Minutes of the meeting

Large Companies Forum

MINUTES OF THE PLENARY SESSION 1/2018

Vice-President of the Large Companies Forum

Director General of the State Agency for Tax Administration

Mr. Jesus Gascon Catalan

Members representing the Tax Agency

Director of the Department of Financial and Tax Inspection

Mr. Javier Hurtado Puerta

Director of the Tax Management Department

Mr. Gonzalo David García de Castro

Director of the Revenue Department

Mr. Guillermo Barros Gallego

Director of the Department of Aduanas and Excise Duties

Ms. Mª Pilar Jurado Borrego

Central Delegate of Large Taxpayers

Mr. Manuel Trillo Alvarez

Members representing Large Companies

ACS

Director of Tax Advisory

Mr. Alfonso Moreno Garcia

AMADEUS IT GROUP SA

Deputy Secretary of the Board of Directors

Mr. Jacinto Esclapés Diaz

BANCO SANTANDER

Tax Advisor

Mrs. Carmen Alonso Peña

BANKIA

Director of Tax Advice – Tax Advisory Department

Mr. Juan José Lagares Gómez-Abascal

BBVA

Director of the Tax Department

Mr. Jose Maria Vallejo Chamorro

LA CAIXA

Director of Tax Advisory

Mr. Manuel Alfonso García Rodríguez

CEPSA

Fiscal Director

Mr. Alberto Martin Moreno

COFARES

Advisory Board of Directors

Mr. Luis Valdeolmos Gonzalez

EL CORTE INGLÉS

Director of Taxes

Ms. Pilar Fernandez Medina

ENDESA

Head of Tax Affairs

Mrs. Maria Muñoz Viejo

FCC

Director of the Tax Department

Mr. Daniel Gómez-Olano González

GENERALI ESPAÑA

Director of Accounting Department

Mr. Martí Jo Ruiz

IBERDROLA

Global Director of Tax

Mrs. Begoña Garcia-Rozado Gonzalez

INDITEX

Director of Tax Advisory

Mr. Andres Sanchez Iglesias

MAPFRE

Tax Advice Director

Mr. Antonio Lafuente Gonzalez de Suso

MERCADONA

Tax Manager

Mr. Benjamin Torres Belenguer

NORFIN HOLDER

Director of Tax Advisory

Mr. Jose Antonio Gibello Saiz

RENAULT ESPAÑA

Director of Tax and Customs Affairs

Mr. Felix Ruiz Madarro

REPSOL

Director General of Economic and Fiscal Affairs

Mr. Luis Lopez-Tello and Diaz Aguado

SEAT

Director of Taxes

Mr. Francisco Javier Baulenas Setó

SIEMENS

Director of Taxes

Mrs. Ana Maria Moreda Galante

TELEFÓNICA

Fiscal Director

Mr. Angel Martin Gomez

VODAFONE

Tax Advice Director

Mr. Javier Viloria Gutierrez

Technical Secretariat of the Large Companies Forum

Technical secretary

Mrs. Rosa Maria Prieto del Rey

In Madrid, on July 11, 2018, the sixteenth plenary session of the Large Companies Forum is held, attended by the people mentioned above, and in accordance with the following:

AGENDA

1. Session opening
2. Approval of the minutes of the meeting held on November 21, 2017
3. Results of the different working groups of the Forum
4. Adaptation of the procedure for adhering to the Code of Good Tax Practices to the General Data Protection Regulation
5. Next call
6. Other considerations, requests and questions

1. Session opening

The session was opened by Mr. Jesús Gascón Catalán, Director General of the State Tax Administration Agency and Vice President of the Large Business Forum, who first conveyed the greetings and apologies of the Secretary of State for Finance and President of the Tax Agency for not being able to attend the meeting. Mr. Jesús Gascón then briefly presented the new positions at the Tax Agency, pointing out that they are generally veterans and well-known people in the tax field, and stressing that the Tax Agency is an institution with a long history whose strategic projects are maintained over time regardless of whether there may be changes in the people. The Director General of the State Tax Administration Agency first introduces Ms. Rosa Prieto del Rey, who, on this occasion, attends the meeting as Director of the Planning and Institutional Relations Service and Secretary of the Forum; Mr. Javier Hurtado, current Director of Inspection and who for many years was Deputy Director of Territorial Inspection, therefore well acquainted with the problems of the area; Mr. Manuel Trillo, current Central Delegate for Large Taxpayers, highlighting his previous position as Special Delegate for Madrid and as inspector at the Central Delegation, therefore familiar with issues specific to the relationship with large companies; Mr. Gonzalo García de Castro, former Special Delegate of Catalonia and currently Director of the Tax Management Department, and finally, Mr. Guillermo Barros, Director of Collection, with extensive experience within the Tax Administration.

