From the Giovannini Barriers to the OECD Treaty Relief and Compliance Enhancement project, it has long been observed that withholding tax and the varied procedural requirements for obtaining treaty relief are a drag on, or even a barrier to, cross-border investment. Further, the procedures have also been abused and resulted in significant tax fraud. This report articulates the case for global change to achieve better outcomes for investors, financial intermediaries and governments.

Statement from Seema Pandya, UK Finance International Tax Custody Working Group Chair, said:

In an ever-developing world of financial markets and cross-border investment, there will always be a need for evolution within the industry. The report recognises how a streamlined approach underpinned by technology can balance the needs of all stakeholders – control and oversight for tax authorities, certainty for financial intermediaries and efficient market participation for investors. As an industry, we support this report and call on the stakeholders to engage in the debate to help create a solution that works for all.

Paul Radcliffe, Partner, Ernst & Young LLP, said:

We, at EY, are really pleased to have worked with UK Finance on this report. We welcome the European Commission’s focus on improving withholding tax processes and we encourage stakeholders – that is investors, intermediaries and governments – to get involved in the debate, so we can achieve an outcome that benefits all.

In a time of increasing pressure on investment returns, getting the right post tax outcome in terms of income from investments becomes more important.  We believe that investors, intermediaries and governments should engage in the current debate as to how withholding tax procedures can be improved and look to see how these processes can be made more efficient for all parties. This will drive better investment outcomes for investors; operational efficiency for investors; and increase confidence for governments.

Ramzan Bashir, Senior Manager, Ernst & Young LLP, said:

Genuine withholding tax reform can really facilitate more efficient capital markets: however, this can only truly be achieved where governments have the confidence that the correct withholding tax rates are applied, investors get the rate they are entitled to, and intermediaries able to run efficient systems offering synergies and certainty.  This report discusses how now is the time to devise a system fit the 21st century, capable of producing benefits to all stakeholders.

This withholding tax (WHT) report seeks to focus attention amongst stakeholders on the need for change. Change, that can be accretive, but equally represent an evolutionary jump from a paper intensive WHT reclaim process, by using new technologies - like blockchain, to a new future state with reduced manual processes, better auditability, improved trust and better outcomes for investors.