The evolving landscape of tax reforms in Japan and the broader Asia Pacific region presents a complex tapestry of challenges and strategic shifts.

On this episode of the “GILTI Conscience” podcast, Skadden partners Nate Carden and David Farhat are joined by Samuel Gordon, an international tax partner at Deloitte in Japan to dissect tax implications, reform and concerns in this part of the globe.

The discussion delves into the viewpoint of Pillar Two in Japan, as well as in the larger Asia Pacific region. The conversation also includes how Pillar Two is coming into play in other areas across the continent, including transfer pricing, training and knowledge base, and enforcement, as well as the effects on multinationals doing business throughout the region.

💡 Featured Guest 💡

Name: Samuel Gordon

What he does: Samuel is a bilingual transfer pricing partner at Deloitte, advising firms in Japan and the Asia Pacific region. He has experience in planning, documentation, risk assessments, advance pricing arrangements, transfer pricing governance, and M&A and restructuring.

Organization: Deloitte

Words of wisdom: “I'm an American who's lived in Japan a long time. My observation is the U.S. is always close to the OECD, but very concerned about maintaining … that sovereign perspective. We don't have that as much in Japan. … [T]here may be some interpretive differences, but I don't think that you're going to see any differences with respect to the rulemaking per se.”

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GILTI Conscience is a podcast by Skadden, Arps, Slate, Meagher & Flom LLP, and Affiliates. Skadden’s tax team is recognized globally for providing clients with creative and innovative solutions to their most pressing transactional, planning, and controversy challenges. The insights and views presented in GILTI Conscience are for general information purposes only and should not be taken as legal advice for any individual case or situation. The information presented is not a substitute for consulting with an attorney, nor does tuning into this podcast constitute an attorney-client relationship of any kind.

This is, GILTI Conscience, casual discussions on transfer pricing, tax treaties and related topics. A podcast from Skadden that invites thought leaders and industry experts to discuss pressing transfer pricing issues, international tax reform efforts and tax administration trends. We also dig into the innovative approaches companies are using to navigate the international tax environment and address the obligation everyone loves to hate. Now your hosts, Skadden partners, David Farhat, and Nate Carden.

Hi. Welcome everybody. Once again, Nate Carden, here with David Farhat. This is GILTI Conscience. Eman Cuyler and Stefane Victor are off today, but we're joined by Sam Gordon, an international tax partner at Deloitte in Japan, and we're going to have an interesting conversation about Japan's perspective on Pillar 2, Pillar 1, international tax generally and number of other topics that relate to economic and international development. Sam, welcome to the show.

Thank you. Thank you, Nate. Look forward to speaking with everybody.

Maybe the easiest way to start is with the topic everyone's thinking about, which is Pillar 2, where do things stand? How is it going in that part of the world?

Well, to start with Japan and maybe then we can talk a little bit about the broader region, but Japan is fully on board with Pillar 2, and this prior year is tax reform. So tax reforms that became effective from April 1st, 2023 included basically IIR, the Income Inclusion Rule. Those will be become effective for the year starting April 2024.

As you know, Japan has this fiscal year, the traditional fiscal year starting is a bit different from other parts of the world. With respect to the other aspects or components of Pillar 2, we expect Japan to be on board as those become a little bit clearer, I would say, as Japan has been a big proponent of BEPS overall, going back to BEPS 1.0.

So what's the view of Pillar 2 in Japan with this kind of 15% minimum tax? In my limited experience with Japan, I haven't seen Japanese taxpayers look to maximize their ETA as some other taxpayers might. What's their view on that? Is this something like they see as, "This is just normal, this is what should be done?"

I would put this, and I'll start off, maybe we put this sort of in an ESG bucket for Japan in the sense that Japan itself is a relatively high statutory tax rate itself. You're correct in terms of the tax function and the management of taxes for large multinationals does not center around reduction in ETR as much as it centers around compliance, certainty, business continuity, those kinds of things.