Mr. Jesús Gascón continues by pointing out that the Tax Agency was committed to the cooperative relationship practically from the beginning, when this matter was included in the agenda of the OECD , in 2005. He adds that, thanks to the efforts of everyone, the Forum has reached its sixteenth meeting and that other cooperative instruments such as the minutes with agreement or the APA and not only those derived from the existence of the Forum itself, such as the Code of Good Practices or the transparency report, have become something commonplace and known by all. It is therefore necessary to continue to move forward so that these relationships become increasingly relationships of trust and, ultimately, to be able to reduce conflicts and anticipate their resolution. Tax disputes are practically inevitable, since the regulations are very complex and changing, so one of the priority objectives is to identify these disputes in order to, as far as possible, find the appropriate formulas to prevent them from being prolonged indefinitely over time.

On the other hand, the Director General of the State Tax Administration Agency refers to the problem of unequal treatment of taxpayers, an issue that was already identified as such by the OECD more than ten years, pointing out that the main problem is identifying that we are faced with taxpayers with behaviors that are sufficiently differentiated so that the treatment with them is different. In this sense, it is necessary to assess whether the model should be flat for any taxpayer or whether it is possible to differentiate it based on tax behavior, because they participate in a collaborative process, because they are more transparent, because they have signed the Code of Good Practices, etc. This is why the Tax Agency must study how to adapt its strategy to this new reality. Mr. Jesús Gascón goes on to say that the above is not just a theoretical reflection, but has practical consequences, and adds that these are issues of sufficient importance to be the subject of analysis in the forum and in the working groups. Mr. Jesús Gascón goes on to say that tax control is essential, but tax control does not necessarily involve traditional a posteriori checks. Prevention will be a key point in the coming years, hoping to be able to contribute to establishing mechanisms that facilitate tax compliance.

2. Approval of the minutes of the meeting held on November 21, 2017

Mr. Jesús Gascón gives the floor to Ms. Rosa Prieto, who, after thanking all those present for their attendance, points out that the minutes of the 15th session of the Plenary Session of the Forum were sent to its members and adds that no comments have been received and, if there are none at this time, it will be definitively approved. As no observations were made by those present, the minutes of the plenary session of November 21, 2017 are declared definitively approved.

3. Results of the different working groups of the Forum

At this point, the General Director of the State Tax Administration Agency gives the floor to Mr. Javier Hurtado, Director of the Department of Financial and Tax Inspection, in order for him to comment on the results of the working group on Analysis of Tax Regulations and Reduction of Conflict .

Mr Javier Hurtado points out that the group's content has focused on the Country by Country Report over the last year and a half. Issues relating to the implementation of the OECD and EU lines of work have also been addressed: the entry into force of model 231, the adjustments, the improvements that can be made to both the regulations and the model itself and other issues such as whether the data should be understood as aggregated or consolidated, what should be understood by tax paid or tax accrued, what treatment to give to tax refunds... Mr. Javier Hurtado continues, indicating that the Country by Country Report is a step forward in the international framework that all the countries of the EU and many of the OECD , for the sake of greater transparency in the information of multinational groups. Mr. Javier Hurtado clarifies that the Tax Agency is interested in implementing the model and in using the data, not to carry out inspections but to analyse the risks that these groups are facing. The Director of the Inspection Department also points out that country-by-country information can help companies to have a global view of their activity, which can help them make the right decisions.

Regarding the future of the group, Mr. Javier Hurtado points out that the Inspection Department would be interested, in contact with the Central Delegation of Large Taxpayers, the ONFI , etc., in making progress on other issues raised by large companies, and regarding which the Department, once analyzed, has a clear position.

