of
the budget. Therefore, the cost of tax expenditures should be identified, measured
and reported regularly, and in a way that enables comparison with outlay
expenditures. The TEA Program is designed to provide step-by-step capacity
development for countries to the production of tax expenditure reports,
complementing the PCT report on designing and implementing tax incentives for
investment in low income countries in ways that are efficient and effective that was
published in 2015. 15
Another diagnostic tool related to resource revenue management is the Fiscal
Analysis of Resource Industries framework, which assists countries in designing
fiscal regimes for natural resources.
A similar suite of tools is available to assess the performance of tax and customs
administrations. The Tax Administration Diagnostic Tool (TADAT) is designed to
provide an objective assessment of the health of key components of a country’s
system of tax administration. TADAT assessments identify relative strengths and
weaknesses, which helps in setting and prioritising reform agendas and facilitating
external support for reforms. Other IMF diagnostic tools for revenue administration
include the Revenue Administration Fiscal Information Tool (RA-FIT/ISORA), which
compiles a set of performance indicators for more than 150 tax administrations,
thanks to a joint IMF-OECD-CIAT-IOTA partnership; a similar tool (International
15
http://documents.worldbank.org/curated/en/794641468000901692/Options-for-low-income-countries-
effective-and-efficient-use-of-tax-incentives-for-investment-a-report-to-the-G-20-development-working-
group-by-the-IMF-OECD-UN-and-World-Bank

│ 27
Survey on Customs Administration, ISOCA, will soon be launched in partnership

with the WCO). The Revenue Administration–Gap Analysis Program helps countries
estimate the size of tax gaps for major taxes; it provides a better understanding of
factors affecting the size of, and changes in, those gaps—in particular, those
stemming from taxpayer noncompliance.
Box 4. Examination of tax administration governance arrangements though the

Forum on Tax Administration (FTA)
The OECD has been working through its Forum on Tax Administration (FTA) to
examine tax administration governance arrangements in place in FTA countries.
The results were provided to the Commission of Inquiry Into Tax Administration
and Governance by the South African Revenue Service, and highlighted a number
of elements that are often found in FTA members’ tax administrations, including:
• the need for government oversight of the budgetary approval and review
process,
• the publication of an annual report audited by an independent national
audit function,
• the existence of an internal accountability and control framework with
automatic checks to prevent internal fraud, and
• independent risk assessment of the accountability and control framework,
including both performance and financial reporting, systems of risk
oversight and management, and systems of internal control.
These measures contribute to ensuring a transparent and accountable
environment that can guard against corruption in tax administrations and reinforce
taxpayers’ confidence in the tax administration generally.
Tax certainty also calls for a tax law framework with modernised features reflecting
international good practice to better ensure the effective and efficient operation of
the tax administration. The IMF has a well-developed program of providing
technical assistance (TA) and training to IMF member countries, which contributes
to tax certainty. This includes drafting new laws or amendments to existing laws
containing safeguards to strengthen the governance of tax administrations, anti-
corruption efforts and taxpayer protection (see Box 5).
Following the approval of a Framework for Enhanced Fund Engagement in
Governance, the IMF has stepped up its involvement in governance issues,
providing more candid, evenhanded, and actionable advice to its members in the
context of surveillance and programs, with supporting capacity development in
various areas of governance.

28 │
Box 5. Case Study Sri Lanka
A new Inland Revenue Act (IRA) was adopted effective April 1, 2018 with
modernised features reflecting international good practice to better ensure
the effective and efficient operation of the tax administration. The existing IRA
was simplified and modernised and became a flagship reform under Sri Lanka’s
IMF supported program, with integrated tax policy and law design and drafting TA.
Importantly, the new IRA contained safeguards to strengthen governance,
anti-corruption efforts and taxpayer protection. For example, the IRA removed
most existing discretionary tax incentives and replaced them with a limited number
of tax incentives with well-defined eligibility criteria and conditions, and introduced
new offences and penalties to assist with anti-corruption efforts. Ongoing IMF TA
is being provided to assist with the implementation of the IRA. All these efforts,
together with enhancements under the 2019 budget, have made the
administration of income taxes more predictable and transparent and better
enabled Sri Lanka to effectively manage large-scale capital projects by avoiding ad
hoc and discretionary tax exemptions. The revenue administration IT system is also
being upgraded for compatibility with the IRA, with electronic filing and processing
under this system designed to help reduce discretion and leakage.

│ 29
IMPROVING TAX LAW SYSTEMS AND THEIR

IMPLEMENTATION BY TAX ADMINISTRATIONS
Building capacity and providing training in key tax system components—tax policy,
revenue administration, and legal design and drafting of tax legislation—including
in the taxation of natural resources, is central to the tax certainty agenda. The focus
continues to be on developing a fair, stable and predictable tax system, based on
each country’s context and capacity and a coherent medium-term strategy.
The IMF committed to expanding its support for nationally-owned efforts to
strengthen domestic tax systems and to broaden the use of a range of recently-
developed diagnostic and analytical tools to improve the quality of those systems.
IMF support for national efforts to strengthen tax systems in order to boost
domestic revenue mobilisation (DRM) has increased sharply in recent years,
facilitated by substantial donor support:
• The volume of assistance provided to developing countries, measured in
“person years,” in FY2018 was 46 percent higher than in FY2015; average
levels of support during FY2016–18 were almost 28 percent higher than in
FY2013–15 (Figure 1).
• Between FY2013–15 and FY2016–18, the volume of assistance increased by
28 percent for LIDCs, 27 percent for EMs, and 41 percent for fragile states.
• Patterns of support differ across country groupings, with large increases in
TA for building tax/customs administrations across the board, as well with
respect to the design and drafting of tax and fiscal legislation.

30 │
Figure 1. Tax-Related TA in Developing Countries
Note: The IMF’s fiscal year is May 1 through April 30.

