Commission staff working document accompanying the Communication from the Commission to the Council, the European Parliament and the European Economic and Social Committee on the work of the EU Joint Transfer Pricing Forum in the period March 2007 to March 2009 and a related proposal for a revised Code of conduct for the effective implementation of the Arbitration convention (90/436/EEC of 23 July 1990) - EU Joint Transfer Pricing Forum : Summary Report on Penalties {COM(2009)472 final} {SEC(2009)1169}
Date: 2009-09-14
Institutions: European Commission
Subjects: EU body, activity report, code of conduct, domestic market, tax system, transfer pricing

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 14.9.2009 
SEC(2009) 1168 final 

COMMISSION STAFF WORKING DOCUMENT 

Accompanying the 

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL,  
THE EUROPEAN PARLIAMENT AND THE EUROPEAN ECONOMIC AND 
SOCIAL COMMITTEE 
on the work of the EU Joint Transfer Pricing Forum in the period March 2007 to March 
2009 and a related proposal for a revised Code of conduct for the effective 
implementation of the Arbitration convention (90/436/EEC of 23 July 1990) 

EU Joint Transfer Pricing Forum – Summary Report on Penalties 

{COM(2009)472 final} 
{SEC(2009)1169} 

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TABLE OF CONTENTS 

1. 

2. 

3. 

4. 

5. 

6. 

7. 

8. 

9. 

Introduction and context .............................................................................................. 3 

Definition of penalties.................................................................................................. 3 

Scope of this summary report ...................................................................................... 4 

Penalties and EU laws.................................................................................................. 5 

Main features of the Transfer Pricing report compiled by JTPF Business members... 5 

The taxpayer's conduct - case scenarios....................................................................... 6 

Transfer pricing adjustments and penalties.................................................................. 6 

Cancellation or mitigation of penalties in case of Mutual Agreement Procedure ....... 7 

Conclusions .................................................................................................................. 7 

ANNEX...................................................................................................................................... 9 

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1. 

1. 

2. 

3. 

2. 

4. 

5. 

INTRODUCTION AND CONTEXT 

Most  EU  Member  States  have  rules  which  aim  at  enforcing  taxpayers'  compliance. 
These rules are regulated by national legislation and, therefore, can vary widely. In 
addition  to  penalties  for  non-compliance  with  transfer  pricing  documentation 
requirements, there exist penalties for uncooperative behaviour of a taxpayer. Also, 
more and more countries now have rules which apply if transfer pricing adjustments 
are made by tax administrations to bring a taxpayer's transfer pricing in line with the 
arm’s length principle.  

The issue of penalties was already discussed but not finalised during the Forum's first 
mandate  from  2002  to  2004.  The  Forum  agreed,  therefore,  to  include  the  issue  of 
penalties levied on transfer pricing adjustments in its work programme for 2005 and 
2006  (see  doc.  JTPF/008/REV4/2004/EN).  The  work  programme  states  that  the 
Forum could identify the exact nature and extent of the problems of penalties related 
to  transfer  pricing  (excluding  criminal  penalties)  and  examine  the  scope  for 
solutions. 

In  2002  and  2003  the  Forum  and  the  IBFD  undertook  surveys  on  transfer  pricing 
rules in Member States that included penalties related to transfer pricing. In 2004 a 
Business Member of the Forum, Prof. Maisto, submitted to the Forum a comparative 
study on penalty regimes within the EU regarding transfer pricing documentation and 
adjustments. This "Transfer Pricing Penalties Report" was updated in 2005 to cover 
the 10 new Member States (see doc. JTPF/011/BACK/2005/EN). 

DEFINITION OF PENALTIES 

Penalties are designed to provide disincentives for non-compliance in order to make 
tax underpayments and other types of non-compliance more costly than compliance. 
The compliance at issue may relate to procedural requirements such as timely filing 
of  the  tax  return  or  providing  necessary  information,  or  to  the  substantive 
determination of tax liability. 

In  the  area  of  transfer  pricing  penalties  generally  fall  into  one  of  the  following 
categories: 

(a) 

(b) 

Documentation related penalties, i.e. administrative (or civil) penalties imposed 
for failure to comply with the documentation requirements of a Member State 
at  the  time  the  documentation  was  due  to  be  submitted  to  the  tax 
administration; 

Co-operation  related  penalties,  i.e.  administrative  (or  civil)  penalties  imposed 
for  failure  to  comply  in  a  timely  manner  with  a  specific  request  of  a  tax 
administration to submit additional information or documents going beyond the 
EU TPD or the domestic documentation requirements of a Member State; and 

(c) 

Adjustment related penalties, i.e. penalties imposed for failure to comply with 
the arm's length principle usually levied in the form of a surcharge at a fixed 

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6. 

