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Addressing Tax Risks Involving Bank Losses Addressing Tax Risks The financial and economic crisis had a devastating impact on bank profits, with loss-making banks reporting global commercial losses of around USDin 400 billion in 2008. This level of commercial losses has brought tax risks for both banks and revenuevolving bodies. These risks affect banks’ profits, their capital base, and their level of certainty. For revenue bodies, theb concernank is thatLosses aggressive tax planning involving losses will further reduce already depleted tax revenues as a result of the crisis. This comprehensive report: • sets the market context for bank losses and provides an overview of the tax treatment of such losses in 17 OECD countries; • describes the tax risks that arise in relation to bank losses from the perspective of both banks and revenue bodies; • outlines the incentives that give rise to those risks, including incentives related to the regulatory capital treatment of accumulated tax losses accounted for as deferred tax assets; Addressing Tax Risks • describes the tools revenue bodies have to manage these potential compliance risks; and It concludes with recommendations for revenue bodies and for banks on how risks involving bank involving losses can best be managed and reduced. b Further reading ank Losses Building Transparent Tax Compliance by Banks tax risk bank loss Engaging with High Net Worth Individuals on Tax Compliance bank loss risk tax bank loss risk tax Study into the Role of Tax Intermediaries risk bank loss tax risk bank loss tax (2009) risk tax bank loss risk tax bank loss risk tax bank loss bank loss tax risk bank loss tax risk (2008) (2009) tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax risk bank loss tax risk bank loss tax risk bank loss tax risk bank loss loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax risk bank loss tax risk bank loss tax risk bank loss tax risk bank loss tax risk bank loss tax risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss tax risk bank loss tax risk bank loss tax risk bank loss tax risk bank loss tax risk bank loss tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss Addressing Tax Risks Risks Tax Addressing tax risk bank loss tax risk bank loss tax risk bank loss tax risk bank loss tax risk bank loss tax risk bank bank loss risk tax bank loss risk tax bank loss risk tax The full text of this book is available on line via this link: www.sourceoecd.org/taxation/9789264088672 i Those with access to all OECD books on line should use this link: n volving volving www.sourceoecd.org/9789264088672 s ourceOECD For more informationis the aboutOECD thisonline award-winning library of books, service periodicals and free and trials, statistical ask your databases. librarian, or write to us at b [email protected] a nk Losses nk risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax b . risk bank loss tax risk bank loss tax risk bank loss tax risk bank loss tax risk bank loss tax risk bank loss tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss bank loss tax risk bank loss tax risk bank loss tax risk bank loss tax risk bank loss tax risk bank loss tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax risk bank loss tax risk bank loss tax risk bank loss tax risk bank loss tax risk bank loss tax risk bank risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank l risk bank loss tax risk bank loss tax risk bank loss tax risk bank loss tax risk bank loss tax risk bank loss tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss www.oecd.org/publishing bank loss tax risk bank loss tax risk bank loss tax risk bank loss tax risk bank loss tax risk bank loss ta bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax risk bank loss tax risk bank loss tax risk bank loss tax risk bank loss tax risk bank loss tax risk bank isbn 978-92-64-08867-2 risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank los 23 2010 07 1 P risk bank loss tax risk bank loss tax risk bank loss tax risk bank loss tax risk ban tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax -:HSTCQE=U]][\W: bank loss tax risk bank loss tax risk bank loss tax risk b bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss risk tax bank loss ris tax risk bank loss tax Addressing Tax Risks Involving Bank Losses ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT The OECD is a unique forum where governments work together to address the economic, social and environmental challenges of globalisation. The OECD is also at the forefront of efforts to understand and to help governments respond to new developments and concerns, such as corporate governance, the information economy and the challenges of an ageing population. The Organisation provides a setting where governments can compare policy experiences, seek answers to common problems, identify good practice and work to co-ordinate domestic and international policies. The OECD member countries are: Australia, Austria, Belgium, Canada, Chile, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The European Commission takes part in the work of the OECD. OECD Publishing disseminates widely the results of the Organisation’s statistics gathering and research on economic, social and environmental issues, as well as the conventions, guidelines and standards agreed by its members. This work is published on the responsibility of the Secretary-General of the OECD. ISBN 978-92-64-08867-2 (print) ISBN 978-92-64-08868-9 (PDF) Corrigenda to OECD publications may be found on line at: www.oecd.org/publishing/corrigenda. © OECD 2010 You can copy, download or print OECD content for your own use, and you can include excerpts from OECD publications, databases and multimedia products in your own documents, presentations, blogs, websites and teaching materials, provided that suitable acknowledgment of OECD as source and copyright owner is given. All requests for public or commercial use and translation rights should be submitted to [email protected]. Requests for permission to photocopy portions of this material for public or commercial use shall be addressed directly to the Copyright Clearance Center (CCC) at [email protected] or the Centre français d’exploitation du droit de copie (CFC) at [email protected]. FOREWORD – 3 Foreword The role of banks in the global economy, as well as in the functioning of countries’ tax systems, is of vital importance. As a result of the financial crisis, a large number of banks have sustained substantial losses. The scale of those losses, and the potential regulatory capital, profit and cash-flow benefits for banks able to convert them into cash, mean that revenue bodies must be alert to potential tax compliance risks as a result of aggressive tax planning involving losses. This report, which deals with tax risks involving bank losses, was commissioned jointly by the Forum on Tax Administration (FTA) and the Aggressive Tax Planning (ATP) Steering Group of the Committee on Fiscal Affairs’ and was led by HM Revenue and Customs and the OECD Secretariat. This report reflects the experiences of 17 countries who participated in the study team: Australia, Austria, Canada, Denmark, France, Germany, Ireland, Italy, Mexico, the Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland, the United Kingdom and the United States of America. South Africa also provided valuable input in the course of drafting the Report. The Study Team benefitted from the input of other members of the FTA and from consultations with the private sector. The report builds on the earlier report by the FTA, Building Transparent Tax Compliance by Banks (2009), which contained a set of recommendations both for revenue bodies and banks. These were aimed at improving the transparency of banks’ tax planning, providing better alignment between banks’ internal governance and revenue bodies’ risk assessment, and improving the effectiveness of international cooperation to counter aggressive tax planning. The focus of the report is on real rather than artificial losses and it explores the different country approaches to giving tax relief to loss-making banks and to addressing tax risks involving banks’ losses.
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