Assembly members unanimously support motion preventing tax base erosion, profit shifting |23 November 2021
Multinational companies and other big businesses evading to pay taxes as they should in the countries where their businesses are based will soon have to abide by all tax rules now that the National Assembly has resolved to ratify the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting.
The leader of government business, Bernard Georges, thanked the Assembly for giving priority to the ratification of the convention noting that this is because as we move into the budget discussions, the convention has different economic and fiscal implications.
“It is an umbrella convention with wide implications encompassing numerous double taxation agreements that Seychelles has with many countries and it is another of those measures that the Organisation for Economic Co-operation and Development (OECD) is taking to engage with different jurisdictions in general to ensure that fiscal measures being adopted through double taxation agreements prevent companies which, even though do not do business in a country, set up its headquarters in that country in order to evade from paying too many taxes.
Mr Georges explained that recently the OECD has been applying a lot of pressure on many countries, Seychelles included, to ensure companies pay taxes in the country where they should and that is where their businesses are being conducted.
“It is more or less a reorganisation of the world taxation system which will comprise different other phases which are aimed at preventing Based Erosion and Profit Shifting (BEPS),” Mr Georges explained.
He went on to detail that the convention is stating that instead of each jurisdiction changing every double taxation agreement they have with each and every country which will take a long time, it will address this matter in one go.
For his part the chairperson of the National Assembly’s International Affairs Committee (IAC), Waven William, presented an overview of the convention and why its ratification is important.
He reminded Assembly members that the BEPS initiative came into being in 2012 when G20 countries tasked the OECD to develop an action plan for BEPS and in the following year another G20 summit approved the initiative which comprises 15 action plans created to be carried out by countries through their taxation treaties.
He noted that altogether 78 jurisdictions have signed the initiative which was adopted on November 24, 2016.
The initiative came into force in July 2018 and many countries opted to remove themselves from certain action plans including Action Plan No. 12 which relates to the taxation declarations.
Hon. William further noted that in 2017 it was estimated that around 100 to US $200 billion annually in tax payments were lost and in 2018 the Tax Academy Gabriel Zuckman estimated that the loss amounted to almost US $200 billion annually.
For its part the Tax Justice Network has estimated that profits between US $660 billion were transferred in 2015.
He pointed out that during the last decade, bilateral tax treaties concluded by world jurisdictions have tried to stop destructive double taxation and remove barriers between frontiers to allow for trade activities, services, technology and capital transfers as well as movement of people. But he said the chain of world tax treaties has influenced abuse and transfer of profits without paying taxes through the different agreements. Since July 22, 2020, from 94 countries, 47 have submitted their instruments of ratification, approval or acceptance which allow all parties to meet two of the four minimum standards that were agreed in the BEPS package.
BEPS refers mostly to multinationals which avoid paying taxes by transferring profits which they make in the countries which pay a lot of taxes to other countries which pay less taxes on profits.
“This kind of practices prevent or limit the amount of taxes that the countries should collect. The OECD defines this strategy on BEPS as a form of exploitation of weaknesses in the law and deficiencies in tax regulations. If it wants to remain OECD compliant, Seychelles does not have any choice but to ensure its double taxation agreements are all up to date and take the next step to support the transition from black list to grey list in the hope that we reach the white list,” Hon. William remarked.
For his part Hon. Wavel Woodcock further stressed that the convention is very important in a country where taxes that should be collected are collected.
He noted that here in Seychelles there have been cases where several companies have not paid their taxes as they should and the convention is obliging countries to put in place measures to prevent BEPS.
Hon. Wallace Cosgrow for his part further added that those organisations which avoid paying their taxes, denied those countries where they are operating the opportunity to collect the required amount of taxes while they find it easy to avoid meeting their obligations towards those countries in which they are operating.
The ratification of the convention therefore allows for Seychelles to amend certain provisions without having to negotiate individually with countries it has already signed double taxation agreements with.
Other members who intervened on the importance of the ratification noted that benefits for Seychelles would be numerous as it will put Seychelles more up to date with its international obligations namely with the OECD, improve its ranking on different international lists, while multinational companies will have to adhere to their obligations and Seychelles will therefore collect more money for its different economic needs.
Ratification of cooperation agreement between countries of the IOC
Presenting the motion to ratify the general cooperation agreement between member countries of the Indian Ocean Commission (IOC), the leader of government business Bernard Georges noted that the IOC has a special place in the hearts of the Seychellois people as the instrument which established the IOC was signed here in Seychelles through the l’Accord de Victoria in 1984.
He pointed out the fact that recently the National Assembly received the visit of the secretary general of the IOC, Vêlayoudom Marimoutou, during which they had a long and frank discussion on the different challenges that the IOC is facing and has always faced.
He noted that even though we know about the IOC, often we forget that we form part of the regional grouping which is very important to us.
“One of the reasons that often times we tend to forget the advantages of the IOC is because it is not visible enough,” Mr Georges remarked.
He went on to note that one of the issues they raised with the SG is the fact that the organisation does a lot of work but these are not made known to all member countries.
He remarked that even though Seychelles has a key representative at the IOC secretariat, we do not see sufficient spin-offs as well as enough publicity given to the work of the commission, something which he says needs to be reviewed.
He pointed out that the IAC in its report has highlighted different points to be reviewed.
He noted that these include the challenges for some member countries with the language used by the commission which is only French.
He noted that the ratification will be another step for Seychelles to establish itself in the region and on equal terms with other member countries as well as the world.
The ratification will also be another step in improving the different work instruments we have as a country at the centre of our region.
The chairperson of the Assembly’s International Affairs Committee, Waven William, went on to further stress the points raised, noting that the people of Seychelles should be better informed of trade and business opportunities as well as opportunities for jobs and exchanges in various fields and at different levels. He went on to stress on the importance of the activities, projects and programmes of the IOC to be made more visible and transparent to all member countries and for English and Creole to be also included as the languages to be used by the commission for more inclusivity.
The motion to ratify the general cooperation agreement between member countries of the Indian Ocean Commission (IOC) also received the unanimous support of Assembly members.
The Assembly will not be sitting today but will resume its debate on the budget in committee stage where different entities will be called in to defend their budget allocations as from tomorrow.