QUESTIONNAIRE FOR BUSINESS ON THE APPLICATION OF CONSUMPTION TAXES

(VAT/GST) TO THE TRADE IN INTERNATIONAL SERVICES (INCLUDING INTANGIBLES)

Introduction

The global spread in consumption taxes like Value Added Tax (VAT) and Goods and Services Tax (GST),
combined with the rapid growth in the trade in international services, has led to suggestions that there is
significant double taxation and unintentional non-taxation taking place. A recent report by an OECD joint
business and government group (the Consumption Tax Technical Advisory Group), available at
http://www.oecd.org/dataoecd/38/42/5594899.pdf, suggested a number of reasons why this may be taking
place.1 In response to this the OECD believes it is important to ascertain the extent to which double
taxation and non-taxation are taking place, and to consider the causes.

In carrying out this work the OECD believes that it is vital to have input from the business community,
advisors, industry organizations, academics and the like. We are, therefore, issuing an open invitation to
you to contribute to this work by providing us with your experiences of problems concerned with the
application of VAT/GST to international services.

A number of reasons have been suggested as to why double and unintentional non-taxation takes place.
These include:

o Approaches to the place of taxation

o Approaches to time of supply and interaction with place of supply
o Definitions of the nature of the service
o Verifying jurisdiction and/or taxpayer status
o Treatment of bundled supplies
o Approaches to supplies between members of the same corporate entity
o Approaches to the supply of rights

There may well be others; this questionnaire seeks to find the main cases with a view to taking forward
further work on ways of minimizing the potential.

To ensure a full and frank disclosure your comments will, unless you state otherwise, remain confidential
to the OECD Secretariat, although OECD member countries will be provided with a summary of the issues
and comments raised. We do however ask you to identify yourself in your reply as we may need to follow
up on your responses.

Input can be provided by individual businesses or on a more collective basis by industry bodies,
professional advisory firms or academics. If you would like further information or would like to discuss the
substantive issues please do not hesitate to contact David Holmes, Head of the Consumption Taxes Unit
(david.holmes@oecd.org) or Nils Eriksen, Senior Advisor Consumption Taxes Unit
(nils.eriksen@oecd.org).

1
Further the EU has recently completed a public consultation process on the EU VAT treatment of place of supply of
services, the results of which are available on the European Commission's website
http://europa.eu.int/comm/taxation_customs/taxation/consultations_en.htm

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Please send your response by e-mail, fax or post to the following address by 24 October 2003.

Monica Lawrence
Centre for Tax Policy and Administration
2 rue Andr Pascal
75775 Paris Cedex 16
France

Fax: (+33) (0)1 44 30 61 36

E-mail : monica.lawrence@oecd.org

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 GUIDANCE NOTES FOR COMPLETION OF THE QUESTIONNAIRE

The questionnaire seeks to identify international double taxation and unintentional non-taxation in a broad
sense. For example the questionnaire seeks to identify both the imposition of VAT or GST in two (or
more) States on the same taxpayer in respect of the same transaction (international juridical double
taxation) and the imposition of VAT or GST to the same transaction in two (or more) States on different
taxpayers (economic double taxation). Although double taxation and non-taxation are key issues we would
also welcome evidence of other difficulties you may have encountered in applying VAT or GST to
services traded internationally. For instance a number of countries do not have a refund of VAT or GST
scheme to foreign businesses. This leads to a non-recoverable tax cost for business in international trade
compared to domestic trade.

We are interested in identifying the above issues both in trade between OECD member countries and non-
member countries. For the purposes of this work services are defined as any commercial transaction
other than the sale of goods. Thus it includes transactions involving items such as transfers of rights,
intellectual property, consultancy, services relating to goods, services relating to land or immovable
property, financial services, and the services of agents and commissionaires. The focus is firmly on
international trade and is not concerned with services supplied domestically.

Below we provide guidance to some of the specific questions in the questionnaire.

Question 3: We are interested in identifying actual examples of international double taxation. We realise
that it might be difficult for advisors and in particular academics to estimate costs. To identify the
monetary importance of the potential problem, we would, however, encourage business and to the extent
such information is also available to other respondents to provide estimates of the costs. At this stage we
are merely interested in identifying the tax costs and not the associated compliance costs.

Question 5: We are interested in identifying actual examples of non-taxation potentially also leading to
distortion of competition. As to estimated tax costs (for the business suffering from tax) we refer to
guidance to question 3 above.

Question 7 seeks to identify whether there are mechanisms (e.g. arbitration, international courts, competent
authority and mutual agreement procedure) in place to solve international double taxation disputes in the
field of VAT and GST. We would also be interested in identifying why existing mechanisms do not work
sufficiently well.

Question 8: We are interested in both material improvement and dispute resolution improvement.

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 QUESTIONNAIRE ON INTERNATIONAL SERVICES AND CONSUMPTION TAXES

The following questionnaire is designed to enable you to tell us your experiences with the application of
consumption taxes like VAT and GST to internationally traded services. We are particularly keen to learn
of instances of double taxation and also of unintentional non-taxation which has potential to lead to
competitive distortion. The focus is on actual experiences rather than theoretical potential.

If you complete this box with your contact details, we can get in touch with you for any clarification of the
issues you have raised. Completion of these details is optional:

Name:

Affiliation:

E-mail address:

Telephone: Fax:

Q1: Please state your business sector (eg financial services, telecommunications, energy and utilities,
media) or whether you are responding as tax advisor, industry organization, academic or other.

Q2: Are you aware of examples of double taxation occurring in your, or others business dealings?

Q3: If you answered yes to Q2, please describe how and why double taxation came about, which countries
were involved and the approximate tax cost, where possible to estimate, to your or others business.

Q4: Are you aware of competitive disadvantage to certain business as a result of non-taxation of other
business caused by the application of VAT or GST to internationally traded services?

Q5: If you answered yes to Q4, please describe how and why non-taxation came about, which countries
were involved and where possible to estimate the approximate competitive disadvantage or potential cost
in monetary terms.

Q6: Are you aware of examples in your own or other business dealings where you or others had to decline
entering or leaving a particular market because of problems connected with the application of VAT or GST
to the services supplied or received? Please describe the circumstances.

Q7: If problems identified above have come about as a result of different approaches by two or more
national tax authorities please describe how you tried to resolve the issues, how long the process took and
if not why not.

Q8: What suggestions do you have to improve the application of VAT and GST to internationally traded
services?

Q9: Any other comments?