7. 

8. 

3. 

9. 

10. 

amount  or  a  certain  percentage  of  the  transfer  pricing  adjustment  or  the  tax 
understatement. 

As opposed to administrative (or civil) penalties, which are generally imposed by the 
tax administration, criminal penalties are imposed by a public prosecutor or court and 
are virtually always reserved for cases of very significant fraud. 

Member  States  may  use  different  names  for  penalties  that  accomplish  the  same 
purpose.  Also,  national  compliance  practices  depend  on  the  overall  tax  system  and 
the  judicial  system  in  the  Member  State.  Penalties  can,  therefore,  take  the  form  of 
monetary deterrents, e.g. a surcharge or additional tax imposed as a consequence of 
underpayments of tax in addition of the amount of underpayment, or, for example, a 
reversal of the burden of proof where a taxpayer has not acted in good faith.  

tax  as  penalties  where  such 

Penalties related to transfer pricing adjustments must be distinguished from interest 
for  late  payment  of  tax.  Some  commentators  consider  commercial  interest  for  late 
is  non  deductible.  Tax 
payment  of 
administrations, however, generally take the view that interest for late payment of tax 
at a commercial, i.e. market, interest rate does not constitute a penalty. Such interest 
can be considered as compensation for the "interest free loan" that the taxpayer has 
enjoyed due to his underpayment of tax. 

interest 

SCOPE OF THIS SUMMARY REPORT 

This  paper  concentrates  on  adjustment  related  penalties,  i.e.  penalties  imposed  for 
failure  to  comply  with  the  arm's  length  principle  usually  levied  in  the  form  of  a 
surcharge at a fixed amount or a certain percentage of the transfer pricing adjustment 
or the tax understatement.  

As  regards  documentation  related  penalties,  the  JTPF  in  its  activity  report  from  1st 
January 2004 to 31st May 2005 recommends in paragraph 38 of the conclusions on 
documentation rules: 

"A  Member  State  should  not  impose  a  documentation  related  penalty,  where  a 
taxpayer  complies  in  good  faith,  in  a  reasonable  manner,  and  within  a  reasonable 
time 

(a) 

(b) 

with standardized and consistent documentation as described in paragraphs 20 
to 25 or with a Member State's domestic documentation requirements; and 

properly  applies  his  documentation  to  determine  his  arm's  length  transfer 
prices." 

11. 

The report continues in paragraph 39: 

"A  taxpayer  avoids  the  imposition  of  a  co-operation  related  penalty  where  he  has 
agreed to adopt the EU TPD approach and provides, upon specific request or during 
a  tax  audit,  in  a  reasonable  manner  and  within  a  reasonable  time  additional 
information and documents going beyond the EU TPD." 

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12. 

13. 

14. 

4. 

15. 

5. 

16. 

17. 

As the Forum agreed not to discuss criminal penalties and as documentation related 
and co-operation related penalties were already addressed in the JTPF activity report 
from  1st  January  2004  to  31st  May  2005,  in  particular  in  the  conclusions  on 
documentation rules, these issues are not discussed in this paper. 

The  EU  Arbitration  Convention  at  Article  12  offers  business  the  certainty/comfort 
that they would not suffer from unresolved transfer pricing related double taxation in 
the  single  market.  The  elimination  of  double  taxation  is,  however,  not  secured  if  a 
serious penalty is imposed on a taxpayer (Art. 8 (1) of the Arbitration Convention). 
Member States have laid down their definitions of a serious penalty in the meaning 
of  Art.  8  (1)  of  the  Arbitration  Convention  in  unilateral  declarations  to  the 
Arbitration Convention. 

The  Commission  Services  have  already  pointed  out  in  the  past  that  some  of  the 
unilateral declarations appear to contain a rather broad definition of the term "serious 
penalty".  This  could,  in  certain  circumstances,  constitute  an  impediment  to  the 
effective access to the Arbitration Convention. This issue may, therefore, need to be 
addressed by the Forum. 

