IRS Commissioner John Koskinen discussed recent developments in the international tax scene spanning the last two years at the 2016 Organisation for Economic Co-operation and Development (OECD) International Tax Conference in Washington, D.C. on June 7. The Standard for Automatic Exchange of Financial Account Information in Tax Matters, more commonly known as the Common Reporting Standard (CRS), was of particular focus during his keynote address.
The standard, developed by the OECD with G20 countries, is “critical” in providing straightforward reporting for U.S. financial institutions and companies, Koskinen said. But the current U.S. statutory framework conflicts with the CRS, he noted. “We hope that we will get congressional action in time to be able to participate,” Koskinen told Wolters Kluwer at the conference.
The call for a “common reporting standard” came after the challenging yet overall successful implementation of the Foreign Account Tax Compliance Act (FATCA) (P.L. 111-147), which uses an intergovernmental agreements approach to combat noncompliance by U.S. taxpayers using foreign accounts. The creation of CRS was largely derived from the need to make successful the automatic information sharing among countries component of the Base Erosion Profit Shifting (BEPS) package, Koskinen noted. The BEPS package consists of “a comprehensive action plan to update international tax rules to reflect modern business practices,” he said. The package includes new standards to assist countries in combating cross-border tax avoidance, he added.
“The evidence of widespread support for this [CRS] standard is clear, as 101 countries have committed to using it,” Koskinen observed. At this time, Congress has not moved forward with legislation allowing for U.S. participation in the CRS. Such legislation would “broaden the information we could provide,” Koskinen told Wolters Kluwer.
Koskinen also made mention of the country-by-country reporting system, another issue relative to the BEPS package that is “on everyone’s mind,” he said. The system is effective as of January 1, 2016, but U.S. regulations congruent with the system will only apply to tax years beginning after June 30, 2016, he noted.
The IRS understands the “concerns expressed by the business community about the difficulties that this gap period poses for U.S. based companies,” according to Koskinen. He added that alternative methods, including voluntary reporting, are being considered for receiving submissions for the gap period. Although no final decisions have been made, “we are coordinating with other countries to try and make sure that voluntary filing will work.”
Koskinen commended the progress made in what he termed the “global tax arena,” but noted that a significant amount of work remains unfinished. “I remain confident we will achieve our goals,” he concluded.
At the beginning of Koskinen’s keynote address, he stated that he remains committed to serve out the last year and half of his term. “One way or another, I plan to be around until November 2017,” he declared.
By Jessica Jeane, Wolters Kluwer News Staff