The entirety of BEPS, I think though has been perceived through two lenses in Japan. One is through the NTAs lens, which you do still have obviously the use of some low-tax jurisdictions, and there's a lot of interest deduction issues that arise. So you see anti-avoidance, other types of anti-avoidance things in the Japan tax policy. So this becomes a tool with the NTA, vis-a-vis the Ministry of Finance, views as part of its toolbox.

The other side of it is the ministry of the economy, trade and industry. That side, which is more a proponent of Japanese multinationals going out into the world. They're really trying to work with this around, "Okay, the direction of travel is that Japanese multinationals need to do a better job of centrally managing their taxes, have better awareness and better governance and control over tax globally." And so they're driving this from that perspective, i.e, multinationals and groups need to be able to deal with it, vis-a-vis all the other jurisdictions they're in.

So I think there's this two-stage approach to it and both of them, to my view, round out to being a responsible taxpayer and what that means and how then do you manage that?

Got you. Another question before we look at the rest of Asia and Pillar 2. Do you anticipate or have you heard any rumblings about any kind of variation or moving away from what the OECD has put out with Pillar 2, or do you think Japan will be right down the middle with those rules?

In all of the Pillar 1, stuff that came into the domestic rules right down the line. And we anticipate Japan is going to do the same with respect to both Pillar 1 and Pillar 2. The interesting thing though, Japan is one of those countries where there are CFC rules, pretty complex CFC rules. And so the one thing that they're trying to figure out is that interaction. And so I think the Pillar 1 rules will come in pretty standard, but the implications of them for the CFC rules and how CFC rules are going to be probably modified over time is probably something to watch out for.

Generally speaking, you can think of Japan as being in Asia while we have the inclusive framework, you can think of Japan as being one of the longest running most invested OECD members, and there aren't that many OECD members to begin with in the APAC region. So I think Japan in that respect is really looking to be an example. And politically, there's no real political risk, I would say, associated with just carrying a straight line on this and dealing with it on a standard basis.

So no real sovereignty worries about the OECD providing additional guidance and acting as an extraterritorial rulemaking body, some of the stuff that we hear in the United States.

Not to the same degree. Clearly there are constituencies that have that concern, but I don't see... The NTA, as you may know, is probably one or the Japanese tax authorities, is probably one of the most competent authority groups in the world. Most connected, most interactive, so on exchange of information on dealing with double taxation. So I think they're already bought into mechanisms that have to be in place to deal with these issues. So that part to me is not as evident here probably as it is in the US.

The US is always... I'm an American who's lived in Japan a long time, but my observation is the US is always close to the OECD, but very, very concerned about maintaining that, as you say, that sovereign perspective. We don't have that as much in Japan. The interpretation of it and how then it gets looked at from an examiner point of view, there may be some interpretive differences, but I don't think that you're going to see any differences with respect to the rulemaking per se.

As people listening to this, think about some of those interpretive differences that might emerge. Is there anything we can learn, for example, from how NTA applies BEPS1.0 and DEMPE principles, et cetera, that might give a sense of direction of travel. It'll be pretty much down the middle of the fairway, there'll be a more aggressive application of the Pillar 2 rules with anti abuse principles, things like that, or do you think it's hard to predict at this point?

I start by what are our clients and folks we talked to most concerned with? They're most concerned with how to do this operationally, how to reconcile, how to demonstrate. And if you've ever dealt with the NTA and the TR2b, you'll have an appreciation for that, because the difference between the NTA, the NTA is the policy setting arm, the regional tax bureaus, Tokyo Regional Tax Bureau being the largest of them, is the audit arm and is the field arm, if you will.

That field arm has very wide discretion as to the level of depth that they can go to in terms of how the data and information that they can request and that they can seek to validate as part of any audit issue that they address. That's expected, that won't stop. That's just a part of how that's baked into the system.

So I think the biggest thing that folks are thinking about when they think about the interaction between Pillar 2, CBCR, CFC, what are currently thought to be three different data sets, what is that going to be vis-a-vis the NTA? So I don't know that there necessarily is going to be just this Pillar 1 particular thing that comes through. But when you get that convergence of the three, we anticipate there's going to be a lot of work in that space one on the preparation side, but then as you say on the interpretive side in terms of how you get validation, how you get confirmation through examinations and through those types of things.