In addition to what has been said about this working group, Mr. Javier Hurtado reflects on Cooperative Administration and the problem of compliance. A este respecto, el Director del Departamento de Inspección señala que hace ya diez años, participó en el subgrupo de la OCDE denominado compliance Subgroup. Desde su perspectiva como inspector de hacienda, la idea de compliance es una idea ajena a la filosofía tributaria española, pudiendo traducirse este concepto como “cumplimiento tributario”. El compliance no es un problema de aplicación de ley sino más bien de organización social. Desde este punto de vista, y avanzando en las ideas de compliance, continues Mr. Javier Hurtado indicating that in that working group of the OECD some issues that will mark the future were discussed, such as the idea of compliance , which means that the entire system is set up so that obligations are met in a reasonable way, without controversy, as all members of a single community. In this regard, the Director of the Inspection Department indicates that the ideal would be for all those present, both representatives of the Tax Agency and of the Large Companies, to seek the same thing: improve a relationship that has always been a bit controversial, so that in the future there will be a smoother, faster and more effective relationship.

Mr. Jesús Gascón thanks the Director of the Inspection Department for his intervention, and gives the floor to Mr. Gonzalo García de Castro, Director of the Tax Management Department, in order for him to comment on the content of the working group Analysis and Rationalization of Indirect Tax Burdens .

Mr. Gonzalo García de Castro points out that one of the main strategic lines of action of the Tax Administration is to minimize the costs, as far as possible, of the set of formal burdens and obligations that inextinguishably accompany material tax compliance. This strategy requires a continuous effort, which certainly does not produce immediate consequences or as immediate as desired. Mr. Gonzalo García de Castro took the opportunity to thank his predecessor, Mr. Rufino de la Rosa, for his work, expressing his intention to maintain continuity. The Director of the Tax Management Department goes on to indicate that in recent times there has been a redefinition of the context of the relationship between the Administration and the administered, especially in the area of large companies, as a consequence of the implementation of the SII , highlighting the fundamental role played by these large companies as suppliers of information to the Tax Administration. He also comments on the positive results that the implementation of SII has had, with compliance levels above 95% in general and, specifically for taxpayers who file tax self-assessments, above 98%. The SII opens a path in terms of burden reduction mechanisms in the sense that, the more automatic supply, the less capture and fewer individualized information actions.

Mr. Gonzalo García de Castro concludes by stating his intention to continue along the same lines and to resume group meetings as soon as possible. It is also available to large companies for anything they consider necessary and that may depend on the Tax Management Department.

Mr. Jesús Gascón thanks Mr. Gonzalo García for his intervention, and extends the recognition made to the former Director of the Tax Management Department to the rest of the former Directors as well as to the former Director of the State Agency for Tax Administration, insofar as he has contributed to maintaining the Forum and strengthening it in recent years. Next, Mr. Jesús Gascón gives the floor to Ms. Pilar Jurado, Director of the Customs and Excise Department, in order for her to comment on the work of the group dedicated to excise taxes .

Ms. Pilar Jurado begins her presentation by briefly commenting on the background of this working group. In this regard, he explains that this group was separated from the group on procedural simplifications at the request of companies belonging to the Forum and working in the field of excise duties. Ms. Pilar Jurado goes on to point out that the meetings discuss both issues proposed by the companies themselves and by the Tax Agency, as was the case at the last meeting, where the regulatory changes relating to the formal obligations of consumers of subsidised diesel fuel who use it for the production of electrical energy or cogeneration, the final consumer declaration model for subsidised diesel fuel and the draft ministerial order that is currently being processed for the development of the procedure for sales en route and provisioning of vessels and aircraft were presented. He also points out that, in recent meetings, information has been provided on the work that the Department is carrying out to maintain the accounting of special taxes in the electronic office, known as the SII of special taxes, consisting of transferring the accounting of stocks to the Tax Administration itself. Ms. Pilar Jurado adds that they are currently working internally in a working group in which territorial and central services participate, evaluating each type of product, hydrocarbons, alcohols and tobacco, and takes the opportunity to thank the companies that have welcomed them into their own facilities, which has allowed them to see how they work first-hand. The Director of the Customs and Excise Department goes on to indicate that all types of companies are being visited: beer manufacturing, wine manufacturing, alcoholic beverages, tobacco, etc., with the aim of understanding their needs and being able to draw conclusions within the group, which will subsequently be passed on to the companies. Another issue discussed at the working group meetings was the elimination of the regional section of the hydrocarbon tax, and the ministerial order regarding the declaration model for this tax was also modified. Finally, to conclude her speech, Ms. Pilar Jurado points out that the self-assessment model for the electricity tax is being modified to include a box detailing the supply or consumption in agricultural irrigation and industrial activities that obtain tax benefits.

