After more than seventy-five years, TEI’s global influence is, by any measure, enormous. An illustrative example is the recent Organisation for Economic Co-operation and Development (OECD) Stakeholder Day on Global Mobility, in which two members of TEI’s EMEA Chapter, Karine Halimi-Guez, vice president and head of tax at Booking.com, and Sandra Esteves, senior tax director at Qlik, were invited to participate. We interviewed them to find out more about what happened at the meeting. Michael Levin-Epstein, Tax Executive’s senior editor, conducted the interview in November.
Michael Levin-Epstein: Both of you are members of TEI’s EMEA Chapter, and Sandra, you are also on the chapter’s board and you chair the EMEA Direct Tax Committee. You both recently participated in the OECD’s Stakeholder Day on Global Mobility. How did you get involved in that meeting?
Karine Halimi-Guez: That meeting was triggered by many meetings before with the OECD but also with other governing bodies, those being the EU Commission and the United Nations. More specifically with the OECD, we got to meet Olivia Long of the OECD, who was assigned the task to drive the analysis of “work from anywhere” and its impact on corporation and employee taxation. We had conversations with her prior to that day, and when that day was organized, I guess she probably found it quite natural to invite both of us to that event. One of the key benefits is that, as you say, we are members of TEI, and, more specifically, that Sandra is a member of the board of the EMEA Chapter. We clearly positioned TEI as a key partner with the OECD and also with the other governing bodies, thanks to the reach we enjoy with our members, which represents a source of comments and understanding of really what’s happening on the ground. To make a long story short, it’s both our previous encounters with the OECD and most probably the fact that we both belong to TEI that I think made it appealing to Olivia to invite us.
Sandra Esteves: Before addressing your question, it may be helpful to explain what the OECD Global Mobility Stakeholder Day meeting was. It was a multiday meeting between the OECD and the 145 members of the OECD/G20 Inclusive Framework, plus a representative of the European Union, to debate the challenges of working remote, from a tax, legal, and employment [standpoint], among other issues. I echo Karine’s feedback. The invitation to that meeting is a recognition of the OECD’s trust in TEI as a partner. Karine, Monique van Herksen—who has been a great partner in this journey to advocate for a tax-simple and -secure working-from-anywhere policy for people and MNEs—and I had multiple meetings with tax policymakers. Karine and I joined those meetings as TEI members. TEI was a door opener. It’s also about the content we bring; people may not realize that before the meetings we would gather input from TEI colleagues about the topics and solutions that we would be discussing. The survey on working from anywhere, released during last summer, is really the best example.
Levin-Epstein: What were the specific tax issues that multinational enterprises face with the rise of “work from home” and “work from anywhere” kinds of arrangements that were discussed at the meeting?
Halimi-Guez: That’s a very broad topic, and Sandra and I, with TEI, are really focusing on one of those—we believe the most interesting aspect—which is permanent hiring from abroad. In your question, you touched upon very different situations, very different scenarios. You have the scenario of working from home when you are in the same country. From a tax perspective this is not a big deal, in all honesty, and we all do that, or most do that, for a portion of the week, and that’s not really a big deal. Then you have another situation, which is temporary working from abroad. I’m based in the Netherlands, so an employee hired in the Netherlands, lives in the Netherlands, works from home or from the office—that doesn’t really matter—but for a number of days or weeks per year, that employee can go and work from the family house in [the] south of France during the summer. That’s the temporary working from abroad. Then you have permanent working from abroad. In situations where the Dutch employer finds a great talent in Spain, but that person based in Spain doesn’t want to relocate to the Netherlands for at least a very good reason—when you know the weather in Spain versus in the Netherlands, but usually, typically, you can have family constraints, etc. That talent says, “Wait a minute. Why should I relocate? We’ve all been working remote for two years during COVID, and it was working very fine. Why would that become an issue?” That is the situation we are focusing on. That particular situation triggers problems both from the perspective of employee taxation as well as from the perspective of corporate taxation. From an employee taxation [standpoint], the key issue is, Where is the salary taxable from the perspective of income tax and Social Security and payroll taxes? That’s the first point of attention. The second point is, How is that taxation happening, and how is the employer who is located in another country, how in practice can we make it manageable for that employer to entertain and to counter-provide for the taxation of the salary that he pays to that employee abroad? [Another] aspect is, from the corporate tax perspective, does that employee reach the threshold of permanent establishment [PE]? You have two sub-cases there, two sub-scenarios. Is that employee working from their home? Or is that employee working from a local subsidiary, where they are hired or localized? So, PE typically is the number one topic or concern for TEI members and, in general, for all the practitioners that we’ve met on the topic. And then you have, as a second level to that question, if you get to the level of PE, then how do you attribute profits to that PE? So, overall, the PE and its ramifications is the number one issue that we’re seeing from a corporate perspective.
