Uncertainty in the application of international tax rules can act as a barrier to the expansion of cross-border trade and investment. When the OECD Guidelines on Multinational Enterprises were being revised, the chapter on tax contained vague language on “complying with the spirit of the law” that few people had focused on. USCIB alerted its members to the risks associated with language that created an environment without transparency or certainty which would place companies at the mercy of government’s interpretation of what constituted a violation of the “spirit” without regard to the intention of their legislatures.
USCIB Speaks Out
At the OECD
USCIB, working with its tax committee, organized a campaign to raise the issue inside the OECD on the need to revise the language in the tax chapter. They drafted new language to define the “spirit of the law” and advocated their position directly to the OECD as to why the language must be revised.
At the U.S. Department of State
USCIB brought the U.S. Department of State into the discussion and urged them to stand their ground based on the negative impact the original language could have on U.S. companies. USCIB continued to coordinate with the OECD and the State Department to press for new language and ensure approval.
As a direct result of USCIB’s efforts, the final language adopted stated that complying with the “spirit of the law” means discerning and following the intention of the legislature. And that the intention of the legislature is determined based on the statutory language and relevant, contemporaneous legislative history. This prevents tax authorities from asserting that legitimate tax planning violates the “spirit of the law” and is viewed as a major victory for U.S. companies.
*(The Guidelines are recommendations addressed by governments to multinational enterprises operating in or from adhering countries. They provide voluntary principles and standards for responsible business conduct in areas such as employment and industrial relations, human rights, environment, information disclosure, combating bribery, consumer interests, science and technology, competition, and taxation)