Mr. Jesús Gascón thanks Ms. Pilar Jurado for her intervention and then gives the floor to Mr. Manuel Trillo, Central Delegate for Large Taxpayers, so that he can comment on the activity of the Cooperative Relationship working group.

Mr. Manuel Trillo, after offering his full willingness to the attendees to reach an understanding within the controversy that will inevitably arise, begins his presentation by pointing out that all members of the working group should consider what benefit can be obtained from the cooperative relationship; That is to say, we should analyze what each person needs and from there look for useful instruments to achieve it. The Central Delegate for Large Taxpayers continues by apologising for the cancellation of the working group meeting scheduled for 2 July, and announces that the meeting will continue in September. Returning to the previous topic, Mr. Manuel Trillo makes reference to the transparency reports submitted by large companies and which are being analysed by specialised teams, with the aim of drawing conclusions that can be subsequently debated within the working group. He added that work is being done to obtain information to begin working on early risk detection and thus avoid potential disputes. The first reflection, says Mr Manuel Trillo, would be to ask whether transparency reports serve this objective. Transparency reports should serve everyone: For companies, they should be a good means of communication, a good means of raising operations, problems, doubts, etc., which could be assessed from the beginning by the Tax Agency, and for the latter, they should be a good tool to know how to work in the future. Mr. Manuel Trillo concludes by indicating that this would be one of the issues to be addressed in this working group.

Mr. Jesús Gascón thanks Mr. Manuel Trillo for his intervention and points out that, although there is a section for “Questions and requests” on the agenda, if anyone wants to comment on any issue related to the working groups, they can do so at that time, without prejudice to the possibility of speaking again at the end of the meeting.

Ms. Carmen Alonso, a collaborator of the Technical Secretariat and representative of Banco Santander, took this opportunity to introduce herself and thank everyone for holding the meeting. He points out that the continuity in the holding of working groups is interesting and adds that although some groups, such as the Analysis of Tax Regulations and the Reduction of Conflicts, which have focused mainly on the Country by Country Report, because it is a topic of concern at that time, the common interest is that, through these groups, help is provided to understand the criteria of the Tax Agency and reduce conflicts, since the purpose of the Large Business Forum is ultimately the cooperative relationship and not just to provide transparency reports to improve tax control. Ms. Carmen Alonso also requests that, in these uncertain times when new reforms are being considered, companies be included and that these reforms can be discussed in working groups.

Mr. Jesús Gascón continues by expressing his agreement with what Ms. Carmen Alonso said and adds that the content of the groups has to evolve according to the needs of each moment. He then gives the floor to Mr. Antonio Lafuente, representative of MAPFRE.

Mr. Antonio Lafuente reiterates the claim that he has been making for some time in relation to the data that appear in the reports of the Tax Agency regarding the rates of large companies, since he considers that these data do not represent what they should really represent, and adds that this fact is causing a lot of damage in the eyes of public opinion. In this regard, Mr. Antonio Lafuente points out that the idea he conveys is that large companies pay taxes at a rate of around 7%, and this is not really the case since, specifically, the group he represents pays taxes at a rate close to 30%. Mr. Antonio Lafuente goes on to say that the problem is comparing the tax paid in Spain with the profit obtained worldwide, thus obtaining rates that do not reflect reality. If all international taxes paid by companies, which ultimately constitute corporate taxes, were included in the numerator, these rates would be adjusted to reflect reality. In light of the above, Mr. Antonio Lafuente requests the possibility of creating a joint team to further explore this issue and reach an agreement on a figure that is more representative of the reality of Spanish companies.

