syed masoud ali naqvi senior partner kpmg taseer hadi & co. karachi 15-16 april 2008 globalizing...
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Syed Masoud Ali NaqviSenior Partner
KPMG Taseer Hadi & Co.Karachi
15-16 April 2008
Syed Masoud Ali NaqviSenior Partner
KPMG Taseer Hadi & Co.Karachi
15-16 April 2008
South Asian Tax Summit 2008, South Asian Tax Summit 2008, KarachiKarachi
GLOBALIZING ECONOMIES: GLOBALIZING ECONOMIES:
CHALLENGES TO TAX CHALLENGES TO TAX SYSTEMSSYSTEMS
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GLOBALIZING ECONOMIES: GLOBALIZING ECONOMIES: CHALLENGES TO TAX SYSTEMSCHALLENGES TO TAX SYSTEMSGLOBALIZING ECONOMIES: GLOBALIZING ECONOMIES: CHALLENGES TO TAX SYSTEMSCHALLENGES TO TAX SYSTEMS
Fundamental Goals and Objectives of Tax PolicyFundamental Goals and Objectives of Tax Policy
ChallengesChallenges
Response to ChallengesResponse to Challenges
KPMG Tax Survey 2007KPMG Tax Survey 2007
Issues for Global and National Tax AuthoritiesIssues for Global and National Tax Authorities
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FUNDAMENTAL GOALS ANDFUNDAMENTAL GOALS ANDOBJECTIVES OF TAX POLICYOBJECTIVES OF TAX POLICY
GLOBALIZING ECONOMIES: GLOBALIZING ECONOMIES: CHALLENGES TO TAX SYSTEMSCHALLENGES TO TAX SYSTEMSGLOBALIZING ECONOMIES: GLOBALIZING ECONOMIES: CHALLENGES TO TAX SYSTEMSCHALLENGES TO TAX SYSTEMS
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FUNDAMENTAL GOALS ANDFUNDAMENTAL GOALS ANDOBJECTIVES OF TAX POLICYOBJECTIVES OF TAX POLICYFUNDAMENTAL GOALS ANDFUNDAMENTAL GOALS ANDOBJECTIVES OF TAX POLICYOBJECTIVES OF TAX POLICY
Meeting revenue needs in a fair mannerMeeting revenue needs in a fair manner
Maintaining neutrality and minimizing distortionsMaintaining neutrality and minimizing distortions
Limiting compliance and administrative burdensLimiting compliance and administrative burdens
Impacting on array of economic and social activitiesImpacting on array of economic and social activities
Promoting investment and accelerating economic Promoting investment and accelerating economic growthgrowth
Creating employment opportunitiesCreating employment opportunities
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Providing relief to common man and improving social Providing relief to common man and improving social indicatorsindicators
Attracting Foreign Direct Investment (FDI)Attracting Foreign Direct Investment (FDI)
Strengthening country’s infrastructureStrengthening country’s infrastructure
Meeting the challenge of changeMeeting the challenge of change
FUNDAMENTAL GOALS ANDFUNDAMENTAL GOALS ANDOBJECTIVES OF TAX POLICYOBJECTIVES OF TAX POLICYFUNDAMENTAL GOALS ANDFUNDAMENTAL GOALS ANDOBJECTIVES OF TAX POLICYOBJECTIVES OF TAX POLICY
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CHALLENGESCHALLENGES
GLOBALIZING ECONOMIES: GLOBALIZING ECONOMIES: CHALLENGES TO TAX SYSTEMSCHALLENGES TO TAX SYSTEMSGLOBALIZING ECONOMIES: GLOBALIZING ECONOMIES: CHALLENGES TO TAX SYSTEMSCHALLENGES TO TAX SYSTEMS
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CHALLENGESCHALLENGESCHALLENGESCHALLENGES
Fall of Trade barriersFall of Trade barriers
Global Market for capitalGlobal Market for capital
Instantaneous access to information around the Instantaneous access to information around the globeglobe
Development of e-commerce and new technologiesDevelopment of e-commerce and new technologies
Expansion of services economyExpansion of services economy
New financial instruments, tax havens and financial New financial instruments, tax havens and financial innovationsinnovations
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Rapidly changing business structuresRapidly changing business structures
Focus on corporate governanceFocus on corporate governance
Impact of other jurisdictional choices in tax policy on Impact of other jurisdictional choices in tax policy on national ability to raise revenue in a fair mannernational ability to raise revenue in a fair manner
International Tax CompetitionInternational Tax Competition
CHALLENGESCHALLENGESCHALLENGESCHALLENGES
Harmful Tax CompetitionHarmful Tax Competition
ArbitrageArbitrage
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CHALLENGES – CHALLENGES – HARMFUL TAX COMPETITIONHARMFUL TAX COMPETITIONCHALLENGES – CHALLENGES – HARMFUL TAX COMPETITIONHARMFUL TAX COMPETITION
Competition occurs when one country provides tax Competition occurs when one country provides tax inducement to attract capitalinducement to attract capital
Harmful tax competitionHarmful tax competition
Can severely erode the capital base of losing countryCan severely erode the capital base of losing country
Can distort investment decision and undermine fiscal Can distort investment decision and undermine fiscal stabilitystability
Can result in high taxes on immobile income like Can result in high taxes on immobile income like wages, etc.wages, etc.