So pivoting from Japan a little bit and going to the rest of Asia, understanding Asia pack isn't a monolith and there are different interests there. What's the view across Asia on some of this with regards to implementing and folks looking at themselves as winners or losers from the Pillars?

I'm actually sitting in Hong Kong as we tape this and visiting and with clients here, and you're absolutely right, it's not a monolith, and who's the winners and losers is a good way to look at it. In the first instance, I would say if you go back 20 years, Japan was thought to be a hyper-aggressive jurisdiction. Part of it is what I just mentioned, that level of detail, that just rabbit hole kind of thing with respect to information.

Part of it was they had some unique stances that were thought to be out of the norm with probably some of the other OECD nations. Fast-forward to now, everybody views India as a very challenging jurisdiction. Korea has always been a particularly challenging jurisdiction. Australia thinks of itself as the lead in terms of trying to create certain, I think, taxpayer behavior. I don't know how successful they are in that, but that's their view.

So if you first start with those, all of those are pretty much on board. I think India is a little bit farther behind in terms of the actual rulemaking with it, but if you look at Australia and Korea already some clarity as to where they're going. I think Korea was in the last reforms, but they're going to revisit it in part due to additional OECD developments, basically.

Australia is equally moving along very quickly towards 2025. So that's that one bucket. The interesting thing about that, then if you switch to the city-states as I like to call them, Hong Kong and Singapore. Which you can imagine their economic models are very different from large production states. They either have a manufacturing base themselves, a large multinational base or our production centers as part of larger supply chains. Their need to draw investment, their preference for relatively low tax or source rules that effectively result in low ERTs. Those kinds of things are very much at issue, I think with this change.

That is to say, I think that they're both on board politically. They know that this is the direction of travel, but the unwinding or the bringing together of Pillar 1 with their effectively public policy point of view and what they see as core to their economic kind of model is taking a bit more time. I think about the source rule changes that came through in Hong Kong. We know that on the Singapore side, there's a lot of discussion within the government as to what types of incentives. Singapore is known for various types of incentives, what types of incentives will work in the new world for them.

So those things I think are in play. I think China is probably the one that is... I don't have a lot of visibility yet into exactly where china's going. You would think that they're a lot on board. They seem to probably benefit, but China's issue I think is that they have, from the administrative standpoint, the administration of tax there is fairly fragmented. And so the central tax agency there has a little bit more challenge in terms of how it manages the variety of locations.

So I can see where that constituency point, even within the tax administration in China, is going to be an important aspect to it going forward. That's the landscape point. My focus in terms of what I see is probably more on those city-states and then to a certain degree on supply chains where this is coming into play. And I do think when we are looking at folks that are doing assessments, so whether that be some Japanese multinationals, US or European headquartered, when they think of APAC, the two jurisdictions that they're most concerned with in terms of how the income inclusion rule, the immediate impact would be are Hong Kong and Singapore. Those two jump off immediately.

So I think that the focus from a local rulemaking perspective as opposed to what's being forced onto these jurisdictions by the headquartered jurisdiction as a result of how this is rolling out there is going to create some momentum in the next six to eight months around what has to be done. Even if rules are not in the place here on the ground, that's just the world we live in.

One of the things around this we've been talking about with folks from Europe, and we were fortunate enough to get from some folks from Africa and even folks here in the US, is there's a concern that there's going to be a lot of turmoil. You have a ton of confusion. You have this sitting on top of transfer pricing where we've already had enough problems. How is that picture in Japan and the rest of Asia, is there the same worry that there's going to be a lot of confusion, a lot of turmoil with these rules?

I think so. When we look at some of the... when the commentary has been made at various stages to drafts and documents that the OECD has looked for input. If you look at some of the major Asian industry association input, that's been one of the biggest concerns. You have this, the Japan example I mentioned with CBCR, CFC and this, and we didn't even mention transfer pricing. We didn't mention APA. We didn't get into any of that.