PENALTIES AND EU LAWS 

Penalties are governed by Member States' domestic laws. However, it might be the 
case that the application of the Convention for the Protection of Human Rights and 
Fundamental  Freedoms  (“ECHR”)  and  the  conformity  of  domestic  penalty  regimes 
with  EU  legislation  and  principles  (discrimination,  proportionality,  compatibility 
with  freedom  of  establishment,  etc.)  should  also  be  seen  as  a  more  severe  penalty 
regime  for  cross-border  transactions  as  compared  to  domestic  transactions  might 
constitute  an  infringement  of  the  fundamental  freedoms  as  laid  down  in  the  EC 
Treaty. 

MAIN  FEATURES  OF  THE  TRANSFER  PRICING  REPORT  COMPILED  BY  JTPF 
BUSINESS MEMBERS 

According  to  the  Transfer  Pricing  Penalties  Report,  nearly  all  Member  States 
administrative  or  civil  penalties  can  be  imposed  in  case  of  transfer  pricing 
adjustments and no specific penalty regime in relation to transfer pricing adjustments 
exists.  

The  rules  for  interpretation  and  specification  of  the  amount  of  penalties  are 
somewhat  mixed;  some  countries  regulate  these  issues  in  detail  whereas  other 
countries leave the application of general penalty principles to the discretion of the 
tax  authorities.  In  most  Member  States  the  penalty  consists  of  a  percentage  of  the 
profit  adjustment  or  the  additional  tax.  The  range  is  between  5  %  and  30  %  of  the 
profit adjustment or between 10 % and 200 % of the additional tax. In most Member 
States the penalty can to some extent be waived under the administrative discretion 
of the tax administrations. 

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6. 

18. 

19. 

20. 

7. 

21. 

22. 

23. 

THE TAXPAYER'S CONDUCT - CASE SCENARIOS 

The  imposition  of  penalties  is  generally  influenced  by  the  taxpayer's  conduct.  It  is, 
therefore,  important  to  have  a  common  understanding  of  the  terms  used  in  this 
context.  Broadly  speaking,  there  are  four  types  of  conduct:  (i)  good  faith,  (ii) 
negligence,  (iii)  gross  negligence,  and  (iv)  fraudulent  intent  or  wilful  conduct.  To 
enable  Tax  administrations'  members  to  present  their  thoughts,  they  were  asked  to 
comment on four purely illustrative case scenarios. These scenarios and an analysis 
of the answers received are set out in the annex. 

This annex therefore is to be considered as a useful insight into tax administration's 
reasoning processes in the field of penalties related to transfer pricing adjustments. 

However the Forum did not consider it useful to deepen its comparative analysis with 
a  view  to  trying  to  reach  an  agreement  on  the  definitions  of  (a)  good  faith,  (b) 
negligence,  (c)  gross  negligence  and  (d)  wilful  conduct/fraudulent  intent.  Most  tax 
administration  members  felt  that  it  would  be  difficult  to  reach  meaningful 
definitions,  and  to  do  so  would  in  any  case  not  be  especially  helpful  to  taxpayers 
since each transfer pricing case is very dependent on the facts of the case. Some tax 
administrations merely commented that these definitions were a matter of domestic 
law and therefore not appropriate to be considered in the Forum. 

TRANSFER PRICING ADJUSTMENTS AND PENALTIES 

As  transfer  pricing  is  not  an  exact  science,  there  will  usually  be  a  range  of 
possibilities  in  which  the  arm's  length  price  will  be  found.  This  lack  of  precision 
means that transfer pricing by nature represents a potential for tax disputes, transfer 
pricing  adjustments  and  possible  double  taxation.  Business  claims  that  it  is  often 
difficult for a taxpayer to prove its transfer pricing is arm's length, for example due to 
the lack of comparables. 

A taxpayer's transfer pricing may, therefore, be non arm's length without negligence 
or wilful conduct. It follows that failure to meet the arm's length standard should not 
per se give rise to the presumption of wilful conduct or negligence as the facts and 
circumstances need to show additional elements leading to the evidence of intent or 
negligence.  The  OECD  Guidelines  also  stress  in  paragraph  4.33  that  it  would  be 
unfair to impose sizable penalties on taxpayers that made a reasonable effort in good 
faith to set the terms of their transactions with related parties in a manner consistent 
with the arm's length principle. 