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CHALLENGES –CHALLENGES –TAX ARBITRAGETAX ARBITRAGECHALLENGES –CHALLENGES –TAX ARBITRAGETAX ARBITRAGE
Exploitation of differences in tax laws of two or more Exploitation of differences in tax laws of two or more
jurisdictions that results in lowering of a tax payers jurisdictions that results in lowering of a tax payers
world-wide tax liability by ensuring that income is not world-wide tax liability by ensuring that income is not
taxed anywheretaxed anywhere
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CHALLENGES –CHALLENGES –ELECTRONIC COMMERCEELECTRONIC COMMERCECHALLENGES –CHALLENGES –ELECTRONIC COMMERCEELECTRONIC COMMERCE
Adaptation of existing tax systems to an economy Adaptation of existing tax systems to an economy that increasingly ignores physical borders and that increasingly ignores physical borders and operates under new business modelsoperates under new business models
Shrinkage of tax base by convergence of more and Shrinkage of tax base by convergence of more and more assets into intangiblesmore assets into intangibles
Adaptation of a location – base for taxing e-Adaptation of a location – base for taxing e-commercecommerce
Increasing difficulties for governments to verify that Increasing difficulties for governments to verify that a transaction has occurred and wherea transaction has occurred and where
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CHALLENGES –CHALLENGES –ELECTRONIC COMMERCEELECTRONIC COMMERCECHALLENGES –CHALLENGES –ELECTRONIC COMMERCEELECTRONIC COMMERCE
The overall problem of double taxation in case of The overall problem of double taxation in case of e-commerce due to conflicting provisions of e-commerce due to conflicting provisions of countries regarding e-commerce and intangible countries regarding e-commerce and intangible assetsassets
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CHALLENGES –CHALLENGES –POLITICAL & SOCIALPOLITICAL & SOCIALCHALLENGES –CHALLENGES –POLITICAL & SOCIALPOLITICAL & SOCIAL
Fiscal responsibility requires addressing both taxes Fiscal responsibility requires addressing both taxes and spendingand spending
Rising inequality strengthens the case for Rising inequality strengthens the case for progressivityprogressivity
Tax system should collect the taxes that are owedTax system should collect the taxes that are owed
Tax reforms should strengthen taxation at the Tax reforms should strengthen taxation at the business levelbusiness level
Taxes for individuals be simplifiedTaxes for individuals be simplified
Social policy can and should often be advanced Social policy can and should often be advanced through the tax code-and it must be well designedthrough the tax code-and it must be well designed
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RESPONSE TO CHALLENGESRESPONSE TO CHALLENGES
GLOBALIZING ECONOMIES: GLOBALIZING ECONOMIES: CHALLENGES TO TAX SYSTEMSCHALLENGES TO TAX SYSTEMSGLOBALIZING ECONOMIES: GLOBALIZING ECONOMIES: CHALLENGES TO TAX SYSTEMSCHALLENGES TO TAX SYSTEMS
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RESPONSE TO CHALLENGESRESPONSE TO CHALLENGESRESPONSE TO CHALLENGESRESPONSE TO CHALLENGES
Tax ReformsTax Reforms
EfficiencyEfficiency
FairnessFairness
SimplicitySimplicity
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RESPONSE TO CHALLENGESRESPONSE TO CHALLENGESRESPONSE TO CHALLENGESRESPONSE TO CHALLENGES
Tax environment for Foreign Direct Investments (FDI)Tax environment for Foreign Direct Investments (FDI)
Adaptation of international tax rules to the services Adaptation of international tax rules to the services economyeconomy
Countering the use of tax havens to evade taxCountering the use of tax havens to evade tax
Balance between tax payers service and enforcementBalance between tax payers service and enforcement
Avoiding double taxationAvoiding double taxation
Linkage between tax compliance and good corporate Linkage between tax compliance and good corporate governancegovernance
Discourage bribery and corruptionDiscourage bribery and corruption
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RESPONSE TO CHALLENGESRESPONSE TO CHALLENGESRESPONSE TO CHALLENGESRESPONSE TO CHALLENGES
OECD Role in inspiring betterOECD Role in inspiring betterInternational Tax Co-operationInternational Tax Co-operation
Agreement on the models – guidelines and best practicesAgreement on the models – guidelines and best practices
Monitoring implementation of modelsMonitoring implementation of models
