Taxing Multinationals - Interview with Taxand’s Chairman
First published on Web Tv www.labourseetlavie.com, 26 November 2012
Multinationals are scrunitsed now more than ever, not only by their relevant tax authorities but also by the media on a global scale. Taxand Chairman, Frederic Donnedieu de Vabres, speaks to journalist Didier Testot regarding the international taxation of multinationals.
Didier Testot: Is taxation an important issue for companies?
Frederic: Yes, it is an extremely important issue. Legislation is becoming increasingly complex and increasingly diverse. As you know, many company's activities are global, which means that tax planning - which is quite different to tax evasion - is a very technical profession. Tax planning adjusts to a companies' business, to the changes in the global marketplace, as well as adapting and handling tax issues depending on the complexity of legislation in various countries, acting always in the company's best interests.
Didier Testot: In your view, should tax be the first area of focus?
Frederic: Projects must never be what you would call "tax driven", ie projects that are purely conducted and conditioned by tax issues, as these never work out. Therefore our role as tax specialists, whether external tax advisors or in-house tax lawyers, is to provide our support on projects by managing the tax burden in the best possible way.
Didier Testot: Would you say that all European countries compete with one another to some extent with regard to taxation?
Frederic: There are countries, such as Ireland and Belgium who offer very attractive tax regimes for companies with a large number of intangibles, for company headquarters or for other types of operations. These countries therefore naturally have an influence on the techniques for setting up these international groups in Europe. This is not in any way illegal, it is not wrong, but only natural because when you're free to introduce intangibles or set up the centre of your business activities, ie your headquarters, and you're starting from scratch, you will naturally have a tendency to turn to the countries which are the most attractive. So yes, there is competition in Europe.
Didier Testot: This leads us to think of negotiations, to think of discussions between governments and large corporations...
Frederic: It is necessary to find the right balance between defending the interests of multinationals, since the role of their financial and tax departments is to contribute to shareholder value, and in the tax field, to manage tax in the best way possible and of course in compliance with law. However everything is so complex that there is considerable room to maneuver and manage taxation in the best interests of the company and its shareholders, whilst staying within the law, of course.
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There is a challenging future ahead for tax. The type of relationship between multinationals and tax authorities will have to adapt and change. Corporations should have a real interest in having more dialogue with the tax authorities in the early stages of a project and therefore early rulings could be obtained. Prior rulings could also help to reassure companies who would otherwise find themselves in an environment of legislative changes, creating considerable discomfort and qualms. With the tax authorities' toughening their position, it is thought that litigation will have a bigger place and a certain number of subjects will be settled more through litigation than through negotiations with the tax authorities.