The F.A.I.R.N.E.S.S. method for solving (international) tax-related problems.
We all want to be treated fairly, but for that to happen we need to step up and set a good example. In the area of taxation, this is even more important. The problem is thatoften we don’t know how to do it.
This is why I have developed a set of guiding principles which I call the F.A.I.R.N.E.S.S. method. This method is based on my own experience and that of leading tax professionals from all arounds the world whom I have observed and worked with over the last 30 years. I use it every day and I assure you that it works.
Here is the basic outline of the F.A.I.R.N.E.S.S. method for solving tax problems.
Focus on your business. You can’t separate taxes from your commercial activity, as proved by all the anti-avoidance rules laid down in current tax treaties and domestic legislation.
Acknowledge the context in which you carry out your activities. Be aware of: the general socio-political circumstances of the countries you operate in; the other companies operating in your field; the situation of your own company and/or the companies you are advising; the internal dynamics in your company’s departments.
Initiate conversations about your tax issues with other stakeholders. Talk to people that might be more familiar with the situation, whether they work in your field or not, or even with complete outsiders who know nothing about your business. And whoever you talk to, talk to them in a way they can understand and relate to.
Recognize any problem you might have. Is it a reputational problem? Is it a cashflow problem? Is it even really a problem? Maybe it is simply a case of having topay taxes!
Navigate carefully in the tax arena. Don’t forget that taxes are an important part of your risk assessment. Double check the legislation that applies to your situation and find out how this legislation is usually interpreted by the Administration and the Courts.
Explore the issue. In addition to knowing the tax rules and regulations, considering other legislation (and how it isinterpreted) can help you understand a problem more clearly.
Solve the problem as straightforwardly as possible and inthe way that is best suited to your activity.
Save all supporting documents – not only invoices and contracts but also ideas and alternatives you may not have used for the issue you are currently dealing with. You might need these documents in the future, and you will almost certainly be asked to present them in the event of a tax audit.
And when you have done all this and decided what action you are going to take, ask yourself the following question: will I be able to look anyone in the eye and tell them what I intend to do without feeling embarrassed or ashamed?
Yes, I know what you are thinking… it sounds complicated. But don’t worry, you are not alone. I’d love to know what you think about my method. Is there anything you would change or add to it?