So the concern is that it is going to be very, very difficult for anyone to know what's the true answer on these things because you have so many things at issue. Luckily, I think Japan, as I mentioned, is probably the one jurisdiction that has the most competent authority experience in the region. Some India, and I believe even China are starting to ramp up in terms of case volume, but Japan's experience, particularly with the US and European counterparties goes back to the late eighties.

And the variety of cases as well, the different kinds of cases in Japan.

That's right. That's the other thing. It's a variety of cases and it's also one of the dynamics you always have to appreciate with APAC, I don't know if it was the same with Africa though. Is if you have both inbound and outbound multinationals in a jurisdiction, you tend to get a better balance in terms of if you're skewed towards one or the other from a policy and also from just the way the mechanics of things work and the politics. You can see where those things drive you in a bit of a different direction.

So I do envisage that being a problem. I hope that some of the OECD's more prescriptive, what it considers to be constructive and prescriptive approaches to how these things would be dealt with in a MAP context are helpful. We'll have to wait and see is the answer on that, but I do think that that is a concern of taxpayers.

I think tax administrators at this point, they're kind of in the "First let us get some rules on the books and see how this goes." If we think about CBCR to the earlier point about taking us back to BEPS 1.0, there was a huge concern about tax authorities were going to come in and use it immediately to start making adjustments. We don't see that at all. We barely see it come up in tax examinations. We don't get a view that they're really even using it. So there's this perception of all these rules immediately creating these explosions.

When in fact tax administrations are not well set up and not resourced well enough to keep track of all the things they normally need to do, let alone take on these other areas. So hopefully that gives us a window of time to settle into it before the controversy becomes just overbearing.

Clearly, I'd turn the table on you guys a bit. One big concern is the US. What is the US going to do? That's probably the biggest concern. When we look at Japan, when we look at a lot of Asian countries, the US is in the top three or four in terms of trade partners. And so when you have that and you're not clear about what's going to happen there, that dynamic in particular, that channel or corridor in particular is one that I think people are going to be really keen to understand how it's going to work.

What are they worried might happen? Because my general sense of things is that you have some US multinationals and US subsidiaries of foreign multinationals that might be worried about their globe ETR, but it tends to be around the edges, et cetera. So what are their big concerns?

Well, I just think it comes more at this point from a rule adoption perspective, the timing within rules. I think most of it right now is on what's occurring and on the horizon in terms of transitions. And are we moving everything at the same time? Clearly to the degree, I think it's probably more to the degree... If you think about a Japanese multinational, I don't think they're going to have as much of an issue, if they have a top-up, it's going to be in Japan.

I think that it's a question probably of for US inbounds because let's take what you have to... As a US inbound, the requirement for IIR is going to be disclose the constituencies of the group, the ETRs by country and those kinds of things. So once you get further down in the rule set, once those start to come into play, if you don't have corresponding sort of IIR in the US and you've got something that pops up with respect to the US ETR in a given country, how are they going to deal with that? I think that's the thing.

And again, because the US is such an important trade partner for many of these multinationals or because the US presence might be very significant, multinational presence might be significant in an Asian market, that's where the concern comes from probably. So it's much more probably just how are the rule sets coming converge over time, and in what timeframe is that really going to recur? Are you going to have a few years out where you have this gap effectively that you're just going to have to deal with?

Does anyone worry on the Japanese multinational side about US multinationals potentially having at least a short-term competitive advantage during this transition? Because I could see that, I'm not sure that it's actually going to shake out that way, but I could see, "Hey, we're subject to all these rules and the US is no longer on an even footing."

I think there may be a bit of that, but going back to the initial point we made with David, if you take Japanese multinationals, there's two things they're going to have. The resource output, the increased resource and complexity of what they have to deal with. Which is probably not as much of a competitive issue as it is a slight cost issue. If you think of it from an effective tax rate perspective and from a capital market, so the flow through to the capital markets here, Japan is just getting to a point where there were some recent reforms, via the Tokyo stock exchange, where there's a push to increase the return on equity in terms of where you're listed on the exchange.

