Tax Stories: Life, Business & Tax

Would you like to know more? Feel free to read ⁠⁠tax blogs⁠⁠ by Janis Taukacs or ⁠⁠resolve here any tax disputes, or even better - plan your tax matters here timely, so you can avoid such disputes⁠.

Moving to the Netherlands

The fascinating story of Itzik’s life and career at this podcast starts like many life events - by chance. Itzik started teaching at universities because a professor got ill and needed a substitute. Then he moved to study international tax in Leiden, the Netherlands when in the first LLM program there were just 5 students. 

Relations

Itzik suggests that relationships are built for reason, season or lifetime. Investing into people with whom you would like to have relations for the rest of your life shaped his life and career. But how to build relations at the end of 90ies when there was no social networks, just phone and e-mails? That’s when he decided to move to the Netherlands. 

A hug of life

In 1996 while still living in Israel Itzik missed his bus he normally took every morning to work. And that bus had a bomb and no passengers who took that bus survived. Needless to say this event shaped many of his decisions in his life.

Legacy and hunger 

Once you have reached many of your aims one may more start thinking about the others – what do I leave behind? Itzik refers to a motivational speaker Les Brown who said “You have to be hungry in order to be successful”. And at that time Itzik felt comfortable, not hungry. Those two issues started to bother Itzik and he decided he would quit the job and tax and would need to do something else that would help others. 

Art of giving attention

When an opportunity knocks on your door, don’t doubt, because it knocks only once. So, that’s how Itzik turned to business consulting, networking and his bestselling book - The Attention Switch - How to Pay with this Secret Ingredient to Attract,. Influence, Deeply Connect and Get the Success You’ve always Wanted (that you can buy on www.attentionswitch.com). It’s all about listening, not telling. It’s influenced by the book of Dale Carnegie How to Win Friends and Influence People.Itzik thinks that subconsciously people find relations with people they like to deal with. We also spoke of Benjamin Franklin effect – try the podcast to learn about it. 

People are people, everywhere

The frequent travels (when it was still possible) did not indicate too many cultural differences for Itzik, rather similar patterns of human behaviour. Relationship and knowledge is what nobody can take away from you. The less (and smarter) you work, the more money you make. 

Voldemort for lawyers

Lawyers are afraid of mentioning the s.. word. Cause they don’t sell. Really? And what is the unselling process? And life is short – pay attention to those people you like, and don’t do things you don’t enjoy! And be authentic to yourself – tell whatever you think to whomever you want, with all the consequences. 

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Would you like to know more? Feel free to read ⁠⁠tax blogs⁠⁠ by Janis Taukacs or ⁠⁠resolve here any tax disputes, or even better - plan your tax matters here timely, so you can avoid such disputes⁠.

Russian classics

With both prominent tax experts from Russia - Viktor Machekhin and Roustam Vakhitov we start the chat with what was education and taxation like during the Soviet times. The discussion unwinds when Viktor dives into Gogol’s Dead Souls, Saltykov-Shchedrin’s History of a Town and other Russian classics that are actually tax-based stories. The outcome of the latter story seems very relevant for today’s governments, after 2.5 centuries – just let people do what they like to do and they will be happy to pay their taxes. Mikhail Bulgakov’s quote from The White Guard “Everyone knows that tax inspectors are monsters“ cannot be related to the modern tax collectors’, though. 

Learnings from tax-related historical events

If the country has fair tax authorities, at least you understand what you are paying for, says Roustam. He also recalled how the Netherlands was created – partially due to Spanish aggressive tax collection from traders. Even more famous story is the Boston Tea Party that was also partially a tax event. So – tax authorities and governments should keep the taxpayers fairly and happy as much as possible.

Crazy taxes then and now

There is a new book “Rebellion, rascals and revenue” by Michael Keen and Joel Slemrod on historical events around taxes. One of the stories is about India in 19th century where there were taxes for wearing jewellery, moustache or even covering their breasts when going outside. We discussed some older examples from Russia and what our grandchildren might think about some of the current taxes. Such Russian examples are taxes on smoke (a house with one chimney was one taxable unit; for that reason some people made saunas without external chimneys – so called black saunas) and beard. Nowadays the tourist tax and a payment for hardware where copyrighted art can be copied into (while people are normally streaming) seem quite illogical examples. Viktor remembers that during Soviet times there was a tax for men who after certain age do not have children. 