Developing framework for resolving disputesDeveloping framework for resolving disputes
Encouraging dialogue amongst developed, Encouraging dialogue amongst developed, developing and economies in transitiondeveloping and economies in transition
OECD Model Tax ConventionOECD Model Tax Convention
OECD Transfer Pricing guidelinesOECD Transfer Pricing guidelines
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RESPONSE TO CHALLENGESRESPONSE TO CHALLENGESRESPONSE TO CHALLENGESRESPONSE TO CHALLENGES
OECD Role in inspiring betterOECD Role in inspiring betterInternational Tax Co-operationInternational Tax Co-operation
Interact with business to provide global frameworkInteract with business to provide global framework
Provide tax framework for e-commerceProvide tax framework for e-commerce
Extending the debate to all cross border servicesExtending the debate to all cross border services
Issues under Direct TaxIssues under Direct Tax
Issues under Indirect Tax - VATIssues under Indirect Tax - VAT
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KPMG TAX SURVEY 2007KPMG TAX SURVEY 2007
GLOBALIZING ECONOMIES: GLOBALIZING ECONOMIES: CHALLENGES TO TAX SYSTEMSCHALLENGES TO TAX SYSTEMSGLOBALIZING ECONOMIES: GLOBALIZING ECONOMIES: CHALLENGES TO TAX SYSTEMSCHALLENGES TO TAX SYSTEMS
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KPMG TAX SURVEY 2007KPMG TAX SURVEY 2007KPMG TAX SURVEY 2007KPMG TAX SURVEY 2007
KPMG Survey stresses that corporate tax rate worldwide KPMG Survey stresses that corporate tax rate worldwide continue to fall but the rate of decline is slowingcontinue to fall but the rate of decline is slowing
Global average rate is 26.8 percent as against 27.2 Global average rate is 26.8 percent as against 27.2 percent last yearpercent last year
Out of 92 countries which participated in the survey, 18 Out of 92 countries which participated in the survey, 18 countries lowered their rate and 2 countries increased. countries lowered their rate and 2 countries increased. Major exception was Turkey where 10% reduction of tax Major exception was Turkey where 10% reduction of tax was made (from 30 to 20 percent)was made (from 30 to 20 percent)
Corporate tax rates have almost reached their natural Corporate tax rates have almost reached their natural low point and countries are now turning to more low point and countries are now turning to more sophisticated method of attracting and retaining inward sophisticated method of attracting and retaining inward investment investment
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KPMG TAX SURVEY 2007KPMG TAX SURVEY 2007KPMG TAX SURVEY 2007KPMG TAX SURVEY 2007
There would still be some further reduction of tax rate There would still be some further reduction of tax rate
in UK, Germany, Spain, Singapore, China and in UK, Germany, Spain, Singapore, China and
countries like Pakistan, which demonstrates that countries like Pakistan, which demonstrates that
international tax competition will still have some way international tax competition will still have some way
to goto go
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KPMG TAX SURVEY 2007KPMG TAX SURVEY 2007KPMG TAX SURVEY 2007KPMG TAX SURVEY 2007
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KPMG TAX SURVEY 2007KPMG TAX SURVEY 2007KPMG TAX SURVEY 2007KPMG TAX SURVEY 2007
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KPMG TAX SURVEY 2007KPMG TAX SURVEY 2007KPMG TAX SURVEY 2007KPMG TAX SURVEY 2007
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KPMG TAX SURVEY 2007KPMG TAX SURVEY 2007KPMG TAX SURVEY 2007KPMG TAX SURVEY 2007
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KPMG TAX SURVEY 2007KPMG TAX SURVEY 2007KPMG TAX SURVEY 2007KPMG TAX SURVEY 2007
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KPMG TAX SURVEY 2007KPMG TAX SURVEY 2007KPMG TAX SURVEY 2007KPMG TAX SURVEY 2007
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KPMG TAX SURVEY 2007KPMG TAX SURVEY 2007(VAT / GST OECD 2007)(VAT / GST OECD 2007)KPMG TAX SURVEY 2007KPMG TAX SURVEY 2007(VAT / GST OECD 2007)(VAT / GST OECD 2007)
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KPMG TAX SURVEY 2007 KPMG TAX SURVEY 2007 (Latin America / Caribbean 2007)(Latin America / Caribbean 2007)KPMG TAX SURVEY 2007 KPMG TAX SURVEY 2007 (Latin America / Caribbean 2007)(Latin America / Caribbean 2007)
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KPMG TAX SURVEY 2007KPMG TAX SURVEY 2007(European Union 2007)(European Union 2007)KPMG TAX SURVEY 2007KPMG TAX SURVEY 2007(European Union 2007)(European Union 2007)