In  the  light  of  these  features  of  transfer  pricing,  the  Members  examined  whether 
specific  penalty  rules  for  transfer  pricing  as  opposed  to  general  penalty  regimes 
would meet tax administrations and taxpayers concerns. Tax administration members 
concluded  that  penalty  regimes  are  a  matter  for  domestic  law  and  most  tax 
administration  members  seemed  to  feel  that  the  inter-action  of  transfer  pricing  and 
penalties could be accommodated in existing penalty regimes.  

24. 

A  Business  Member  has  proposed  that  in  case  of  an  adjustment,  no  negligence 
should be alleged in the event that a so-called “reasonable documentation test” has 
been met. Such reasonable  documentation  test would be met if (i) the taxpayer has 

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collected the essential information regarding the disputed controlled transaction and 
(ii)  such  information  is  collected  and  available  as  from  the  date  of  filing  the  tax 
return  for  the  relevant  tax  period.  However  the  forum  did  not  consider  that  this 
approach should be deepened because transactions are not acceptable on the basis of 
the documentation provided but well on the basis of evidence that the transaction is 
arm's length. 

8. 

25. 

CANCELLATION  OR  MITIGATION  OF  PENALTIES  IN  CASE  OF MUTUAL AGREEMENT 
PROCEDURE 

Even  if  currently  penalties  are  generally  reduced  or  waived  in  case  a  settlement 
between  the  taxpayer  and  the  tax  administration  has  been  reached  or  following  a 
downward transfer pricing adjustment resulting from a mutual agreement procedure 
(MAP)  or  arbitration,  the  JTPF  considered  as  appropriate  to  include  some 
considerations on this issue in its conclusions  

9. 

CONCLUSIONS 

This  section  represents  the  Forum's  conclusions  in  the  area  of  penalties  in  transfer  pricing. 
The JTPF excluded criminal and documentation penalties from its deliberations. 

1. 

Penalties for transfer pricing adjustments 

The JTPF considers that transfer pricing holds unique difficulties for both taxpayers and tax 
administrations. Transfer pricing, famously, is not a science – see the OECD guidelines 1.45 
and 4.8. The determination of the arm's length price is very fact dependent. It is often difficult 
to  determine  the  arm's  length  price.  Under  these  circumstances,  it  is  inappropriate  for  tax 
administrations  to  automatically,  without  having  regard  to  the  facts  of  the  case,  impose  a 
penalty  merely  due  to  the  existence  of  what  turns  out  to  be  incorrect  transfer  pricing.  The 
Forum  also  explicitly  agrees  with  the  considerations  in  paragraph  4.28  of  the  OECD 
guidelines. 

2. 

Penalties for transfer pricing adjustments and subsequent MAPs. 

It is often the case that a transfer pricing adjustment is subsequently reduced during a Mutual 
Agreement Procedure. The JTPF considers that where such an adjustment initially attracted a 
tax geared penalty and such a penalty was applied it is appropriate that the penalty is reduced 
commensurately.  This  would  put  the  penalty  in  line  with  the  final,  agreed  transfer  pricing. 
This,  however,  would  not  necessarily  be  the  case  for  criminal  penalties  or  penalties 
considered as serious under the Arbitration Convention. 

Such a reduction would not have to take place, however, if the taxpayer would gain a better 
result than would be available under a domestic procedure. 

3. 

Penalties and the Arbitration Convention 

The Arbitration Convention currently excludes taxpayers who have incurred a serious penalty. 
The situation at the moment under the Arbitration Convention where 27 different definitions 
of a serious penalty exist does not sit easily with the idea of a single market. Therefore the 

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JTPF will in the future look at what precisely a serious penalty should be for the purposes of 
the  Arbitration  Convention.  The  idea  behind  this  work  would  be  to  clarify  what  a  serious 
penalty is in terms of transfer pricing and to prevent taxpayers from being disadvantaged from 
different  definitions  within  the  EU.  The  JTPF  will  seek  to  define  in  which  cases  a  penalty 
should be considered as serious. 

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ANNEX 

Penalty scenarios for illustrative purpose only. 

Case scenarios 

ManCo  is  a  large  joint  stock  company  incorporated  in  Member  State  A  and  resident 
therein for tax purposes. ManCo is engaged in manufacturing consumer products through 
a factory located in Member State A and sells finished products to its subsidiary SubCo 
which is resident of Member State B. 