Russian business today - more compliant

Roustam sees that a modern Russian business plays more or less by the same rules as the European ones. Even more, we discussed in what areas the tax authorities are regarded by many experts as technologically and intellectually advanced, thus making the Russian businesses to follow the advancement. An efficient tax dispute resolution system also adds to the trend of having a modern approach to resolving tax issues in Russia lately. In addition to that the Russian tax reform was successful in calling foreign companies (including the ones at offshores) and assets back home by introducing the CFC (Controlled Foreign Corporation) and amnesty legislation a longer while ago. 

The Baltics

Roustam likes the flexibility of the Baltic tax systems, that in smaller countries the changes can be achieved faster, and thus a more modern and competitive approach can be overtaken quicker. He mentions also tax certainty and ability to discuss matters quite openly with the tax authorities as a priority to set up there as well. 

Would you like to know more? Feel free to read ⁠⁠tax blogs⁠⁠ by Janis Taukacs or ⁠⁠resolve here any tax disputes, or even better - plan your tax matters here timely, so you can avoid such disputes⁠.

Constant personal growth

Professor Maisto even now when seemingly he has achieved everything in his life continues to learn. He tries to get his pilot license. And that probably is a fair description of such great minds – they never stop learning. Mr. Maisto likes them both - the practice and academic work, perhaps  he feels  a bit more more as a practitioner rather than academic, because the the problem solving ability comes to light more easily meaning that you see more easily the practical outcome of your work. Mr. Maisto suggests to start a career with a broader view, like he did with the initial studies of European and anti-trust law.

A special recognition by Amsterdam

An award by the mayor of Amsterdam to Mr. Maisto highlights his contribution towards the International Bureau of Fiscal Documentation and the importance of the organisation to the city. 

Motivation still to be very active

He likes to be informed about most of the firm’s cases, but if he needs to pick the most interesting ones then he likes to be involved in tax audits, especially on international aspects, and tax litigation, of course, including the EU Court of Justice. Also meeting many different people, also celebrities, make the profession of a tax lawyer attractive. 

Keys to success of the firm

As of 1991 when the professor established the firm together with three other partners they were betting on a natural growth – carefully selected home-grown talents that eventually become partners. Also it’s important to have a good mix of practitioners and academics on board of the firm. The firm has so called applied university where they do the research that is eventually applied in practice. The firm also has an internal tax academy from May to November for 15 students taught (whole Friday and ½ Saturday) by all the firm members. The firm also has bi-weekly internal meetings on EU tax, tax treaties, M&A, VAT, and local tax. 

Two weaknesses of the tax system

In the first instance courts judges are dealing with tax only part time. By the way, on average Italian tax cases are heard for 10 years through all the court instances, and over ½ million tax cases are pending to be heard at the 1st instance courts. Professor Maisto also praises the systems where in court hearings all the case aspects are discussed in depth. Now in Europe a good change is a possibility of an arbitration on international tax treaties thus avoiding the local litigation. 

Story of creativity in tax practice 

Perhaps a learning for Latvia (and maybe other systems) from the Italian litigation system could be that in tax litigation there is an attorney general who also provides an independent opinion, like in the EU Court of Justice. The role of this position is also reflected in the tax story picked up by Mr. Maisto on how he in a creative way got around a provision in the law strictly stating the roles of persons in court hearings. 

Keys to success of a life

In the professor’s view you have to be strict to your duties, work that you love and are passionate about and only then enjoy your life. Because passion and love are the keys to success of a person and of a life. Only then when you enjoy the life you can feel more comfortable with yourself. However, for younger generation he suggests to be less strict in observing this rule, in order to develop ideas and hobbies. 

Would you like to know more? Feel free to read ⁠⁠tax blogs⁠⁠ by Janis Taukacs or ⁠⁠resolve here any tax disputes, or even better - plan your tax matters here timely, so you can avoid such disputes⁠.

The only way for a small country 

Hobbies. In this episode Kaido explains about break-dancing that it will be in Paris Olympic games and how to measure who is a better dancer. We spoke about crypto-currencies, that it’s now still a bit like when Estonia got back its independence and there were not that many regulations, but it’s here to stay. 

Authorities. My attempt to get a story about movie Tenet that was filmed in Estonia failed, but Tanel shared insights on how tax authorities got as business-friendly and IT-advanced as they are now. He says that the authorities realised that being business-friendly generates more money for the state, and Estonia is not the place where investors can be ripped off. A small country cannot afford acting otherwise. And the IT systems of the tax authorities are top notch. 95% of VAT payers get their VAT refund in 5 days. 