Regarding the request made, Mr. Jesús Gascón points out that this is a problem that he is aware of and that, although it is actually a piece of data on one page of a very dense report, it is true that the communication policy has focused on this percentage. He goes on to point out that the annual report on tax collection for 2017 will be published shortly and anticipates that this data will continue to be included in it, since its elimination would be counterproductive, and it would be better to maintain the historical series. Mr. Jesús Gascón adds that a further explanation could be offered on this data and in this regard the Country by Country Repport, that is, model 231, could be an opportunity. Mr. Jesús Gascón is committed to considering this option, or if necessary, he will consider the possibility of seeking a differentiated product focused exclusively on groups, with the aim of improving communication and being more transparent about the taxes that large companies actually pay.

Next, Mr. José María Vallejo, representing BBVA, took the floor, pointing out that neither the organization nor the initiative had changed essentially, only the people, and he highlighted the importance of the Forum's commitment to the cooperative relationship. He adds that this relationship requires a permanent renewal of vows, since it is an initiative that is built by everyone and is influenced by aspects such as the social and political moment. Next, Mr. José María Vallejo, shows his agreement with what was previously pointed out by Mr. Jesús Gascón in relation to the problem of unequal treatment of taxpayers and the need to carry out an exercise of transmitting this reality to society, in a transparent and clear manner. He states that it is important to move forward in the cooperative relationship and once the validity of this relationship and the good will of the parties have been accredited, the next step would be to translate it into instruments. In relation to the idea of compliance , to which the Director of the Inspection Department, Mr. José María Vallejo, has referred, he points out the need for all those present, as very important economic agents for the country, to be able to exercise empathy and act as partners, so that not only will they contribute to legal security, but also to financial security, and in some way, they will add value to Spain as a place of investment. Regarding the comments made by the Central Delegate for Large Taxpayers on the transparency report, Mr. José María Vallejo highlights the courage of everyone in this initiative, adding that this is an area in which we must begin to land and in which there is room for work. Finally, in relation to what was pointed out by Mr Antonio Lafuente, representative of MAPFRE, regarding the rates resulting from the reports of the Tax Agency, Mr José María Vallejo agrees with what was indicated by Mr Jesús Gascón on the need to maintain the historical series and the methodology, although he is in favour of working on communication, since it entails an undeserved reputational cost.

Mr. Jesús Gascón thanks Mr. José María Vallejo for his intervention and highlights the perfect summary he has given of all the topics discussed up to that point in the meeting. He then asks again if anyone else is interested in speaking at that time and since there are no other interventions he moves on to the next point on the agenda.

4. Adaptation of the procedure for adhering to the Code of Good Tax Practices to the General Data Protection Regulation

Mr. Jesús Gascón gives the floor to Ms. Rosa María Prieto, who explains that since the General Data Protection Regulation came into force on May 25, it is necessary to modify the annex of the Code of Good Practices. Ms. Rosa María Prieto points out that the aforementioned annex expressly indicates that the Tax Agency may report which entities have adhered to the Code unless the company expressly states otherwise and based on this the list of companies adhering to the Code of Good Practices has been published. Since the Data Protection Regulation requires express consent from companies to be published as a company adhering to the Code and since not all companies gave such express consent when they joined, it is appropriate, for procedural and formal reasons, to submit this adaptation of the Code to the General Data Protection Regulation to a vote by the plenary representatives. Ms. Rosa María Prieto puts the adaptation to a vote and then, given that there is no opposition, proceeds to approve the proposal. It also informs that an email will be sent to all those companies that did not give such express consent so that they may send it and, in the event that any of them did not send it or stated otherwise, it would not appear published in the list of companies adhering to the Code.

5. Next call

Regarding the next meeting, Mr. Jesús Gascón expressed the intention to maintain the semi-annual frequency of the meetings, indicating in this regard that the next meeting would be held approximately in November.

He then gives way to the round of requests and questions , and at this point he takes the opportunity to express his concern about the percentage of Spanish companies, only 31%, that have contingency plans in place for the Brexit. With the intention of being able to convey a message of reassurance to the Ministry, Mr. Jesús Gascón requests the opinion of those present on this matter.