Case I 

ManCo  undertook  an  economic  study  to  confirm  its  compliance  with  the  arm’s  length 
principle and commissioned a tax expert's opinion to confirm compliance with State A’s 
transfer pricing regulations. Intercompany pricing is finally agreed by ManCo and SubCo 
on the basis of the economic study and tax expert's opinion. State A’s tax administration 
makes a transfer pricing adjustment to ManCo. 

Case II  

ManCo's CFO neither undertakes an economic study to establish/check compliance with 
the arm’s length principle nor requests a tax expert's opinion to confirm compliance with 
State  A’s  transfer  pricing  regulations.  State  A’s  tax  administration  makes  a  transfer 
pricing adjustment to ManCo. 

Case III 

ManCo sells its items to SubCo applying the cost plus method at a mark up of 1 per cent. 
ManCo's CFO neither undertakes an economic study to establish/check compliance with 
the arm’s length principle nor requests a tax expert's opinion to confirm compliance with 
State  A’s  transfer  pricing  regulations.  State  A’s  tax  administration  makes  a  transfer 
pricing adjustment to ManCo. 

Case IV 

ManCo  sells  its  items  to  SubCo  at  cost  plus  5  per  cent,  but  makes  arbitrary  transfer 
pricing  adjustments  (properly  documented  and  reflected  in  its  accounting  records)  to 
reduce the group’s taxable income (tax rate is higher in State A than in State B). State A’s 
tax administration makes a transfer pricing adjustment to ManCo.  

Possible interpretations of the Case scenarios 

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1. 

2. 

3. 

4. 

Case  I  –  probably  good  faith  behaviour  evidenced  by  taking  expert  advice  and 
providing sufficient supporting information or documentation. 

Case  II-  it  is  likely  that  the  taxpayer  has  been  at  least  negligent  if  no  evidence  of 
arm's length pricing was produced, either to put in place the transfer pricing policy or 
to  justify  it  during  the  audit.  However,  the  lack  of  a  tax  advisor's  opinion  or 
economic  study  is  not  conclusive  when  assessing  culpability;  a  taxpayer  who 
accumulated  documentation based on internal comparables could be acting in good 
faith even if those comparables turned out to be incorrect. 

Case III – there is nothing in this scenario to indicate that the taxpayer has been more 
or  less  culpable  than  in  Case  II  but  here  a  methodology  has  been  selected  with  no 
reference  to  internal  comparables  nor  any  economic  study  or  tax  advisor's  opinion. 
Therefore it is likely that the culpability of the taxpayer is worse than in the previous 
cases; the precise size of the mark up chosen is not conclusive when considering the 
culpability once the transfer pricing is shown to be wrong. 

Case IV – here the situation is the same as in Case III (especially if one views the 
size of the mark up as not conclusive when assessing culpability) until the arbitrary 
adjustments  are  made.  As  the  adjustments  were  arbitrary  they  were  not  made  to 
change the transfer pricing in place at  the time  the transactions took  place to arm's 
length pricing for the tax return. The adjustments were made for some other purpose 
–  one  can  assume  that  it  is  possible,  perhaps  likely,  that  they  were  made  to  push 
profits  into  a  lower  taxing  country  and  not  in  accordance  with  the  arm's  length 
principle. This would affect the culpability of the taxpayer. Equally, the adjustments 
may have taken place so that a sales manager could enjoy a greater salary bonus. The 
facts  would  have  to  be  examined.  If  the  adjustments  had  not  been  made  arbitrarily 
but  to  adjust  the  profits  in  line  with  a  documented  transfer  pricing  policy,  then  the 
taxpayer  would  have  grounds  for  arguing  a  much  reduced  degree  of  culpability 
(perhaps  even  good  faith),  even  if  the  transfer  pricing  policy  was  later  discredited 
during an audit. The mere fact that an adjustment is made to a transacted price should 
not merit a penalty: the reason for the adjustment needs to be examined. 

Analysis of tax administration comments 

5. 

The comments from tax administrations recognised that real life cases are often more 
complex  than  can  be  encompassed  in  any  illustrative  example.  Nevertheless,  the 
relevant facts that need to be considered for any particular purpose are often fewer in 
number than the total facts of a case and most tax administrations have been ready to 
comment  on  the  Case  scenarios  to  further the  discussion.  Tax  administrations  have 
different interpretations of what good faith, negligence, gross negligence and wilful 
misconduct  consist  of,  and  in  real  life  cases  categorising  actions  will  be  very 
dependent  on  the  facts.  Despite  this,  there  is  a  large  degree  of  consistency  in  the 
comments  received.  In  particular,  tax  administrations  frequently  had  the  same 
reasoning  and  viewed  the  same  facts  as  most  important.  Looking  at  the  answers 
provided , one can extract these points as the ones that were most relevant to the tax 
administrations: 

6. 