Startups. Kaido thinks that the only way for a small country to get bigger is to support IT business that does not recognise physical borders. Government simply does not interfere with this natural progress of the IT sector and its unicorns. Estonians praise Latvian tax system of reduced taxation of startup employees and just one year stock option plan possibility. 

The Baltics. A way to look at the differences is that Estonia and Latvia has this deferred corporate tax model (20% upon profit distribution), whereas Lithuania has a conventional (15%) system with R&D incentives. Latvia has a largest Russian-speaking community in the EU. Estonians are becoming more like Scandinavians – calm, nice to deal with. Lithuania is a bigger market, but also bigger competition. It also may depend on industry – say, road transport and fintech industry is more developed in Lithuania. But overall the cultural differences are not that significant.

Tax disputes and fraud. If the tax authorities understand there is no such strong evidence as they initially thought, they can agree on the tax assessment amount that corresponds to that evidence. In order to have less VAT fraud companies can go online and check information about turnover and employment taxes paid, that is updated on a quarterly basis. This helps also for public procurement purposes. In Estonia criminal liability is normally possible, if the breach is intentional and the amount of unpaid taxes exceeds EUR 40,000. 

On football

We started the conversation with.. football. One guess why the football related tax scandals occurred might be a bad choice of external tax consultants. This presents a wider problem – the tax is so complex that for ordinary people (also football players in this sense) is difficult to choose if the structure presented by a consultant is too aggressive. 

Tax story

The Accountant is the movie that comes to Karl’s mind when thinking of a tax story. This made his friends wonder is a tax is really that exciting, and for me this made a new entry to my list of movies to watch. The trailer looks good. 

In the law school tax seemed to be boring

Even Karl admits that his perception at the law school was that tax is a boring topic.. until he saw an add by Maersk. There he quickly realised that tax in practice is different to what you learn at law school. You better understand the business there, meet many people from around the world, solve some super-challenging international issue. Thereafter he never wanted to do something else. 

The tax systems and authorities

When speaking of cultural differences and the best systems from around the world Karl highlights Asian and African countries that apply a lot of withholding taxes that are detrimental to business and economy in general. He also highlighted the UK HMRC as the most professional and skilled tax authority it’s a pleasure to work with. Even in disagreements their position is understandable and the dispute resolution system is well-designed. Their guidelines are written in a way so that non-tax people would understand as well. 

On transformation of the company from black to green

It was fascinating to hear how Orsted transformed from having black business with coal-heated plants and oil & gas business to the green energy leader. Now it is the most sustainable energy company and second most sustainable company in the world, including transparency in tax matters. Karl believes that transparency will be a license to operate in many areas in the future. Karl mentioned also Repsol tax report as an example of being transparent. I wonder why in our country still it’s possible to win public procurements and receive Covid-19 support without paying full taxes properly. 

Then and now, and the future

Comparing to 2007 when Karl started at Maersk importance of a tax department has increased dramatically within any business. It’s a board level issue today. And tax has become an ethical, not only a legal issue. But what is a fair share many are talking about? Besides, we are seeing an end to offshore structures, at least for companies in Europe. And we will see changes in international taxation of businesses on internet. Regarding environmental taxation we see that heavy polluters pay low CO2 taxes, taxation favours oil & gas industry. Polluters have to start paying the price of what it costs to pollute. His fear about the future of taxation is a further complication of transfer pricing and unilateral measures taken by individual countries that could lead to double taxation.

Would you like to know more? Feel free to read ⁠⁠tax blogs⁠⁠ by Janis Taukacs or ⁠⁠resolve here any tax disputes, or even better - plan your tax matters here timely, so you can avoid such disputes⁠.

On football

We started the conversation with.. football. One guess why the football related tax scandals occurred might be a bad choice of external tax consultants. This presents a wider problem – the tax is so complex that for ordinary people (also football players in this sense) is difficult to choose if the structure presented by a consultant is too aggressive. 

Tax story

The Accountant is the movie that comes to Karl’s mind when thinking of a tax story. This made his friends wonder is a tax is really that exciting, and for me this made a new entry to my list of movies to watch. The trailer looks good. 

In the law school tax seemed to be boring

Even Karl admits that his perception at the law school was that tax is a boring topic.. until he saw an add by Maersk. There he quickly realised that tax in practice is different to what you learn at law school. You better understand the business there, meet many people from around the world, solve some super-challenging international issue. Thereafter he never wanted to do something else. 

