Jean-Blaise Eckert (IFA): “ The issue is whether to update or reshape ideas dating from the mid-20th century"

Leaders League. Tell us a bit about the history of the IFA...

Jean-Blaise Eckert. The IFA was created in 1938 in The Hague, at a time when economic exchanges had developed after World War One. It was also following developments of former international tax treaties. There was therefore a growing need to have an international place for network and technical discussions in this new field. The IFA’s activities really took off in 1946, after World War Two.

The purpose and mission statement of the IFA is to keep a close eye on the advancement of international fiscal matters. The association is purely technical. One of the key values of the IFA is that this is a non-partisan, non-lobby organization. This aspect is crucial for the development of its activities because the IFA can bring together authorities – both the OECD and the UN are participating, together with tax authorities, university professors, judges, tax directors of companies and advisors. In fact, everyone in the tax world is participating.

The IFA is proud to be the only neutral association of its size in the world! The neutrality of the association may explain why a Swiss was chosen. My mandate as secretary general lasts four years and is renewable for one additional four-year term.

The IFA celebrated its 80th birthday last year. How has it evolved over time?

The IFA has a legal form of association with slightly over 13,000 members around the globe. There are 74 branches and members present in 120 different countries around the world. The IFA primarily developed as an association that was very present in Europe and North America and has really flourished in Asia and Latin America over the past two decades. More recently, the association expanded in Africa: I just flew to Kinshasa to open a Congolese branch of the IFA.

Our landmark product still is our annual congress, gathering about 2,500 to 3,000 participants for four days, in a different location each year. The next congress will take place in London from Sept 8th to 12th. Apart from this, there are frequent regional conferences around the world, and several other activities.

What would you say are the most interesting international trends and the major issues in the corporate tax world?

The complete reshaping of international tax rules as a consequence of project called Base Erosion and Profit Shifting (BEPS), launched by the OECD, at the behest of the  G20, is certainly one of the major topics of debate.

At its core, the aim of this project is to make sure that the present international tax rules don’t facilitate the shifting of corporate profits away from where the real economic activity and value creation are taking place.

There are a few new specific measures but more generally it refers to a reshape of a number of basic principles that have governed tax to date. For instance, with the advent of new technology and the digital economy, there is a big question mark over whether to reshape concepts dating back from mid-twentieth century, such as the concept of permanent establishment (PE).

The big debate that has been taking place over the last five to six years, including during each IFA Congress, is to figure out whether to update these concepts or to simply replace them. This is still one of the main topics of our annual congress this year. And it is not clear yet who the winners and losers of this big reshape will be.

The general issue is also to find out who and what should be taxed, whereas in the past there would have been a rather more formal approach.

More generally speaking, this debate has opened the door to another one: namely the chosen approach. This is where a formal approach may have to be reviewed in order to concentrate more on where the real activity is taking place, and defining where the person who helps develop and preserve the value is. This is subject to much debate. And then there is the specific discussion of the digital economy. In this respect, one must start by stating that there is no formal definition of what the digital economy is. This is the first question, and then come discussions on where profit should be taxed: where the consumer made the purchase? Where the value comes from? How we answer these questions is crucial, but there is no international agreement in place or even on the horizon.

There have been recent developments such as the French digital tax law, but we have no idea where this might lead, and the US government has already threatened to take countermeasures. All of this keeps the international tax community very busy, and that goes for the IFA as well.

Are there any up-and-coming jurisdictions we should be keeping our eyes on as interesting regulatory jurisdictions for tax?

The Chinese government launched the One-belt-one-road (OBOR) program three years ago and is building a very significant amount of infrastructure. There is a tax aspect to this program. The first international conference on this topic took place a few months ago. On another note, the EU might eventually agree a way forward regarding tech companies, and there could be some developments that should be carefully scrutinised as well.

Currently tax is determined by national governments. Many argue that if tax dodging is to be reduced, more globalised or pan-national tax systems would have to be instituted. What is your take on that? My personal view is that there are precisely two things we want to keep national: the army and tax! A true international tax system with immediate application onto purely national situations is not doable at all. And at the end of the day, each state has its own budget and would like to have enough to maintain it. We should aim towards a more global understanding, but seem to be trending in the opposite direction, and this raises concerns.

Have there been any particularly novel or interesting international tax litigation cases lately?

We keep having interesting cases coming from India regarding the concept of permanent establishment. Those are the most interesting cases at the moment. We are also waiting for the decision of the European Court of Justice concerning state aid, which has become a tax topic, or at least a topic connected to tax issues. 

Interview by Elodie Sigaux