Source: IMF staff estimates, based on data available from the Travel Information Management System
(TIMS).
IMF support has made use of various diagnostic and analytical tools (Box 6). TADAT
is a publicly available instrument, with separate donor financing and a Secretariat
housed within the IMF; 78 assessments (including subnationals) have been
conducted since the official TADAT roll-out in November 2015. Analyses of VAT
gaps, using the Gap Analysis tool, have been conducted in 36 countries and the
methodology has now been expanded to cover the corporate income tax.
The Fiscal Analysis of Resource Industries (FARI) tool has been applied in about 50
countries, while capacity building support on how to use FARI to strengthen fiscal
regime analysis and revenue forecasting has been provided in 23 countries. As part
of a joint initiative with the World Bank, the two institutions agreed to work towards
developing a tax policy diagnostic framework (TPAF) that could assist countries and
TA providers in systematically analysing existing tax policies in accordance with
good practices. Initial online modules are in varying stages of development, with
one, the VAT module, now available. 16
16
www.imf.org/external/np/fad/tpaf/pages/vat.htm

│ 31
Technical support is being provided to 10 countries in various regions on

developing medium-term revenue strategies (MTRS). 17 The MTRS approach was
developed for the G20 by the PCT and provides a comprehensive approach to
boosting tax revenues over the medium term, aligning tax policy, revenue
administration and legal reforms around a coherent plan embraced by all of
government, as well as other stakeholders. A key requirement is high-level political
support over an extended period, with revenue goals being aligned with
spending/development needs. The MTRS also serves as a vehicle to align the efforts
of multiple capacity building partners active in the reforming country. Papua New
Guinea and Uganda are examples of countries that are developing or have adopted
a MTRS. Since the 2018 Update, Indonesia published a MTRS that aims to raise tax
revenue by 5 percentage points of GDP in five years, with a detailed tax system
reform proposal, supported by a plan to achieve coherent, fair and efficient
implementation.
Box 6. Strengthening Tax Capacity
The IMF, working with development partners, has developed various assessment and other
tools to continue to help countries seeking to strengthen their tax systems. These include:
• Tax Administration Diagnostic Assessment Tool (TADAT) to assess key functions,
processes and institutions of tax administration systems.
• Revenue Administration Gap Analysis Program (RA-GAP) to assess gaps in value-
added tax (VAT) and corporate income tax (CIT).
• Revenue Administration Fiscal Information Tool (RA-FIT/ISORA), a survey-based
dataset on revenue administration practices, soon to include customs data (ISOCA).
• Fiscal Analysis of Resource Industries (FARI) to provide a framework for extractive
sector fiscal regime policy advice. FARI, developed in 2007, continues to be used in
TA as a fiscal analysis tool to provide policy advice.
These tools help inform diagnostics for the formulation of tax system reforms, notably in
formulating a MTRS.
Countries that have received extensive IMF support in building tax systems include
a mix of EMs and LIDCs (the latter including many fragile states). The Revenue
Mobilisation Thematic Fund (RMTF), financed by bilateral donors, is supporting a
second phase of technical assistance to developing countries on revenue issues. In
this work-stream, emphasis has been placed on providing intensive support to
17
The MTRS concept was introduced in a report to the G20 on “Enhancing the Effectiveness of External Support
in Building Tax Capacity in Developing Countries,” prepared by the Platform for Collaboration on Tax (IMF, OECD,
UN and WBG) for the July 2016 G20 Finance Ministers meeting (www.imf.org/en/Publications/Policy-
Papers/Issues/2016/12/31/Enhancing-the-Effectiveness-of-External-Support-in-Building-Tax-Capacity-in-
Developing-PP5059). An update on experience with the development of MTRSs is provided in the PCT’s progress
report to the G20 of June 2019.

32 │
selected countries, with assistance phased over time. This assistance is in several
cases providing the basis for developing MTRSs. The Managing Natural Resource
Wealth Thematic Fund (MNRW) supports capacity building in resource-rich low and
lower-middle income countries. The key emphasis is on the design, implementation
and administration of the tax and non-tax fiscal regime for extractive industries and
in an integrated manner also supporting macro-fiscal revenue management and
statistics. Box 7 includes brief descriptions of three case studies that illustrate the
breadth of work being done to produce tangible improvements in various aspects
of national revenue systems, with implementation support to enhance tax certainty.
Box 7. Examples of Revenue Capacity Building to Enhance Tax Certainty
Tax administration reform in Mongolia. A three-year project began in 2017 under the RMTF
to help the authorities increase taxpayer compliance. Through December 2018, nominal tax
yields increased by 22 percent—in part due to increases in commodity prices, but also
reflecting administrative reforms. The VAT compliance gap was reduced by a quarter,
helped by the introduction of mandatory electronic receipts and compliance enforcement
strategies. The tax coverage ratio (taxpayers who paid as a share of those expected to pay)
increased modestly for the major taxes, while audit assessments increased by 300 percent.
Sierra Leone’s Extractive Industries Revenue Act. In 2012, Sierra Leone set out to establish a
standard framework for the taxation of extractive industries (EI), having long experienced
revenue losses from discretionary and project-specific changes to its fiscal regimes for
mining and petroleum. Reforms were delayed by the Ebola outbreak of 2013–2015 and the
collapse of commodity prices in 2014–2015, but, with technical support financed through
the MNRW, a new fiscal regime responding automatically to changes in project profitability
was developed. The authorities, with IMF support, used the FARI modeling system to build
capacity and to analyse and simulate mining and petroleum revenues. In July 2018
Parliament passed the Extractive Industries Revenue Act, which provides predictability,
eliminates discretion, and promotes investment while protecting tax revenues.
Central African Economic and Monetary Community (CEMAC) changes in regional tax policy
and legislation. The marked decline in commodity prices from mid-2014 underscored the
need for CEMAC countries to build tax systems less dependent on resource revenues. The
regional tax policy framework—mainly a set of directives governing the design of major
national taxes (such as VAT and income taxation)—was outdated and ill-suited to helping
member countries boost tax revenues. In 2016, a five-year reform prepared, with technical
assistance to implement being supported by the RMTF. As of February 2019, the regional
double taxation treaty has been updated to include the minimum standards under the BEPS
project and to limit tax avoidance through ‘treaty shopping’; excise taxation has been
reformed; and a revised VAT directive is under preparation.
In both advanced and developing countries, the design issues relating to taxation
and stability of legislative frameworks to enhance tax certainty are also dealt with
in IMF surveillance. For example, the expansion of coverage of international
corporate taxation issues in IMF surveillance continues to also be implemented with