So you're starting to see a bit of a change in management view around the importance of return on equity. As that happens, I think you'll start to see the idea of ETR and the competitiveness around how you're positioned after tax come into play.

It's so interesting that Pillar 2 creates additional compliance burdens, creates additional costs, creates an additional drive to squeeze more out of your tax function, which was allegedly not the point.

Right. Oops. These unseen adverse effects of these types of... It's awfully hard to... This to me has that kind of drop of pebble in the water and the ripples and it's a giant wave somewhere in the world as a result of it.

One quick question before we talk about some of the ripples, especially from a controversy sense. When we're talking about Pillar 2 or BEPS 2.0 overall, there seems to be a frustration, especially from current OECD countries with how transfer pricing works, them not getting their fair share of tax revenue, things that BEPS 1.0 was supposed to solve.

Whether it solved it or not, I don't know if they gave it enough time to work, but it was very quickly from pivoted to 2.0. Do you see that same kind of frustration in Asia? Does that exist there as well or is this something more unique to Europe?

I think you see the same frustration because if you think about when the rule set was just coming on and the politics of BEPS 2.0 started and people were like, "Okay, we've yet to really get everything under the hood running well with BEPS 1.0." And I think your nature mention of the DEMPE point, it's like, "Well, we were told that this was about intangibles and interest income, now we're being told it's about distribution in the front end, and market footprint." It's like, "Which one is it?" And so I think that dynamic, the idea that the first wave of BEPS was really oriented towards what was very clear types of income versus this is oriented just basically towards effectively business models that in the first instance, we're never tax driven, particularly digital models. This was always just a function of how these firms thought it was most effective to set up and scale up for multiple locations.

So I do think that there's that frustration. I think, David, to our breaking out of the countries into two buckets, that frustration is probably highest in Hong Kong and Singapore because they're the ones that, in a way to stand to lose because you can see where relatively low populations overall compared to all of the other places. Typically, high talent, high transaction, less physical, good movement except for the Hong Kong ports and the gas and oil that goes through Singapore.

So you've got this thing where you've got basically these massive regional service hubs that are now being put under pressure as a result of another take on business models. And so I think that part is definitely frustrating to folks.

Going back to the ESG point that you made right at the beginning, which to me is fascinating. Is the policy debate there more of a what I would call traditional tax policy debate, what's efficient, what's not, what's the right way to tax this? Or is it more of an ESG public perception? People just think transfer pricing, international tax, pick your level is not working and we need to do something, so this is what we're going to do?

In Japan, I would say that it is probably, it starts with... And this is cultural and to a certain degree, it starts I think, with the idea of what does it mean to be a good corporate citizen? What does it mean to be, particularly if we think about an outbound multinational from a Japanese perspective, what does it mean to be that?

Now that doesn't mean you necessarily are going to pay more tax than you need to, but you're not going to necessarily be against paying the appropriate level of tax. The engagement, to your point on the debate, the way the engagement occurs, you think about how civil society, and how multinationals, and law firms, and professional service firms influence the policymaking process, in other places.

In Japan, there are very specific, what they call study groups led by the ruling parties that work basically throughout the year to establish each year's tax reform agenda. And ministry of finance, as I mentioned earlier, their role is much more in a way to figure out the rule set that works best for stimulating economic activity and collecting the right amount of taxes.

Menti, on the other hand, is more concerned in inputting as to how do we make sure that particularly large Japanese multinationals in the international tax space are well-prepared and well situated to deal with rules as they evolve and as they're come into being. And are the rules, practically speaking, something that they can deal with.

So you have these kinds of groups at the table, and largely when you think about how multinationals participate, they participate not as much, they do do a bit on their own as individual corporates, but they predominantly participate through industry associations. Through [inaudible 00:26:51], for example, that's one of the largest one that everyone has heard of.

To a certain degree, certain things just get baked in. The OECD stuff just gets baked in. Japan's an OECD nation, we're going to adopt it. It's much more about how and when and that kind of a thing.

