Action urged to solve BRI tax issues

The action plan was announced along with a statement agreed on by the initial Britacom members from 34 BRI countries and regions, as well as by observers and other stakeholders. They called for innovative measures to minimize and resolve crossborder tax disputes in a timely and principled manner, to better protect the legitimate rights of taxpayers and to secure the domestic tax base.

"We are determined to apply the laws and the tax treaties in a fair, predictable and consistent fashion," the statement said.

Kees van Raad, a professor at the international tax center of the University of Leiden in the Netherlands, said, "Cooperation is desirable, as a lot of tasks need to be done. But the BRI countries need to find out which are the priorities."

A recent survey of the Organization for Economic Co-operation and Development showed that the top factor affecting investment and location decisions is uncertainty about the effective tax rate on profits, according to Ludger Schuknecht, OECD deputy secretary-general.

"Enterprises investing and operating in BRI countries point to often serious levels of tax uncertainty that arise from poorly drafted, unclear or complex tax rules, excessive documentation requirements and unpredictable or inconsistent tax treatment," said Lewis Lu, head of advisory services provider KPMG China.

During the conference, the example was given of Zhangzhou Kibing Glass Co in Zhangzhou, Fujian province. When the executives decided to inject 1.17 billion yuan ($174.5 million) in Malaysia for two new production lines, the company was asked to pay further remittance tax on interest income, which was not mentioned during the investment decision-making process.

State Taxation Administration officials helped the company with contacting Malaysia's tax authority, and 34 million yuan in tax was saved after a negotiation, said Cao Yuchang, executive manager of the company.

To stimulate cross-border trade and investment and reduce tax uncertainty, Schuknecht suggested that Britacom provide professional support and strengthen information sharing among its members, as well as provide training for tax authorities and taxpayers.

"The mechanism is very significant to improving global tax cooperation," he said.

Britacom, according to its statement, supports and reinforces prevailing international tax standards, including the existing OECD, United Nations and International Monetary Fund models to solve international tax issues.

IMF Managing Director Christine Lagarde wrote in a recent article that a fundamental rethinking of international taxation is needed.

"An immediate impetus for an overhaul has been the rise of highly profitable, technology-driven, digital-heavy business models. By rethinking the existing system and addressing the root causes of its weakness, all countries should benefit, including low-income ones," she said.