│ 33
both developed and developing countries. Discussions with 24 countries had been
completed as of early-FY19, with additional cases to be taken up during the
remainder of FY2019 and in FY2020. Conclusions from these discussions have fed
into the IMF’s wider analysis of international tax issues and informed its policy
advice to individual countries, including in IMF (2019). Further, IMF TA and staff
publications continue to focus on adopting a rules-based approach to designing
and developing legislative frameworks to enhance implementation certainty, with
a recent focus on the design and drafting of interest and tax penalty regimes (Box
8), being an example of an area where there is a clear need to ensure fairness and
certainty for taxpayers by ensuring that administration of income taxes
becomes more predictable and transparent.
Box 8. IMF technical assistance on designing interest and tax penalty regimes
When designing and drafting interest and tax penalty regimes, there is a clear need
to ensure fairness and certainty for taxpayers. In January 2019, the IMF issued a new Tax
Law IMF Technical Note 18 on the design and drafting of interest and tax penalty rules and
guidance in relation to their application, which is also applied when delivering IMF TA.
Nearly all tax systems have some form of interest and tax penalty regimes. Interest payable
on any late or underpayment of tax seeks to protect the present value of the tax amount
to the government budget, whereas penalties are intended to deter taxpayers from
defaulting on their tax obligations—and to punish them if they do—to achieve horizontal
equity vis-à-vis compliant taxpayers. The recent Tax Law IMF Technical Note focuses on the
key issues that should be taken into consideration in designing interest and penalty
regimes in tax legislations in order to preserve fairness and enhance tax certainty, with
sample legislative provisions in order to promote consistency, international comparability,
and therefore enhance tax certainty.
As TA on improving tax law systems and their implementation by tax

administrations has substantially increased, several lessons (not all new) are
informing work on the design and delivery of future assistance to enhance tax
certainty:
• Success in building tax systems should be assessed not only by the revenue
levels achieved, but also by the improvements in the quality of tax system—
minimising economic distortions, while ensuring predictability, fairness, and
simplicity.
• Tax policies, tax administration, and the legal framework within which they
operate are closely intertwined; a reform strategy needs to address these in
an integrated fashion. For example, a modern and robust tax law framework
that conforms to international good practices will: (i) support greater
18
https://www.imf.org/en/Publications/Tax-Law-Technical-Note/Issues/2019/04/04/Designing-Interest-and-Tax-
Penalty-Regimes-46648

34 │
domestic revenue mobilisation; (ii) ensure international compatibility; (iii)

better preserve the policy intention of the law by minimising tax avoidance
opportunities; and (iv) simplify the application and administration of the
provisions in order to enhance tax certainty.
• National ownership in various forms is needed to achieve lasting success in
building tax systems that are sustainable and certain. Strong sustained
support from finance ministries is essential, as is keeping capable managers
and teams in place for an extended period; reform efforts need to be
sustained beyond the life of a single government as institutional reforms
can take years to fully implement; new governments must get behind
ongoing reform programs quickly to avoid losing momentum.
• Sustained multi-year support from TA providers is essential to achieve
effective and more certain results.

│ 35
DISPUTE RESOLUTION: DEVELOPMENTS UNDER

MUTUAL AGREEMENT PROCEDURES AND
ARBITRATION
The genesis for the Action 14 Minimum Standard on dispute resolution was
developed from a recognition that the actions to counter BEPS must be
complemented with actions that ensure certainty and predictability for businesses
and individuals. It was therefore necessary to develop robust dispute settlement
resolution processes across jurisdictions to ensure that disputes are resolved in a
timely, effective and efficient manner. This includes standards on mutual
agreement procedures (MAP) and the option of arbitration.
Mutual Agreement Procedures
The Action 14 Minimum Standard seeks to strengthen the effectiveness and

efficiency of the MAP process through a rigorous stage 1 peer review process that
is then followed up one year later in a stage 2 monitoring report. The peer review
process is now well underway. Already, 45 jurisdictions have been peer reviewed
under stage 1 of the process, eight more are currently in the process of being
finalised and another 26 jurisdictions are scheduled for review (see Table 1).
For the 45 jurisdictions reviewed thus far, around 990 recommendations have been
issued, including recommendations for jurisdictions to maintain compliance with
certain elements of the minimum standard as well as increasing resources to
support the MAP function. At the same time, the BEPS Action 14 Minimum
Standard is already having a broader impact on dispute resolution worldwide, thus
contributing further to enhanced tax certainty in the international environment:
• There has been a marked increase in the number of cases dealt with by
competent authorities and almost 80% of the reporting jurisdictions with
more than 10 MAP cases closed more cases in 2017 than in 2016. This is
likely the result of an increase in resources for many competent authorities
as a result of the peer review process or, in some cases, for jurisdictions that
anticipate their own upcoming peer review.
• The peer review process has spurred on changes regarding the structure
and organisation of competent authorities to streamline better their
processes for resolving MAP cases in a timely manner (e.g. hiring of more
resources or reorganisation of competent authority staff per type of cases).
• The number of Inclusive Framework MAP profiles published on the OECD
website continues to increase. In addition, many jurisdictions introduced
MAP guidance to provide taxpayers with clear rules and guidelines on MAP.