The tax systems and authorities

When speaking of cultural differences and the best systems from around the world Karl highlights Asian and African countries that apply a lot of withholding taxes that are detrimental to business and economy in general. He also highlighted the UK HMRC as the most professional and skilled tax authority it’s a pleasure to work with. Even in disagreements their position is understandable and the dispute resolution system is well-designed. Their guidelines are written in a way so that non-tax people would understand as well. 

On transformation of the company from black to green

It was fascinating to hear how Orsted transformed from having black business with coal-heated plants and oil & gas business to the green energy leader. Now it is the most sustainable energy company and second most sustainable company in the world, including transparency in tax matters. Karl believes that transparency will be a license to operate in many areas in the future. Karl mentioned also Repsol tax report as an example of being transparent. I wonder why in our country still it’s possible to win public procurements and receive Covid-19 support without paying full taxes properly. 

Then and now, and the future

Comparing to 2007 when Karl started at Maersk importance of a tax department has increased dramatically within any business. It’s a board level issue today. And tax has become an ethical, not only a legal issue. But what is a fair share many are talking about? Besides, we are seeing an end to offshore structures, at least for companies in Europe. And we will see changes in international taxation of businesses on internet. Regarding environmental taxation we see that heavy polluters pay low CO2 taxes, taxation favours oil & gas industry. Polluters have to start paying the price of what it costs to pollute. His fear about the future of taxation is a further complication of transfer pricing and unilateral measures taken by individual countries that could lead to double taxation.

Wim shares his vision on:

- how has the tax advice changed since Wim was a head of tax of a multinational company comparing to now when he is a head of a global advisory firm;  

- why did he choose tax advice as a profession;  

- where he sees a benefit of Tax Stories podcast;  

- his book - On a Journey. A vision of International Tax Management;

- what is the difference between working for a multinational company vs a global advisory firm;

- and of course - WTS Global.

Would you like to know more? Feel free to read ⁠⁠tax blogs⁠⁠ by Janis Taukacs or ⁠⁠resolve here any tax disputes, or even better - plan your tax matters here timely, so you can avoid such disputes⁠.

How has the tax advice changed since Wim was a head of tax of a multinational company comparing to now when he is a head of a global advisory firm?

The conversation started with.. my beloved John Grisham & The Firm, of course. How the non-transparent world of the times of The Firm changed to substance-over-form, transparency and data leakage. This has transformed the needs to manage the tax risks within companies – from complex rules still possible to explain to concepts now (like a fair share and a general anti-avoidance debates) that are more reputation and common sense based. 

Why tax?

That is exactly why Wim loves tax - because of its complexity and because its an international practice area. And tax is a premium place to learn about mechanics of a business – supply chain, funding, acquisition, operation. Just one conversation with a senior of a multinational company more than 25 years ago telling this truth inspired Wim to choose the profession. 

Why Wim agreed to the interview?

On the same note Wim picks up why he likes the idea of Tax Stories podcast – with experienced people sharing their thoughts others might be as inspired as he was when being at the crossroads 25 years ago: “if there is just one person who just picks up one line of the podcast, I will be happy.”

“On a Journey. A vision of International Tax Management”[1]

It’s an old pilgrimage route to Santiago de Compostella that is described in the book together with Wim’s thoughts on tax management during that long journey. A nice dinner and chatting with friends and people met on the journey gave space to think broadly about the bigger questions that matter in everyone’s life. Also for me as an external advisor it was interesting to learn in the book what a head of tax of a large multinational firm is thinking about. 

In-house vs. outsourcing

Being inhouse means to deal with risk management, governance, project management – coordinating international situations with advisors and stake-holders. “Peter, are you willing to give up the tax code,” Wim asked once when hiring an inhouse for a role of an international tax manager in charge of 25 countries, because in a role like that a person becomes more a project manager, not so much an expert advisor. Whereas the outsourced consultants should help the in-house to make a decision. Different worlds, but both fascinating. 

The best kept secret

Wim also has been teaching within a business management program @ CEDEP / INSEAD in Fountainebleau, France for a consortium of 25 large multinational companies, where a Tax Leadership program has now been set up as well, for both tax practice leaders of WTS member firms and their clients. 

WTS Global

The network with Fidal law firm in France joining recently is crossing ~5000 tax experts mark globally – in more than 100 countries, with more than ½ billion in tax advice revenues. The network has built a TP centre in Manila, AI centre in Berlin, a US & digital hub in Amsterdam to help US and global (esp. digital) platforms to set up in Europe, the training facilities for the clients, a strong presence in Africa for setting up there. One of the interesting projects together with a client is an app to help with legal reorganisations, which just raised USD 3.6m to bring it to the next level. An audit is where WTS will never go and that makes it different from Big4. Many of the WTS member firms have emerged from people who wanted to do something different and with an entrepreneurial and innovative spirit became successful quickly. Now those firms unite in a global success story. The next two regions on Wim’s travel lists are Ruanda and the Baltics which says a lot about importance of the businesses there.