Pivoting a bit to talk about when the rubber meets the road, controversy. You mentioned APA, you mentioned MAP and some of that. How do you envision that happening across Asia APAC?

I think the first thing that has to occur is... Again, from on the run in Japan, because when we look at Japan, of its top 10 trade partners, only two of them are outside the region, Germany and the US. All the rest are in APAC. The history of Japan MAP relationships with APAC countries is not as, I would say, as advanced and as strong as it is with the US and the U.K.

We know for a fact right now there was a lot of push on developing those relationships, improving those relationships. Part of it is is the fact that you just haven't seen as much... If you take the China MAP processes, you just don't see as many, you don't see as much. If you take India, they're very limited in terms of focus, in terms of the types of things you see.

So there is an appreciation that there has to be a rule set that first makes them have to come to the table on these issues. Otherwise, there's a fear that they'll kick the can down the road. To complex, not resourced well enough, that kind of thing, don't really care. Maybe less concerned about the average time to close cases, maybe from a KPI standpoint.

So the idea of a mechanism that really makes it easier for folks to come to the table. Also, anything that effectively forces them to come to the table. And so those are the things that we really think have to be there in order for it to start to work. We do know that as part of APA discussions, we anticipate some of these things to come up and be discussed in that context.

That doesn't necessarily mean they're going to be addressed as part of APA transactions in scope transactions. But on other issues like on PE issues and things like that, we always know that as part of APA discussions, that it just provides a forum and there's a level of trust that's there that's different from your typical MAP case, just straight MAP case that allows for certain advancements on that.

So I think it's two or three things. One is rule sets that really force folks to come to the table, don't give them the option to kick the can down the road. The other is the building of relationships in some of these corridors where the relationships weren't as strong as they previously have been. And I know those are occurring. I've seen some of my colleagues try to help facilitate some of that.

And then the last thing I think is with respect to existing APAs, using that APA forum as a dialogue, because you're going to have APAs that are rolling on over five, six-year periods, using those things as discussions to start the dialogues on these things so that you have a practical place to come to understand each other on it. So hopefully that's what occurs.

David, I don't know. I know that's what I will be advocating in terms of the clients that I work with in terms of the APA and the MAP portfolio that I'm involved with. I'm unique in that I'm increasingly having more Japan/Singapore stuff compared to in years prior where it was a lot of Japan/US stuff. So I think that's a good sort of focus point for me to see how this evolves over time.

Do you have any sense at all as to, with the particular rule set that is Pillar 2, how's the training and knowledge base going on amongst the Japanese tax authorities? Because one of the things that I certainly observe in the United States is you have a small sliver of people who are very into the weeds on Pillar 2 and think about it a lot. And then a vast number of private sector government, every kind of practitioner who hasn't even started thinking about it yet, and that worries me from an enforcement and controversy perspective. What's it like there?

I think that's what we're waiting on in a way, because typically when you have the reforms come out, you then will see enforcement orders and operational guidelines that come that give you a sense, "Okay, this is what you expect from..." As I mentioned, the regional tax bureau arm and how they're going to be approaching this and in practice it's going to be dealt with. We haven't seen much of that yet, and I think that's important.

Generally speaking though, I think that there's two things. The first thing I mentioned with respect to how policy gets made and how those constituencies come together. As part of that process, the NCA and the Regional Tax Bureau have representation there. And so I'm pretty sure that from a broad rule standpoint, they have a clear understanding of it. That part is not an issue. But the question though... Let's take an example of a question that came up for me.

Well, I've got one client who they historically you did their CBCR bottom up, and the reason they did is because they made an acquisition at one point in time and it continued to run along with that acquisition under its accounting system and never really replaced and brought everything into the same SAP consolidation groups system. I don't think that, and again, the regional tax bureaus are very, very detailed oriented. And so they're going to come with questions without having any context for the system, the consolidation system understanding and what's involved in that and how that works and why certain things maybe aren't possible.

So I think that level is something until they really get out in the field and the interaction between taxpayers when they're determining those enforcement orders and that operational guidance, there is a commentary period. There is an opportunity to provide commentary, but there's not as much interaction between taxpayers and the regional tax bureaus such that they would really have a deep understanding of that context until they get in an audit world.