36 │
• Access to MAP is now granted for transfer pricing cases even where the
treaty does not contain Article 9(2) of the OECD Model Tax Convention,
especially in those jurisdictions that did not provide access to MAP in such
cases in the past.
In addition to these broader changes, the monitoring process under stage 2 has
already begun. The reports for the six jurisdictions that were peer reviewed in
batch 1 have recently been discussed and approved by the FTA MAP Forum 19.
These stage 2 reports are the first glimpse into how well jurisdictions are
implementing the specific recommendations issued to them during stage 1 of the
Action 14 peer review process, the results of which contribute to enhancing to tax
certainty in a number of ways.
The results of this stage 2 monitoring process available thus far indicate that
jurisdictions are making tangible progress. In general, the six batch 1 jurisdictions
are considered to be compliant under most of the criteria of the Action 14
minimum standard with respect to the prevention of disputes, availability and
access to MAP, the resolution of MAP cases and the implementation of MAP
agreements. In this regard, a few noteworthy developments can be highlighted as
follows:
• All six jurisdictions provide for the possibility of roll-back of bilateral APAs.
• All six jurisdictions have a documented bilateral notification and/or
consultation process in place to notify the other jurisdictions in cases where
they consider a MAP request to be not justified.
• Many of the jurisdictions have updated their publicly available MAP
guidance to provide more clarity and details to taxpayers.
• Each of the six jurisdictions decreased the amount of time needed to close
MAP cases and five of the six jurisdictions met the sought-after 24-month
average timeframe to close MAP cases.
• Only one jurisdiction has a potential difficulty with implementing MAP
agreements given that almost none of its tax treaties contain a provision
stating that MAP agreements shall be implemented notwithstanding any
domestic time limits, which may result in such agreements not being
implemented.
In the future, more insights into progress will come not only from the MAP statistics
but also from the release of each stage 2 monitoring report following up on any
stage 1 recommendations.
19
www.oecd.org/tax/beps/beps-action-14-peer-review-and-monitoring.htm

│ 37
Table 1. Timeline of the Mutual Agreement Procedures Peer Review
Source: OECD/G20 Inclusive Framework on BEPS Progress Report, 2018-2019
Arbitration
While specific measures for preventing disputes will reduce the number of cases
going through the MAP, mechanisms are also necessary to ensure that cases are
resolved in a timely manner once they are being dealt with in this procedure. For
this reason a mandatory and binding arbitration procedure was added as a final
stage to the MAP of Article 25 of the OECD Model Tax Convention in 2008.
Competent authorities involved are, pursuant to Article 25(5), given a two-year
term to reach an agreement on how to resolve a situation of taxation not in
accordance with the provisions of a tax convention. In the absence of such an
agreement, taxpayers can request the initiation of the arbitration procedure for the
unresolved issues of the case. The outcome of that procedure is binding for the
competent authorities concerned.
It should be noted that the mere existence of including an arbitration provision in
the text of a tax treaty incentivises competent authorities to reach an agreement
during the MAP phase. Furthermore, if a mandatory and binding arbitration
provision is included, taxpayers are assured of an outcome within a fixed amount
of time. However, some countries still appear to have strong reservations about
mandatory and binding arbitration. Efforts continue to be made to better
understand these concerns and, where necessary and possible, address them. The
number of treaties that contain such an arbitration continues to increase, thanks in
large part to the Multilateral Instrument (MLI).

38 │
An optional arbitration provision was developed as part of the MLI. Part VI of that
instrument contains the optional provision setting out rules on timelines for the
procedure, the appointment of arbitrators and type of arbitration process. In total
29 jurisdictions have so far opted for Part VI that will apply to a treaty only if both
treaty partners to that treaty choose to apply it. This figure represents 33% of
current signatories. Via the MLI, nearly 200 treaties will incorporate this arbitration
procedure, a number that is expected to increase over time, thus providing ever
more certainty to taxpayers that their MAP dispute will be resolved within a fixed
amount of time.

│ 39
TAX CERTAINTY AS A COMPONENT OF TAX

MORALE
The need for tax certainty in developing countries is just as pronounced as in
developed economies and plays an important role in investment decisions. The
2018 report looked at the results from the OECD tax certainty survey of
business; this year, the focus shifts towards examining both tax morale and tax
certainty. There are plans for country level work, as well as for new work to see how
tax administrations in developing countries view some of the tax certainty/tax
morale issues.
The notion of tax morale – confidence among taxpayers in the tax system to deliver
fair and transparent results – is closely linked with tax certainty and, combined, they
constitute key ingredients to mobilising domestic resources in developing
countries. Tax morale is an area of increasing interest for tax policy, though
relatively little work has been done on the tax morale of businesses. In part this is
because measuring the tax morale of businesses is difficult, the public attitudes
surveys used to track tax morale of individuals cannot be used to track businesses
tax morale.
To overcome this challenge most research has used proxies for tax morale. One
commonly used method is the fraction of sales concealed from tax authorities,
though the source for this information, the Business Environment and Enterprise
Performance Survey (conducted by the European Bank for Reconstruction and
Development and the World Bank Group) has discontinued data on this topic since
2014.
In the absence of a clear measure for business tax morale, the OECD has
alternatively been using the results of the OECD tax certainty survey of business as
an entry point to generate a discussion on perspectives and attitudes to paying tax,
especially in developing countries. This has included a conference held on 25
January 2019, which discussed issues of tax morale in both businesses and
individuals, and the range of tools available to build tax morale.
The conference heard from a range of perspectives, which have been incorporated
into a draft report which was prepared for discussion at the conference and is
currently being revised following public consultation (final publication due later in
2019). A summary of the conference can be found in Box 9.