Mr. Francisco Javier Baulenas, representative of SEAT, took the floor and pointed out that the contingency plan ultimately means determining how many more resources have to be allocated to deal with possible contingencies that may arise in the management of customs procedures, and in his particular case, in the export of vehicles and parts to the United Kingdom. He believes that this is a subject that is still difficult to assess, given that there is a lot of uncertainty and the terms under which the process will be carried out are not yet known. Brexit. He goes on to say that, in this regard, any information that the Tax Agency may have on this matter would be helpful. Taking advantage of his intervention and in relation to the subject of the cooperative relationship, the representative of SEAT points out that this cooperative relationship has essentially been specified in two instruments. One would be the fiscal transparency report, which now requires specification by the Tax Agency, since many companies have already submitted the report, attended follow-up meetings and provided additional documentation. The other instrument would be the possible consultations that could be presented based on the Code of Good Practices. Mr. Francisco Javier Baulenas believes that it would be important to revive this matter once again, given that it has recently been paralyzed due to the difficulties that the General Directorate of Taxes is having in resolving queries, raising the possibility that the Tax Agency contact the General Directorate of Taxes in order to try to speed up the response to them.

Mr. Jesús Gascón thanks the intervention of Mr. Francisco Javier Baulenas. He points out that, in relation to contingency plans, in the case of the Tax Agency, these plans translate into the necessary personnel to face the risks that may arise, although there is total uncertainty. Regarding legal security and the available instruments, Mr. Jesús Gascón clarifies that they are in contact with the General Directorate of Taxes, not only to help them as much as possible so that the answers to queries are made in a shorter time, but also to see how they can collaborate more effectively. According to the information obtained through the cooperative relationship models of both this Forum and the Forum of Associations and Colleges of Tax Professionals, in many cases the incidents go beyond specific cases that affect a company, so when dealing with problems that affect a sector or a group of taxpayers it would be important to provide a faster response. Mr Jesús Gascón notes that he has taken note of the comments made, although this is an issue on which the Tax Agency is already working.

Mr. Francisco Javier Baulenas takes the floor again, raising the possibility that companies that adhere to the Code of Good Practices, submit transparency reports, etc., may have a certain priority in the response to the queries they submit to the General Directorate of Taxes, since this type of advantage translates into greater solidity in the cooperative relationship, which is ultimately what is sought.

Next, Mr. Jesús Gascón intervenes, who, in relation to the proposal made by Mr. Francisco Javier Baulenas and the unequal treatment of taxpayers, points out that it is necessary to first build a new model and adds that currently the most feasible thing is to use these communication channels to detect general problems to give priority to, and later, in a future evolution of the cooperative model, to be able to give priority to other individual problems that affect those who have opted for this cooperative model. Mr. Jesús Gascón concludes by pointing out that all efforts made to reduce disputes and resolve them as quickly as possible will be welcomed by the Tax Agency.

Mr. Jacinto Escaplés, representative of AMADEUS IT GROUP, took the floor and, in relation to the topics discussed on cooperative relations and conflict, indicated that avoiding conflict requires first of all a “regulatory disarmament” that allows companies to know in advance. Mr. Jacinto Escaplés expresses his particular concern about the possible creation of a “technological” tax, the primary objective of which would be to pursue certain actions by certain companies, but which, collaterally, will affect all companies to a greater or lesser extent. He goes on to point out that, although he does not know the content of the norm that is going to be developed, he is convinced that it will give rise to important controversies and discussions at national and international level. Given this concern, Mr. Jacinto Escaplés raises the possibility that, before the regulation is implemented, companies that may be affected will be included, since this tax will result in double taxation which, for companies like the one he represents, which already pay taxes at a rate of 27 to 31%, will represent a significant amount.

Mr. Jesús Gascón also points out the Tax Agency's concern regarding possible regulatory changes. However, he adds that, based on his personal experience, more as former Director of Taxes than as Director General of the State Agency for Tax Administration, it must be taken into account that, on the occasion of changes in the Government, the media echo working hypotheses that do not always end up materializing, so at this time it is not possible to clearly visualize what could be turned into a bill in the short term. Mr. Jesús Gascón goes on to point out that the opinion of the Tax Agency is that the regulatory process should be orthodox, that there should be a preliminary draft that is subject to public information before becoming a project and being sent to the Cortes Generales.

Since there were no further interventions, Mr. Jesús Gascón concluded by thanking all those present for their presence and inviting them to the next plenary session, which is expected to take place in November.