OECD unveils plan for cross-border tax reporting

Cross-border portfolio investments are greater than $35 trillion globally, but the intended tax benefits are so difficult to claim that they often do not reach their intended targets. In response, the Organisation for Economic Cooperation and Development (OECD) has developed and approved a standardized system of relief meant to streamline processes, reduce costs and assure investors their rights, while also improving tax compliance.

The electronic system allows tax authorities to exchange information and financial institutions to report information to tax authorities. The new “Treaty Relief and Compliance Enhancement” system is based on eXtensible Markup Language (XML) technology. The United States and Canada are among the 34 countries in North and South America, Europe, Asia, Australia and New Zealand that participate in the OECD.

The135-page “Trace Implementation Package” adopted on January 23, 2013 by the OECD committee that developed it would allow authorized intermediaries to claim exemptions or reduced rates of withholding taxes on a pooled basis on behalf of their portfolio investor customers.  The package contains a complete set of tools and documents for intermediaries to begin using the system, although OECD acknowledges there are still some technology issues to resolve and, in some cases, participating countries may need to change certain domestic laws to enable intermediaries to participate. Learn more about this system at the OECD website and read the article “OECD Offers Plan for Cross-Border Investment Tax Woes” at Compliance Week online

Best Practice Resources for Tax Practitioners in Canada

All tax engagements involve some common elements. However, the time and expertise required may vary significantly for each engagement. More than 50% of insurance claims against Chartered Accountants are tax-related but the majority can be avoided with an effective tax risk management strategy.

The newly revised second edition of the CICA Tax Practice Manual contains 22 comprehensive chapters. It provides information on the important risks associated with tax practice, recommendations and best practices to minimize those risks, as well as useful tools and practice aids to accomplish risk minimization that will assist in improving productivity.

In the electronic version of the Manual, the practice aids are listed at the end of each chapter. Word files, PDF files and links are now included on a CD which accompanies the print version of the Manual. The URLs are included on both the CD and in the electronic versions for quick access to source documents.

Developing a framework for “Professionalism”

Australia was the first country outside of the United States to adopt the Certified Financial Planner (CFP) certification model for practitioner excellence. In 2007, the Financial Planning Association of Australia introduced a structured professionalism framework to demonstrate the profession’s commitment to best practice. The publication, A framework for financial planning professionalism, states that professionalism is based on three pillars: professional membership, professional conduct and professional accountability.

The three pillars are illustrated in the following professional framework exhibit. Professional membership is about ensuring that only the right people can become members. Professional conduct is about ensuring members adhere to the high standards set for the profession and that they are supported in following professional ideals. Professional accountability is about protecting the reputation of all members by putting in place an independent, peer-driven disciplinary mechanism.

The framework publication also states: “Our community comprises of our clients, the media, consumer groups and advocates as well as the broader community in which we all live. As a profession, we have obligations and responsibilities to build good relations with the whole community – to be productive and contributing members who make a positive difference to society.”

Furthermore, “A quality professional framework that is supported by the profession and the regulators will underpin these vital goals. Trust will flow on from a robust framework that is supported by members and regulators and shown to have ‘teeth’. The profession’s disciplinary process must be transparent, fair and deliver penalties that match the expectations of the regulators and the community and reinforce best practice behaviours within the profession.”

“The bottom line is that increased community respect will drive the profession’s ‘value proposition’ which will translate into a number of positive outcomes for your business and for you. Some of these outcomes will include increased client stability, growth and profitability.” For more information, also refer to the FPA Code of Professional Practice issued in July 2011.