Levin-Epstein: To use your example, if somebody lives in Spain and has always worked in Spain, you’re going to face those problems right from the beginning, right? The issues of taxation, both from the employee’s point of view and the corporate point of view, have been established, is that correct?
Halimi-Guez: Yep.
Esteves: Existing tax rules were made for situations where the employee and the employer are in the same country, that has been the “traditional” way of working for many years. In the situations that Karine described, multinationals are faced with a “new” way of working, i.e., the employee is temporarily or permanently based in another country. And because international tax rules cater for the “traditional” way of working, employees and multinationals simply lack a tax framework that provides tax certainty for this “new” reality. This is also the feedback we got from the 362 TEI colleagues that responded to the working from anywhere survey—solutions are needed.
Levin-Epstein: That situation would appear to be different than if somebody, say, lived in the United States and then said, “I’m not going to live in the Netherlands; I’m going to live in Spain.” Is that correct, that that’s a different situation?
Halimi-Guez: Well, it’s just a nuance of the same, or a variation of the same scenario, whether that person moves to another country or whether that person stays in the country where they are. Of course, if that person moves to another country, then the question is, Is that person becoming a resident of the new country, a taxed resident of the new country? That’s an extra layer of analysis that you need to make. But once the analysis is made, you still go back to the same questions about taxation of the salary for income tax and for payroll taxes and PE. In the end, it always boils down to these topics. Again, you have nuances and variations around the same scenario.
Levin-Epstein: Let’s go to the other situation that you said was simpler, when somebody lives in the country and is just working from home. Isn’t it nuanced a little bit if the employer requires the worker to be in the office, say, a couple days a week?
Halimi-Guez: If there is no border between the employee and the employer, there’s no real relevance from a tax perspective. It’s a very relevant topic, don’t get me wrong, for other considerations—for culture; for maybe insurance, what happens if you have an accident while working from home? For commuting, how do you manage the reimbursement of the commuting costs when you actually do not commute every day to the office? All of these things are obviously relevant questions in the relationship between the employer and the employees, but if they happen in the same country, there’s no real tax relevance, or very limited tax relevance, to that.
Esteves: That would definitely be a much simpler solution, as long as the employer and the employee are in the same country, allowing an employee to work from his/her home in that country should raise no tax concern. In fact, we learned that some multinationals are requiring employees to go back to the office and simply disallowing temporary or remote cross-border work—if it’s too complex and time consuming to manage and track, the easiest solution is to remove the remote work flexibility. The question that I would ask is, What is the impact of a “mandatory work from the office” policy on employee retention and hiring? Earlier I mentioned the TEI survey on working from anywhere. We asked TEI members if they experienced an increase in employee turnover and/or rejection of job offers because of the employee not being allowed to work permanently remote. An overwhelming 63.7 percent said yes, their companies experience an increase in employee turnover and/or rejection of job offers. This means that it is not just about providing employees with the flexibility to work from home (in the same country). It is broader than that, the lack of a simple framework that provides certainty about the outcome of hiring remotely is impacting the multinationals’ capacity to access and retain talent, and ultimately their ability to grow.
Levin-Epstein: In terms of talking about what the OECD is doing, were there any key takeaways from the meeting?
