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BRICS and the Emergence of International Tax Coordination - Review 2

BRICS and the Emergence of International Tax Coordination edited by Yariv Brauner and Pasquale Pistone, IBFD 2015

Reviewed by Craig West1, 3 Journal of Comparative Law in Africa 2 (2016)

The IBFD-published book BRICS and the Emergence of International Tax Coordination comes during a period of significant flux in international tax. A frequently asked question is whether the BRICS countries (Brazil, Russia, India, China and South Africa) have a clear role to play in the development of international tax understanding in the future.

Having its origin in a research seminar conducted in Amsterdam in 2013, this book synthesizes and expands on those earlier research findings. In a well-structured and logical manner, the book focusses on two key themes:
1. The shift of power in the global economy from the traditionally dominant countries that comprise the OECD - or, even more narrowly, the G7 -  to emerging economies, perhaps led by the BRICS.
2. The various options available to the BRICS and other emerging economies in their quest for a voice in the governance of the international tax regime:
2.1. To operate as a loosely coordinated bargaining group.
2.2. To lose relevance as some or all join the current regimes.
2.3. To further institutionalize and cooperate more closely.
The book examines these themes through the central question of: “whether [or not] the BRICS countries are likely to organize themselves as a bloc, and attempt to influence the evolution of the international tax regime”.

These issues are examined not only in the context of the BRICS economies but in a broader frame that includes Turkey, Nigeria and the regional block of the East African Community.

Recognized as a starting point for research in this area, this influential book examines the convergences and divergences of the BRICS with respect to international tax matters.

The book is divided into three major parts (each comprising further chapters). Part I, “The BRICS and the International Tax Regime”, sets out the purpose of the book and the theoretical framework. Part II examines “Tax Policy and Technical Tensions in the BRICS(+) World”. Part III looks to “The Impact of the Ascent of the BRICS”.

Following the introduction to the research agenda for the book and providing some introductory comments, Tsilly Dagan and Reuven Avi-Yonah respectively cover two important topics, namely an analysis of the theoretical framework and potential for cooperation and a consideration of the current international tax regime with a perspective on supranationality in the 21st century. While written before the BEPS project came to the fore, Dagan’s insightful chapter alludes to the global tendency towards cooperation at all costs and the rise of information exchange and the global forum. In short, the conclusion is that cooperation for the sake of cooperation can be counterproductive and is not to the benefit of the international tax order. Along different lines, Avi-Yonah advocates coordination between the BRICS to some extent in support of an updated international tax order. It can perhaps be said that the different perspectives, circumstances and treatment of selected tax concepts by the BRICS countries may lead to coordination rather than cooperation.

The contribution by renowned authors in the next seven chapters comprising Part II of the book provide country overviews of treaty issues and tax policies in the relevant jurisdictions. These provides the material for comparison in respect of convergent and divergent practices. Equally, the chapters each provide views as to the way ahead. There appears to develop a rough consensus that the BRICS countries can serve their unique positions as leading economies in their regions even considering the BRICS divergent practices from OECD norms. Also included in this part are chapters on Turkey and Nigeria, and a chapter on the “least developed countries” of the East African Community (which comprises Burundi, Kenya, Rwanda, Uganda and Tanzania). The value that teaching from the BRICS might offer developing countries is acknowledged as a valuable counter-example that must be studied by the least developed countries as an alternative solution to the standard rules of international taxation, most of which have been designed by and for developing countries.

Following from the detailed analysis of Part II, Part III provides an overarching analysis of the BRICS as a grouping from inception to current influence to the future. Jeffrey Owens begins this part with an overview of the BRICS from their origins and further considers their current tax structures. As he correctly points out, “great care must be taken in treating the five BRICS countries as a homogeneous group, as not only do their economies differ but also their tax systems”. He points to the rise of other economies and notes that coordination and cooperation among the group has a checkered history – this despite the annual meeting of the leaders of the BRICS (2016 marked the 8th summit) and the tacking on of a meeting of the BRICS Commissioners from an administrative perspective.

Following this overview, Richard Vann provides an insightful chapter with respect to residence and source, which demonstrates that “three of the BRICS countries are determined to shake up the international tax system to assert very strongly the importance of the corporate income tax as a source tax and not to give up on it”. F. Alfredo García Prats and Jan de Goede examine the impact of the BRICS in the context of the UN Model. In partial support of the initial chapter by Dagan, de Goede comments that he “does not think that clearly existing differences necessarily need to preclude effective cooperation, as long as there is a political will to conclude compromises to reach commonly shared aims, or (less ambitiously) at least have the desire to jointly achieve a result where certain individual aims are recognized as possible policy options in the UN Model or Practical Manual on Transfer Pricing for Developing Countries”.

In the next two chapters, Kim Brooks first provides a broad overview of the international tax policy directions of the BRICS (with particular emphasis on income tax), concluding that “[i]t seems that with some coordination, there is an opportunity for BRICS countries to lead a rich discussion and to help shape, and set, the international tax policy agenda for the next 20 years”. Second, Diane Ring reviews the institutional aspects of the BRICS from the identity of the BRICS, their impact of tax policy and, finally, their potential legacy as transformers of the international tax order. She concludes that there is already an observable influence of the BRICS on international tax policy, and their potential for the future is recognized.

Pasquale Pistone and Yariv Brauner provide the concluding chapter. They indicate that it is unlikely that the BRICS will unify to represent a single bloc in all respects. Their differences prevent such unification; however, loose coordination may be favourable. Ultimately, the book’s final words are worth repeating in this review: “Expansion of the governance of the international tax regime would inherently result in more sophisticated collaboration mechanisms rather than cartelistic behaviour, and would necessarily be better suited to accept new members in leadership roles, including countries such as the ‘new’ BRICS (Turkey, Nigeria and Indonesia, among others). As such, this regime should be more stable than the current one, to the advantage of all countries”.

This book represents an excellent resource, providing balanced viewpoints on the current state of play with respect to the BRICS. It provides a superlative analysis of the international tax coordination possibilities for those countries. While technically and scientifically sound, the work makes for interesting and easy reading and is highly recommended for academics, practitioners and government administrators. As the editors indicate that this is the starting point of the research, the next instalment (post-BEPS) is eagerly anticipated.

1 Associate Professor at the University of Cape Town