40 │
Box 9. Summary of OECD Tax Morale and Development Conference – 25 January

2019
The conference was organised by the Task Force on Tax and Development, the OECD’s
multi-stakeholder body that brings together governments from OECD and developing
countries, as well as business and civil society. It featured over 125 delegates from over 65
delegations representing countries, jurisdictions, civil society, business and academia.
There was substantial discussion on the interplay between the determinants of tax morale,
cooperative tax compliance and enforcement. Strategies that focus on one element alone
are unlikely to succeed. Reciprocity (the provision of public goods in return for taxes paid),
effective enforcement to support tax morale, the ease of paying tax, and an understanding
of different groups of taxpayers (e.g. women) can work together in a virtuous circle of
voluntary compliance. Participants emphasised the importance of developing enforcement
strategies that seek to support social norms, and a willingness to comply, in reinforcing tax
morale. This has advantages over purely deterrence-based enforcement.
As regards businesses, the challenges for different types of businesses were set out. For
MNEs, there was support for using tax certainty as a proxy for tax morale; most companies
want to comply, but also need predictability. In the informal sector, the challenges can look
very different, with literacy (including financial) a significant challenge for many not in the
tax system. The solutions are therefore likely to look different, with a role for social
enterprises in supporting formalisation. The challenge of language was also highlighted,
especially in developing countries where a high number of spoken languages can make it
difficult to reach taxpayers in their mother tongue.
Participants showcased a number of tools to build tax morale. Nudging, or behavioural
economic, approaches were shown to have the potential for significant impact, at least in
the short run, with low cost interventions. The long run impact of such measures, likely to
be contingent on other measures, including enforcement and education, were also
discussed. The difference between short and long run impacts was also evident in the use
of earmarked or hypothecated taxation, where there are clear political benefits in the short
run for getting support for increased taxation, but over time the rigidities earmarking
creates were shown to cause some significant problems.
A number of examples were given of how citizens can be engaged on tax issues, to build
support for both paying taxes, and for developing fair and effective tax systems. Some of
the key lessons from taxpayer education programmes at school/university level were
highlighted, including the need for such strategies to be properly resourced, based on
strong relationships with partners (e.g. schools and universities) and to have an inclusive
approach, not just on tax, but to citizenship values, and the frameworks of transparency
and accountability. Civil society also presented examples of how civil society organisations
can support citizens to engage in the tax system, building support for progressive tax
systems that deliver development outcomes and address inequality.
Following this conference the OECD is pursuing a number of work streams that will
provide further insight and analysis into issues of both tax certainty and tax morale.
Plans are being developed with several countries for more detailed work at the

│ 41
country level to understand the specific challenges being faced, and to help identify
tools and approaches that could be adopted. In some countries this work is being
coordinated with the World Bank Group, which is also active in this area through
their new innovations in tax compliance work stream.
The activity most closely related to the tax certainty agenda is a new survey of
revenue authorities, focussing on officials from developing countries (see next
section dealing with how adherence to responsible tax principles by business can
help tax certainty). In addition, the OECD is facilitating relationships between
revenue authorities and research academics to run behavioural economics
experiments, as well as exploring more traditional tax morale survey work.
The OECD has also sought to draw the linkages between tax morale and the
integrity and anti-corruption agenda, organising a side event at the annual Anti-
Corruption and Integrity Forum in March 2019. This event looked at a range of ways
in which corruption and integrity can affect tax morale, from the immediate
activities of the revenue authorities themselves, through to overall government
performance in transparency, accountability and delivering public services.

42 │
HOW ADHERENCE TO RESPONSIBLE TAX

PRINCIPLES BY BUSINESS CAN HELP TAX
CERTAINTY
While the 2018 Update looked at the view of tax certainty in developing countries from
the perspective of businesses, this series has not yet looked at the issue from the
perspective of revenue authorities, and to what extent businesses are themselves
supporting tax certainty in developing countries.
A growing number of businesses have indicated their commitment to supporting tax
certainty in developing countries, and their role in delivering it. The most common way
in which large businesses have done this is to signal their commitment to certain
principles and/or best practices. A range of principles and best practices have been
developed by a range of actors, including businesses, business groupings, and civil
society organisations. These principles go beyond a narrow focus on tax certainty, and
cover a range of aspects of businesses tax practices, including relationships with the tax
authorities, transparency, and approach to tax incentives. The most significant of these
are the BIAC Statement of Tax Best Practices for Engaging with Tax Authorities in
Developing Countries20, produced by the Business and Industry Advisory Committee to
the OECD, and the B Team Responsible Tax Principles, produced by the B Team (a not-
for-profit initiative formed by a global group of business leaders)21.
A growing number of businesses have committed to such principles and best practices.
The BIAC principles having been agreed by all members of BIAC. Since the B-Team
launched its Responsible Tax Principles, 12 companies have endorsed them and many
more have engaged and expressed interest. However, there has not yet been any
attempt to monitor adherence to them, as such it is difficult to judge the impact that
such principles have had on tax certainty in developing countries. To rectify this the
OECD is planning to undertake a survey of revenue authority officials to see how they
perceive adherence to the BIAC principles in their country.
The BIAC principles have been chosen as they are both the most widely endorsed, and
oldest, having been agreed in 2013. The survey will be undertaken by officials
participating in the OECD Global Relations Programme multilateral training events.
Around 2000 officials participate in events under this programme every year, providing
a significant sample; this may be complemented further by encouraging officials taking
part in OECD e-learning programmes to also complete the survey. The survey is currently
being piloted and will be launched later in 2019. It will run alongside the Global Relations
Programme through into 2020. The results are expected later in 2020.
20
http://biac.org/wp-content/uploads/2017/06/Statement-of-Tax-Best-Practices-for-Engaging-with-Tax-
Authorities-in-Developing-Countries-2016-format-update1.pdf
21
www.bteam.org/plan-b/responsible-tax/

│ 43
PLATFORM FOR COLLABORATION ON TAX –

TOOLKITS
Inconsistent or unpredictable treatment by tax authorities, lack of expertise in
international taxation, and inconsistencies or conflicts between tax authorities on
their interpretations of international tax standards continue to be high priority
concerns of businesses in relation to developing countries. In this context the
toolkits being developed by the Platform for Collaboration on Tax (PCT), which
consists of the IMF, OECD, UN, and WBG are potentially useful. These toolkits, being
delivered as part of a mandate from the G20 Development Working Group, are
designed to help developing countries address key issues in international
corporation tax that they have identified as high priority.
Two toolkits have already been published, with the remaining being developed
over the next two years (Box 10). Each toolkit individually can help contribute to
building tax capacity. This can in turn support tax certainty through providing clear
options for developing countries to use, that are consistent with international
standards.