Halimi-Guez: That stakeholder day was the first one. The purpose of the OECD was really to try to wrap their arms around the topic. And I think they are still doing this as we speak. I think where we are, we are quite ahead of the game. From that angle, I would like to mention, yes, it’s Sandra and myself for TEI, but we are doing this with our dear friend Monique van Herksen. She’s a partner from Simmons & Simmons. We’ve been working, the three of us together, on not only understanding what these scenarios meant, but also going one step further and proposing solutions, or innovative ideas, as to how to approach these new topics. Again, what you have to understand is the laws as they stand today, they were not built for that new reality. They were not built for that new norm. These are requests that we see, they are growing. I can tell you from my desk and from many other head of tax desks, we see those requests all the time. This started, let’s say, a year, a year and a half ago, when the COVID constraints started recessing. But the realization came very quickly that the rules do not support that new reality. If you think about Article 15 in the tax treaties, which talks about the taxation of employment salaries, Article 15 was not drafted with that particular scenario in mind. It is completely useless to address that particular scenario. Going back to your question, some of the takeaways of the day, first, it’s a very broad and complex topic. As I said, we are focusing on permanent hiring from abroad, but there are other people focusing also on the temporary working from abroad. Also, we are focusing on employee–employer, but you have also other nuances with freelance people, there’s a ton of different colors to that. The second big takeaway is that this is requested by the people, not by multinationals. Again, as we keep saying, multinationals would vastly prefer everybody back in the office. The previous world was so much easier to manage. But the world has changed, and that’s the third takeaway. The world has changed forever. The genie is out of the bottle, and it ain’t going back in. What we need to do is to think practical, be pragmatic, be ambitious in how we can change the rules so that they make that new norm possible. Today, multinationals are scared. Because of those complexities, because the laws are very unclear and do not provide for these situations, it’s very hard to make it possible. And that’s what we are trying to change.
Esteves: Karine put it simply: the genie is out of the bottle, and it ain’t going back in. A big challenge for multinationals, and for the OECD, is for the countries to understand and agree to prioritize tax policies on working from anywhere. I hope the main takeaway for the countries attending the OECD meeting is that permanent work from anywhere is real, is impacting multinationals, and that it is urgent to take action and implement simple solutions.
Levin-Epstein: Is the goal here to come up with policies that eventually will become standard operating policies in the new normal?
Halimi-Guez: This is absolutely the ultimate goal. TEI members play a crucial role here, because thanks to TEI members, we were able to run a survey, which is to this date, I believe, the largest survey on the topic. Both Sandra and I were able to leverage the results of that survey in many instances, the latest being when I presented the topic at the International Fiscal Association Congress in Cancun a couple of weeks ago. Because of the number of respondents that we got—362—this is the largest on the topic. We have not only obtained input on what the typical topics, the typical issues, are—and they are what I just told you about previously—but also input with respect to possible solutions that we were thinking about, whether they would support such-and-such solution. From that perspective, I think TEI members can be instrumental in shaping these new policies going forward.
Esteves: We wouldn’t be as successful if we didn’t have a way forward. More important, the goal is to have solutions that are practical, simple, and provide certainty for multinationals, and transparent, compliant, and manageable for tax administrations. Win-win solutions.
Levin-Epstein: Has this survey been published anywhere?
Halimi-Guez: I don’t know. The survey was run in September and October. I think we closed it a couple of weeks ago. We already shared the results with the OECD team and with the EU Commission. It hasn’t been published, like really published in a newspaper or something, but we’ve been using it already extensively. As I said, I used it at the IFA Congress, which is a very, very big event. There were hundreds of people who were able to listen to the outcome, at least some of the results that I used for the presentation.
Esteves: By the time this interview is released, yes, the survey will be published. We have a one-hour webinar planned for December 8 that is open to all TEI members, and the goal is to go through the main takeaways from the survey. The slides will include a deep dive into the survey and more detailed information about the questions and answers provided.
Halimi-Guez: It’s an absolute privilege to work with Sandra and Monique on this topic. I’m not a dreamer; I am a realist. But I do believe we can change laws in a way that is very, very impactful to people’s lives. I’m sure everybody, all of us, if not ourselves, we have somebody either in our family, among our friends—we all have somebody or know somebody who is impacted by these constraints. Think about your kids. The number of people who told me, “Oh, yes! My son, he had this great offer by this company, but they want him to relocate, and he doesn’t want to relocate.” The number of times I’ve heard that. This goes beyond tax technical questions. This is really about changing people’s lives. I feel privileged and honored to work on that with Sandra.
Levin-Epstein: Thank you.
