Speaking at last week’s Global Transfer Pricing Forum in London, the panel outlined the best practices for managing disputes in these countries.
“Heads of tax need to get out and inform the authorities what their business does and to educate them in the way you handle tax,” said Damon Richardson, international tax counsel at Google. “The tax authorities will appreciate your appearance and this should help with reducing the time it takes to get any challenges resolved.”
This opinion was supported by Johan Felius, global tax director at SABIC.
“If you just send in a team of lawyers [to resolve an issue] then it just looks like you have guns for hire and the officials won’t appreciate that,” he said.
“In China, the officials like to see taxpayers. It is a sign of respect to the official and this is very much part of the culture,” said Glenn DeSouza, China transfer pricing leader at Baker & McKenzie.
The panel then continued by discussing the challenges taxpayers should expect to face in these locations.
“[BRIC] officials are talking more and are sharing ideas and information,” said Leonard Zhang, of KPMG China. “A prime example of this is the release of Circular 698 in China on the taxation of indirect share transfers. This was a clear response to the Vodafone case in India.”
Discussion then turned to resolving disputes if meeting with officials does not work.
“It pays to go to court in Russia,” said Ruslan Vasutin of DLA Piper, Russia. “This had turned out to be a very efficient mechanism with around 60% of cases going in favour of the taxpayer.”
“The Russian court system is very fair and sophisticated and is my favoured choice to resolving the issue with the authorities,” said Felius.
Navin Jain, general manager, taxation, Cairn India Group, explained that taxpayers have no option but to litigate in India. However, he explained that resolution can take anything up to 10 years and so offered some personal experience on how to speed things up.
“Litigation is inevitable so you must seek alternatives. If we are involved in a dispute then we look to resolve it by MAP (mutual agreement procedure). This roughly takes around 12 months and saves a lot of hassle down the line,” said Jain.