There's an information advantage there that both sides want to kind of maintain. And so I think that's going to be the practical sort of, "Well, why can't we get all these consolidated numbers? Why do we have this piecemeal thing? What's going on with this?" Those kinds of things are going to be at issue for Japan. Many Japanese multinationals will make very significant acquisitions for foreign groups. Maybe smaller groups or equally sized groups.

But historically there has been a practice pretty common, not in all cases, pretty common to let that business run on its own course, level of integration that's fairly senior, systems may not integrate. And to my earlier point about what needs to occur in terms of the centralization of some of this management and understanding, this is again, one of those inflection points where that issue is going to present itself pretty starkly to many taxpayers and to the regional tax bureaus.

So that's where I think they're going to have to learn on the fly, if you will, as they get out in the field. And that's not going to be for... if we look at the timeframe for when these returns are coming in, we're thinking the first fiscal year starts from April 2024, and that is going to then be closed in March 2025. And then you've got X number of months after that, you've got quite a long run before anybody gets any real visibility into what this looks like.

And in that period, I don't know how they're going to get an understanding, are they going to survey? They've done surveys around corporate tax governance. They've started to do that with some of the larger outbound multinationals. Maybe they'll take that approach to try to get an understanding. But again, there's an information advantage that probably taxpayers want to maintain in terms of how they approach responding to those kinds of things, I would imagine.

So one last thing before we get to wrap up here. Given everything you've talked about, what would be your advice for multinationals dealing with Asia PAC, either US inbound folks or Asian multinationals? What should they be doing right now?

I think most folks are in that understand/assess phase and they some sense, "Okay, these seem to be the jurisdictions that matter the most." The criticality of going from that to understanding how and if you're going to be able to apply safe harbors and then going to what are you thinking about as a business-as-usual process? And then what, if anything, are planning things that can help remediate the issues you might have for the two to three jurisdictions in APAC that you know are probably on a regular basis or a particular set of facts that are going to drive you to below 15% in a particular jurisdiction. I think that's where I would suggest people focus.

The other thing is you see these projects occurring at a headquarter level, which makes a lot of sense. I do think now there's a need to start to go down a little bit further and understand what can be done, even if it's on a regional basis, figuring it out a little bit, bringing that down a level. Because my observation is that the interaction between global headquarters and their desire to make sure they keep this ring-fence and don't let the monkey out of the bag yet, is creating a lot of anxiety in regional headquarters in APAC.

What are we doing about it? How are we approaching this? I haven't heard about it. This is like X number of months off. I'm getting questions from my stakeholders. So those kinds of things I think are important.

And then the other thing is I think for those that have APAs, as I mentioned, start to weave in questions. You have unique relationships with some of these tax authorities that folks that don't have APAs do not. You do have a measure of trust to be gauged, but start to see if that's a forum in which you can start to understand this or begin to think about it in a cross-border way, with the lens towards very particular locations and that kind of thing. Those are the things that I would recommend.

It's interesting because unlike David's favorite program, ICAP, one of the big advantages of APA is that it gives you the opportunity to have this continuous engagement. So it's almost telling folks out there, "Look. Yeah, APAs take a long time, but in this world, that might be a feature, not a book because it's allowing you to continue that engagement."

Yeah. The time horizons we're talking about are in line with the types of periods we typically see. I'm not suggesting that you're going to find out everything you need in that context, but I do think that's a forum that needs to start now to be thought of in a slightly different way than it has been in the past, is the way I would put it.

I hope governments enhance that function going forward because with all of the confusion, to your point, that direct conversation between tax authority and taxpayer is a really, really good one. But that being said, it looks like we're out of time. Sam, it was absolute pleasure having you. Thank you so much for doing this. Happy Founders Day, bro. It was good to have you on the 17th.

I appreciate it, man. You as well, you as well. Thank you.

Thank you so much. Again, this has been GILTI Conscience. Thank you for listening.

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