44 │
Box 10. Platform for Collaboration on Tax - Toolkits
A report on designing and implementing tax incentives for investment in low income
countries in ways that are efficient and effective was published in 2015. In addition to
providing information on good practices for the design of incentives to encourage
investment, the report also sets out the importance of good governance in their
implementation: measures which would include greater transparency and certainty around
the eligibility criteria and conditions which apply to incentive regimes.
Following this, a toolkit for addressing difficulties in accessing comparable data for
transfer pricing analyses was completed in 2017. This toolkit provides step-by-step
guidance on interpretation of the arm’s length principle in accordance with international
norms, including in cases where comparables are difficult to find. A lack of comparable data
needed to apply transfer pricing rules is a common source of uncertainty and the toolkit
aims to reduce the likelihood of inconsistent or arbitrary approaches in such scenarios. The
toolkit also includes a supplementary report addressing information gaps in pricing of
minerals sold in an intermediate form, which provides a solid analytical framework to
help determine appropriate pricing for mineral products in the absence of directly
applicable market prices.
A toolkit on offshore indirect transfers of interests has undergone two rounds of public
consultation and is expected to be finalised in 2019. This toolkit will address the legal and
practical difficulties that may be involved in taxing the transfer of shares in foreign entities
which hold, directly or indirectly, valuable local immovable property. A variety of domestic
practices currently exist in relation to such scenarios and this toolkit will provide developing
countries with practical solutions and international best practices.
A toolkit on implementing effective transfer pricing documentation is due to be
released for public consultation shortly. It will describe policy choices and rationales
involved in developing a transfer pricing documentation regime as well as providing
sample legislative provisions which would be effective and efficient in meeting those policy
goals. It will facilitate the use of the standardised documentation package as recommended
in the OECD Transfer Pricing Guidelines and the UN Practical Manual on Transfer Pricing
by providing legislative models. The existence of coherent documentation rules in a country
enhances tax certainty by ensuring tax administrations have access to necessary
information in a timely fashion in order to conclude assessments.
Further toolkits on treaty negotiation, BEPS risk assessment and base eroding
payments are also planned. As with the above, these toolkits will aim to provide developing
countries with examples and best practices for addressing their international tax priorities
in coherent and more standardised ways.
The planned toolkit on supply chain restructuring has been dropped, in response to
feedback that many of the issues that would have been addressed in this toolkit have been
addressed elsewhere, including through the BEPS Actions.

│ 45
OECD capacity building work
The OECD has developed a range of capacity building, training and technical
assistance programmes. These effectively contribute to the development of tax
certainty through the creation of a virtuous circle between the inclusive
international standards developed in the OECD forums, and the guidance, data and
multilateral training that facilitates and accompanies country level capacity
building. The lessons learned from each stage feeds into the others, creating
positive feedback, and supporting the continued development of effective
international standards that can be effectively implemented in all countries.
The OECD capacity building work operates at both the multilateral and bilateral
level, and offers a range of tools and approaches to developing countries:
• Bilateral country level capacity building. This is provided in a number of
areas including:
o transfer pricing and BEPS issues - assistance provided to over
30 countries in response to demand, includes support to both legislative
changes and organisational structures/skills)
o exchange of information – assistance provided to over 60 countries,
primarily supporting new members of the Global Forum implement the
standard and make effective use of information.
These programmes are frequently provided in partnership with others, including
Regional Tax Organisations, and other International Organisations (primarily the
World Bank).
• Tax Inspectors Without Borders (see Box 1) – in partnership with UNDP.
• Multilateral Training. This is provided in a number of areas (e.g. BEPS,
Exchange of Information, VAT, Platform Toolkits, Tax and Crime), through
three main routes:
o The Global Relations Programme – established in the 1990s the Global
Relations Programme trains around 2000 officials per year through the
Multilateral Tax Centres in Ankara, Budapest, Korea, Mexico City, Vienna
and Yangzhou.
o E-learning – the OECD has recently established e-learning modules open
to tax officials anywhere in the world, delivered through the Canadian
sponsored Knowledge Sharing Platform.
o Tax and Crime Academies – established in Italy in 2013 the Tax and
Crime academies are designed to enhance the ability of law enforcement
authorities to investigate tax crimes and other financial crimes, building
on the 10 Global Principles. To date over 700 officials from over 95
countries have been trained, and new academies have been established

46 │
in Africa (Kenya), Latin America (Argentina) with Asia (Japan) due to be

launched shortly.
• Peer Review – for countries that voluntarily choose to commit to OECD
standards the peer review process provides a structure for reform, as well
as dedicated support to developing countries to assist them with the
processes.