You can hear that the guests are amazing personalities, not only top tax and business professionals. I hope that stories of the guests and sharing my experiences of over 25 years in tax consulting will help you to see the ideas of: 

• what you as a person can do differently, 
• how your business can be improved, 
• what we all can do to improve tax systems in the countries we live in. 

We will spread the light on cultural and historical sides of taxation from all over the world. I hope to open the doors for challenging everything we currently have, including: 

• what is the purpose of what we as humans do in everyday lives, 
• what corporate structuring ideas the others have, 
• why the systems are as they are?

Tax scandals break out now more than ever – be it an offshore, a VAT fraud or abuse of a corporate structure. Many of them end up in books and movies – let’s dive into the details!

My hope is that the podcast will not only educate and entertain you, but also make the world to be a better place. I’m Janis Taukacs and these are my Tax Stories. 

Would you like to know more? Feel free to read ⁠⁠tax blogs⁠⁠ by Janis Taukacs or ⁠⁠resolve here any tax disputes, or even better - plan your tax matters here timely, so you can avoid such disputes⁠.

Bold move

Philippos did a bold move in his career three years ago. After being a tax partner in the leading law firm in Cyprus for many years he became a business consultant and coach. We spoke about his feelings and reasoning behind this jump from a stable, highly remunerated environment with a responsibility for the family with three kids into uncertainty, excitement and adventure. Philippos admits he is happier, but it’s not easier now. 

Happiness

Then we float away from tax for a while to speak about Philippos’ new book MARVEL of Happiness. MARVEL is a motivational acronym that stands for Meaning, Autonomy, Relatedness, Values, Experience and Learning. Those principles are relevant at least for team and business leaders. Whereas the book on happiness is a broader try to help anyone feel better in their lives. It’s a combination of philosophy, personal stories, psychology. We also spoke on the reasons why lawyers suffer from depression on average four times more than others, why they are gifted with a blessing and a curse, why many of them become even addicted to cocaine.   

Moral side of tax

Philippos reveals that creativity of designing tax structures gave him joy of working with tax. This is no surprise, as his creativity can bee seen in his podcasts, books, even songs he has composed. And a cherry on the cake was the client satisfaction. On the other hand with the structures come a moral dilemma of potentially reducing the country’s tax revenues, in the country you live and would like to be prosperous.. A similar moral dilemma is in a tax litigation when a lawyer cannot really tell at the beginning if the client is a tax fraudster or not, if he does not want to represent fraudsters. 

Tax story

It was connected with a Russian money in a structure that ignored all the latest tax developments that introduced all sorts of anti-avoidance provisions and continued to do the business like in the good old times. They kept on paying EUR 30k/year for maintaining a corporate infrastructure for paying hundreds of millions in dividends through a Cyprus holding. Until there came a complex two page letter from the Russian authorities, and a head of the Russian tax office was an ex Big4 tax expert. It took about a month of sleepless nights to figure out what to reply. If the Russian administration would prove the Cyprus holding is not a beneficial owner of the dividends received from Russia, the Russian authorities could disregard the tax treaty benefits. In money terms that would be EUR 20 mil. more in tax per year. So, no wonder the Russians were panicking. 

The game has changed

Tax anti-avoidance rules have changed Cyprus business environment. Transparency, a register of beneficial owners (in a combination with a criminal liability for non-disclosure), potential enquiries from the tax authorities of countries of the operating business have an impact on the structures, which mostly create an economic substance in Cyprus as a result of it all. Fiduciary services industry in Cyprus is shrinking. 

Aristotle about liturgy instead of income tax

Aristotle argued that a true wealth consists of doing good. There was no income tax at that time, but there was liturgy – payments by the rich for a specific purpose, be it a bridge or a school. It probably cannot be implemented now 1:1, but it reminds that people are happy to pay, if they see a connection to how the money is spent. Thus the rich were quite often paying even more than requested. Maybe nowadays the large multinationals like Uber or Tesla, for instance, could contribute to the development of transportation systems. Why the rich also now cannot contribute not only money, but also expertise to a particular public good (apart their charities) thus bypassing all the bureaucracy?