There is a question over whether the company is negligent or worse in not using the 
right comparable. There is also a question of whether a company discharges part of 
its responsibilities by paying a tax advisor for an opinion of its transfer pricing; the 

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7. 

8. 

9. 

10. 

11. 

taxpayer of course remains responsible for his tax return but some taxpayers might 
genuinely believe a tax professional's opinion, not knowing that the opinion would be 
unacceptable to tax administrations. 

The main difference between Cases I and II seems to be that in Case I the taxpayer 
genuinely  tried  to  put  in  place  an  arm's  length  transfer  pricing  policy  and  obtained 
evidence  that  it  had  done  so  from  professional  advisors,  even  if  the  evidence  was 
later  found  to  be  incorrect.  In  Case  II,  the  taxpayer  may  have  assumed  that  the 
transfer pricing policy was arm's length but did not check. Alternatively, the taxpayer 
may have been (mistakenly) confident that the internal comparable was a good one. 
A  third  alternative  is  that  the  taxpayer  may  have  known  that  the  transfer  pricing 
policy was not arm's length. The truth would depend on the facts of the case. 

Tax  administrations  who  can  exercise  discretion  in  the  application  of  penalties 
tended to assume that the taxpayer in Case I was less culpable than the taxpayer in 
Case II. However, tax administrations do not hold the view that a taxpayer, through 
the mere  act of consulting  with  a tax advisor or commissioning  an economic study 
(or  a  functional  analysis),  can  automatically  avoid  a  penalty.  It  is  not  compelling 
proof of "good faith" behaviour where a tax advisor's opinion and economic evidence 
have  been  produced  but  most  tax  administration  seemed  to  believe  that  in  the 
majority  of  cases  it  was  at  least  indicative  of  "good  faith"  behaviour.  On  the  other 
hand,  to  follow  a  transfer  pricing  policy  that  was  manifestly  not  arm's  length  is 
unlikely to be viewed as "good faith" behaviour whatever the economic evidence and 
opinions that had been paid for. If the taxpayer had known, or should have known, 
that  the  independent  retail  company  was  not  a  comparable  then  the  taxpayer's 
culpability is worse. 

There  is  a  difference  between  having  abundant  documentation  which  only  reveals 
non  arm's  length  transfer  pricing  and  producing  documentation  as  evidence  which 
proves  transfer  pricing  is  arm's  length.  In  Cases  I  and  II  the  transfer  pricing  was 
equally incorrect. In Case II, less documentation was available than in Case I – but 
this  did  not  result  in  most  tax  administrations  automatically  assuming  a  greater 
degree of culpability in Case II although some did so. All recognised that the degree 
of culpability would depend on all the facts in a real case. 

In Case III no comparable is used at all. There is nothing at all to substantiate the 1% 
mark up. Most tax administrations concluded that this behaviour was more likely to 
attract  a  penalty  and  that  the  level  of  culpability  was  beyond  negligence,  probably 
gross negligence. 

In  Case  IV,  nearly  all  tax  administrations  concluded  that  the  taxpayer's  behaviour 
would  attract  a  penalty.  The  level  of  culpability  had  probably  gone  beyond  gross 
negligence  and  bordered  on  wilful  misconduct  and  intent.  The  key  fact  in  this 
conclusion was seen as the taxpayer's arbitrary behaviour, whatever the motive. The 
motive for that arbitrary behaviour might also be a factor when assessing the degree 
of  culpability  involved:  if  the  facts  revealed  that  the  taxpayer's  behaviour  was 
motivated by a desire to minimise tax payable, this might result in a greater level of 
culpability.  But  even  without  considering  motivation,  for  most  tax  administrations 
the  taxpayer's  behaviour  would  have  attracted  a  penalty.  Intent  is  not  the  most 
important factor for some tax administrations which chose to focus on the action of 

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the  taxpayer.  Motive  of  course  remains  difficult  to  assess  objectively,  behaviour  is 
easier to categorise. 

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