│ 47
Appendix A
Key Features of a Good Governance Framework in Revenue Administration 22
Given the revenues at stake, governments need to invest in modernising revenue

administration and creating greater legitimacy in the collection of revenues. This
will help reduce vulnerabilities to corruption and promote integrity, thereby
contributing to—indeed providing a prerequisite for—tax certainty. A broader
approach (whole of government) will be crucial to creating an environment
conducive to greater integrity. The following describes the key features of good
governance in revenue administration which will promote greater tax certainty: 23
How These Features Reduce Vulnerabilities to

Good Governance in Revenue Administration
Corruption
Sound Policy and Legislation
Revenue policy designed based on principles of Raises revenue in non-distortive manner; creates
equity, efficiency and neutrality, simplicity, and a revenue system that is easily understood and
transparency. harder to avoid or evade.
A common set of administrative and procedural laws that Provides common basis for administration of
are simple and reliable for different tax types. all taxes regardless of tax types, thus
promoting fairness and ease of understanding
and application by tax officers.
Legal framework provides appropriate balance between Supports the building of society’s trust in
the rights of taxpayers and powers of revenue revenue administration.
administration, supported by effective dispute settlement
procedures (for example, independent tribunal/court or a
tax ombudsman) and legal safeguards against the
improper exercise of powers by revenue administration
(for example, opportunity for taxpayers to pay overdue
taxes before forced sale of property seized through
distraint).
A system of tax self-assessment is in place, Minimizes intrusion of revenue officials in
promoting voluntary compliance by taxpayers. the affairs of compliant taxpayers.
Clarity and stability of laws, rules, and processes, Increases transparency; provides certainty to
including minimal discretionary power vested in the avoid disputes; and reduces discretion that
22
Source: IMF Fiscal Monitor: Curbing Corruption (April 2019).
23
Although the term revenue administration covers both tax and customs administrations, some of the
information in this table is more specific to the features of tax administration.

48 │
revenue administration, and where discretion is can be misused by dishonest officials.

unavoidable, there are clear conditions on how
discretion will be exercised.
Legal and human resource frameworks allow for firing of Provides basis for effective human resource
officers behaving unethically and provides a suite of practices to curb corruption.
appropriate sanctions for cases of lower culpability, with
prosecution for criminal activities.
Legislation allows for the adoption of modern systems Provides legal basis for effective administration
and processes and technology in tax administration and to minimize interference and opportunities for
sets out key aspects of organisation and management corruption.
(including the relationship between the ministry and the
revenue administration), including express legislative
requirements for revenue administration to provide and
publish reports on its operations and financials on a
regular basis.
Modern Systems and Processes
Revenue administration work plans, budget, Increases transparency and public accountability
performance objectives, and outcomes are regularly of revenue administration.
reported to the public.
Collection systems and procedures are streamlined to Minimizes intrusion of revenue officials in the
secure timely revenues without imposing undue affairs of compliant taxpayers, avoiding rent-
compliance costs and inconvenience to the business. seeking behaviors.
Service-oriented approach ensuring taxpayers have the Empowers taxpayers; reduces interactions with
information (quantity, quality, comprehensiveness) and officials; and reduces vulnerability to corruption
support they need to meet their obligations voluntarily. by dishonest officials making unlawful demands.
Availability of a tax ruling function with clear and Provides certainty for tax treatment of
straightforward rules to avoid distinct tax treatments that transactions; empowers taxpayers in discussions
deviate from the general rules and pose transparency with revenue officials.
concerns (Christophe and Hillier 2016).
A general risk-based approach is adopted in the Removes discretion and minimizes intrusion of
administration aimed at detecting and acting on revenue officials in the affairs of compliant
taxpayers who present the greatest risk to the taxpayers.
revenue system.
Special programs using modern and transparent Focuses resources on highest risks to revenue;
approaches to manage the compliance of the largest helps preserve the integrity of the tax system by
contributors, including large businesses, high-wealth ensuring that the wealthy in society pay their fair
individuals, and high-income earners. They have complex share.
tax affairs with a high amount of revenue at stake and the
opportunity to undertake aggressive tax planning.
Effective and impartial dispute resolution process is Protects taxpayers from unsubstantiated or
available and publicized. corrupt tax assessments.
Streamlined Organisation and Management
Revenue administration is established with independence Reduces political interference in taxpayer affairs;
from political direction; for example, the administration increases the ability of revenue administration to
reports to the minister of finance, who has overall fiscal act independently in enforcing the laws.
responsibility, rather than to the prime minister or
president.
A function-based organisation design with separation of Removes one-to-one relationship between

│ 49
duties and appropriate numbers of staff assigned to each taxpayer and official; reduces under-employment
function based on workload. and risk of corrupt behavior.
Strong headquarters function providing oversight and Helps reduce vulnerability by establishing
uniform operations across the field network. nationwide clear standardised processes and
monitoring of operational performance of
field offices.
Streamlined field operations and organisational Improves quality of professional interaction with
alignment to key taxpayer segments. taxpayers; focuses resources on highest risks to
revenue.
Effective internal audit and investigation/anti- Creates effective processes to identify and curb
corruption units are established, with relationships and corruption.
co-operation with public-service-wide anti- corruption
activities and bodies.
Strong oversight of revenue administration by external Increases accountability of revenue
bodies (general audit office, ministry of finance) focused administration.
on monitoring performance but not allowed to interfere
in specific taxpayers’ affairs.
Extensive Use of Technology
Revenue administration processes are digitalised and Reduces face-to-face interactions; minimizes
automated to the extent possible. intrusion of revenue officials in the affairs of
compliant taxpayers.
Robust automated system of internal control checks and Ensures integrity of decisions; allows for review
monitoring of processes, with access controls and audit and audit of actions taken by revenue officials.
logs.
Automated risk assessment and case selection is in Removes personal influence and staff discretion.
place.
Technology supports notification of citizens about their Increases transparency and accountability of
obligations and correct procedures for revenue revenue administration.
administration.
Technology supports collection of feedback from the Supports detection and prevention of
public on interactions with revenue administration staff, unethical and unprofessional behaviors.
including reporting of unethical behavior, for example,
through a dedicated integrity hotline.
Human Resources Management
Human resource policies and processes ensure merit- Improves quality and professionalism of
based selection, appointment, appraisal, and promotion staff.
of revenue officials.
Senior management of revenue administration is Reduces vulnerability to cronyism.
appointed for a fixed period (tenure).
Management process built on minimal management Ensures close monitoring of operations;
layers with appropriate spans of control, and internal reduces opportunities for corrupt behavior.
control is one of the core management functions.
Salaries set at a sufficient and competitive level. Reduces incentive for corrupt behavior.
A formal rotation policy supports staff development, Increases officials’ performance incentives and
with a cycle to allow staff to build expertise and knowledge and expertise across all levels;
contribute to the respective function’s performance. increases taxpayer trust and satisfaction.
Ongoing staff training programs are delivered so officials Informs staff of required behaviors and risks of
know their duties, conditions of service, and sanctions for noncompliance.
wrongdoing.