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KPMG TAX SURVEY 2007KPMG TAX SURVEY 2007(Asia / Pacific 2007)(Asia / Pacific 2007)KPMG TAX SURVEY 2007KPMG TAX SURVEY 2007(Asia / Pacific 2007)(Asia / Pacific 2007)
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ISSUES FOR GLOBAL AND ISSUES FOR GLOBAL AND NATIONAL TAX NATIONAL TAX AUTHORITIESAUTHORITIES
GLOBALIZING ECONOMIES: GLOBALIZING ECONOMIES: CHALLENGES TO TAX SYSTEMSCHALLENGES TO TAX SYSTEMSGLOBALIZING ECONOMIES: GLOBALIZING ECONOMIES: CHALLENGES TO TAX SYSTEMSCHALLENGES TO TAX SYSTEMS
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ISSUES FOR GLOBAL ANDISSUES FOR GLOBAL ANDNATIONAL TAX AUTHORITIESNATIONAL TAX AUTHORITIESISSUES FOR GLOBAL ANDISSUES FOR GLOBAL ANDNATIONAL TAX AUTHORITIESNATIONAL TAX AUTHORITIES
Global and Regional collaborationGlobal and Regional collaboration
Devising globally acceptable principles for Devising globally acceptable principles for International Tax CompetitionInternational Tax Competition
Globally / Regionally acceptable tax regulators for:Globally / Regionally acceptable tax regulators for:
Mergers and AcquisitionsMergers and Acquisitions
IntangiblesIntangibles
Electronic CommerceElectronic Commerce
Transfer PricingTransfer Pricing
Permanent establishmentPermanent establishment
Services Taxation balanced approach – Source vs LocationServices Taxation balanced approach – Source vs Location
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ISSUES FOR GLOBAL ANDISSUES FOR GLOBAL ANDNATIONAL TAX AUTHORITIESNATIONAL TAX AUTHORITIESISSUES FOR GLOBAL ANDISSUES FOR GLOBAL ANDNATIONAL TAX AUTHORITIESNATIONAL TAX AUTHORITIES
Policy makers have a difficult task in communicating Policy makers have a difficult task in communicating the benefits of a low corporate tax strategy the benefits of a low corporate tax strategy especially if it is combined with higher indirect taxespecially if it is combined with higher indirect tax
Requires a lot of efforts to persuade voters and Requires a lot of efforts to persuade voters and general public of the benefits of paying taxes for a general public of the benefits of paying taxes for a better tomorrowbetter tomorrow
Modernizing the VAT system to better reflect current Modernizing the VAT system to better reflect current business environmentbusiness environment
Review of the VAT rules for Finance and Insurance Review of the VAT rules for Finance and Insurance sectors to create a legislation which is easier to sectors to create a legislation which is easier to administer and comply withadminister and comply with
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ISSUES FOR GLOBAL AND ISSUES FOR GLOBAL AND NATIONAL TAX AUTHORITIESNATIONAL TAX AUTHORITIESISSUES FOR GLOBAL AND ISSUES FOR GLOBAL AND NATIONAL TAX AUTHORITIESNATIONAL TAX AUTHORITIES
VAT for these sectors will be more stable and tax VAT for these sectors will be more stable and tax leakages will be minimizedleakages will be minimized
Develop a system to better reflect taxation where Develop a system to better reflect taxation where consumption occurs principally for services which consumption occurs principally for services which can be supplied at a distance (e-commerce, etc.).can be supplied at a distance (e-commerce, etc.).
OECD effort on this by the year 2010 may result in OECD effort on this by the year 2010 may result in shift of VAT from one country to anothershift of VAT from one country to another
Need to tackle the Carousel / missing trades fraud Need to tackle the Carousel / missing trades fraud issuesissues
Worldwide re-focusing on indirect taxationWorldwide re-focusing on indirect taxation
Transfer Pricing regulations and documentationTransfer Pricing regulations and documentation
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Thank youThank you
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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
© 2005 KPMG Taseer Hadi & Co., the Pakistan member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in Pakistan. The KPMG logo and name are trademarks of KPMG International.
Presenter’s contact Presenter’s contact detailsdetails
SYED MASOUD ALI NAQVISYED MASOUD ALI NAQVI
KPMG Taseer Hadi & Co.KPMG Taseer Hadi & Co.
+92 (21) 568 5847+92 (21) 568 5847
mnaqvi@kpmg.commnaqvi@kpmg.com
www.kpmg.com.pkwww.kpmg.com.pk
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