50 │
Institutionalised Promotion of Integrity
Staff is regularly informed about and supported in Management leads by example; creates a
adopting positive behavior; corporate practice, including positive organisational culture and fosters
through an enforced code of conduct, strongly signals “esprit de corps;” and supports the prevention
zero tolerance of low staff integrity. of unethical behaviors.
Technology solutions to detect unethical Detects and prevents unethical behavior.
behavior are routinely used.
Legal sanctions are effectively applied on each detected Addresses and prevents unethical behavior;
corrupt behavior and publicly announced. instills greater public confidence in revenue
administration.

2019 Progress Report on
Tax Certainty
IMF/OECD Report for the G20
Finance Ministers and Central Bank
Governors
Tax certainty for taxpayers is an important

component of investment decisions and can have
significant impacts on economic growth. In 2016,
the G20 Leaders called on the International
Monetary Fund (the IMF) and the Organisation for
Economic Co-operation and Development (OECD)
to work on this issue.
Following an initial report in 2017 and an update in

2018, the G20 Leaders re-iterated the importance
of this issue, noting their continued support for
enhanced tax certainty. The Buenos Aires Action
Plan called for “the OECD and the IMF to report to
Finance Ministers and Central Bank Governors in
2019 on progress made on tax certainty”.
This report, prepared jointly by the IMF and OECD,

provides an update on the work on tax certainty
issues and shows clearly that this remains a priority
issue for taxpayers and tax administrations alike.

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ADR Alternative Dispute Resolution

EXECUTIVE SUMMARY ............................................................................................................. 6

2019 PROGRESS REPORT ON TAX CERTAINTY © IMF/OECD 2019

Tax certainty for taxpayers is an important component of investment decisions and

2019 PROGRESS REPORT ON TAX CERTAINTY © IMF/OECD 2019

2019 PROGRESS REPORT ON TAX CERTAINTY © IMF/OECD 2019

2019 PROGRESS REPORT ON TAX CERTAINTY © IMF/OECD 2019

2019 PROGRESS REPORT ON TAX CERTAINTY © IMF/OECD 2019

engaged and focused on the multilateral process. For example, Australia

2019 PROGRESS REPORT ON TAX CERTAINTY © IMF/OECD 2019

UPDATE ON STATUS OF COUNTRY-BY-COUNTRY

2019 PROGRESS REPORT ON TAX CERTAINTY © IMF/OECD 2019

• CbCR risk assessment workshops: Since January 2017, a series of risk

2019 PROGRESS REPORT ON TAX CERTAINTY © IMF/OECD 2019

UPDATE ON THE PROGRESS IN THE

2019 PROGRESS REPORT ON TAX CERTAINTY © IMF/OECD 2019

2019 PROGRESS REPORT ON TAX CERTAINTY © IMF/OECD 2019

ADVANCE PRICING ARRANGEMENTS

2019 PROGRESS REPORT ON TAX CERTAINTY © IMF/OECD 2019

TRANSFER PRICING DEVELOPMENTS

2019 PROGRESS REPORT ON TAX CERTAINTY © IMF/OECD 2019

2019 PROGRESS REPORT ON TAX CERTAINTY © IMF/OECD 2019

Box 1. Tax Inspectors Without Borders

2019 PROGRESS REPORT ON TAX CERTAINTY © IMF/OECD 2019

Direct assistance to developing countries on transfer pricing

Box 2. Country Examples

2019 PROGRESS REPORT ON TAX CERTAINTY © IMF/OECD 2019

2019 PROGRESS REPORT ON TAX CERTAINTY © IMF/OECD 2019

TAX CERTAINTY THROUGH JOINT AUDIT

2019 PROGRESS REPORT ON TAX CERTAINTY © IMF/OECD 2019

DIAGNOSTIC FINDINGS FROM TADAT

2019 PROGRESS REPORT ON TAX CERTAINTY © IMF/OECD 2019

Box 3. TADAT – Updated Dispute Resolution Scores, for 65 countries

2019 PROGRESS REPORT ON TAX CERTAINTY © IMF/OECD 2019

• Entities observed using the TADAT framework to implement reforms. The

2019 PROGRESS REPORT ON TAX CERTAINTY © IMF/OECD 2019

COMBATTING CORRUPTION IN TAX

2019 PROGRESS REPORT ON TAX CERTAINTY © IMF/OECD 2019

2019 PROGRESS REPORT ON TAX CERTAINTY © IMF/OECD 2019

Survey on Customs Administration, ISOCA, will soon be launched in partnership

Box 4. Examination of tax administration governance arrangements though the

2019 PROGRESS REPORT ON TAX CERTAINTY © IMF/OECD 2019

Box 5. Case Study Sri Lanka

2019 PROGRESS REPORT ON TAX CERTAINTY © IMF/OECD 2019

IMPROVING TAX LAW SYSTEMS AND THEIR

2019 PROGRESS REPORT ON TAX CERTAINTY © IMF/OECD 2019

Figure 1. Tax-Related TA in Developing Countries

Note: The IMF’s fiscal year is May 1 through April 30.

2019 PROGRESS REPORT ON TAX CERTAINTY © IMF/OECD 2019

Technical support is being provided to 10 countries in various regions on

Box 6. Strengthening Tax Capacity

2019 PROGRESS REPORT ON TAX CERTAINTY © IMF/OECD 2019

Box 7. Examples of Revenue Capacity Building to Enhance Tax Certainty

2019 PROGRESS REPORT ON TAX CERTAINTY © IMF/OECD 2019

As TA on improving tax law systems and their implementation by tax