{"id":20267,"date":"2013-04-24T10:28:18","date_gmt":"2013-04-24T09:28:18","guid":{"rendered":"http:\/\/www.taxresearch.org.uk\/Blog\/?p=20267"},"modified":"2013-04-24T10:28:18","modified_gmt":"2013-04-24T09:28:18","slug":"is-the-oecd-about-to-fail-to-address-tax-abuse-yet-again-the-omens-are-not-good","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2013\/04\/24\/is-the-oecd-about-to-fail-to-address-tax-abuse-yet-again-the-omens-are-not-good\/","title":{"rendered":"Is the OECD about to fail to address tax abuse, yet again? The omens are not good"},"content":{"rendered":"

The OECD report to the G20 finance ministers meeting at the weekend was interesting. It said (and I have abbreviated a little<\/a>):<\/p>\n

The OECD\u2019s work on BEPS is also being\u00a0informed by engagement with business and civil\u00a0society.\u00a0In general, business recognises that there is a need\u00a0to restore trust in the international tax system by\u00a0revisiting the tax rules. Business emphasised that\u00a0the current rules work effectively in most areas\u00a0but other areas may require an adjustment to the\u00a0rules, in particular where the substance and\u00a0taxation of transactions has diverged. Business\u00a0has acknowledged the importance of economic\u00a0substance and called on the OECD to establish a\u00a0common definition of economic substance,\u00a0proposed the creation of a joint OECD\/ business\u00a0group to work on issues related to the digital\u00a0economy, supported the establishment by the\u00a0OECD of uniform international rules on\u00a0Controlled Foreign Company (CFC) and on\u00a0interest deductibility, and offered to work on a\u00a0business code of tax conduct as part of the BEPS\u00a0agenda.<\/p>\n

TUAC, the Trade Union Advisory Committee to\u00a0the OECD is very supportive of the BEPS\u00a0initiative and its objective to eliminate double\u00a0non-taxation and more effectively address\u00a0aggressive tax planning. They would like the\u00a0scope of the BEPS project to be enhanced by\u00a0calling for greater transparency from MNEs,\u00a0including country-by-country tax reporting, and\u00a0by addressing the speculative use of derivatives\u00a0for tax evasion purposes, including through a\u00a0financial transaction tax on OTC derivatives.<\/p>\n

Briefings of NGO\u2019s have also been organised.\u00a0NGOs expressed strong support for the BEPS\u00a0report and presented a policy paper commenting\u00a0on the report signed by 58 different NGOs (\u201cNo\u00a0More Shifty Business<\/a>\u201d). They strongly argued\u00a0that worldwide consolidated accounts were the\u00a0starting point to put an end to BEPS.<\/p><\/blockquote>\n

So, there are three responses. Note the weighting given to them.<\/p>\n

And note that the TUAC and 58 NGOs all say\u00a0country-by-country reporting is vital. Civil society has much common ground with trade unions.<\/p>\n

But then I note an article in the Tax Journal<\/a>. This, heavily\u00a0influenced\u00a0y a briefing from\u00a0Ernst\u00a0&\u00a0Young\u00a0says:<\/p>\n

\n

The OECD\u2019s action plan to tackle base erosion and profit shifting is unlikely to include a root and branch reform of the international tax system, but last week\u2019s report to G20 finance ministers suggests that recommendations may include uniform international rules on controlled foreign companies and the deductibility of interest.<\/p>\n

OECD tax officials said in a recent article that the arm\u2019s length principle was \u2018an essential element\u2019 of a fair allocation of taxing rights between countries. And discussions with OECD representatives last month indicated that the intention is \u2018not to abandon the traditional arm\u2019s length standard [for transfer pricing] but rather to make refinements to the existing regime\u2019, according to Ernst & Young. Some tax campaigners have called for fundamental reform and a system of \u2018unitary taxation\u2019.<\/p><\/blockquote>\n

Given that the last report is broadly right let's assume the rest is too. In which case we have to be\u00a0preparing\u00a0ourselves for a massive\u00a0disappointment\u00a0 yet again, from the OECD. They failed the world in 2009 on tax havens and the actions needed to tackle them (or we would not need to repeat the exercise in 2013) and it looks like they will do so again. In the OECD \u00a0report\u00a0\u00a0Addressing Base Erosion and Profit Shifting<\/a>\u00a0published in February they said\u00a0that the use of aggressive tax strategies by some multinationals was eroding the tax base of many countries and threatening the stability of the international tax system. But now all it looks like we may get as a result are a few tinkerings at the margins of the system as a\u00a0forlorn\u00a0and\u00a0<\/span>inevitably\u00a0doomed attempt to amend that whole process.\u00a0<\/span><\/p>\n

As the Tax Journal notes<\/p>\n

Writing in the French newspaper\u00a0Le Figaro<\/em>\u00a0last week, Gurr\u00c3\u00ada said: \u2018The G20 has asked us to review international tax rules in order to put SMEs and multinationals on a level playing field.<\/p>\n

\u2018Combating the erosion of tax bases and the shifting of profit has become a priority now that taxpayers\u2019 trust in the effectiveness and fairness of their tax systems depends on it. Eliminating double taxation of transnational investment is necessary for growth and employment.<\/p>\n

\u2018While this objective must be maintained, it is also necessary to do away with \u201cdouble non-taxation\u201d and the shifting of profits to tax-free jurisdictions where no real activity takes place. In July, I shall present the G20 with an action plan to put an end to such practices.\u2019<\/p><\/blockquote>\n<\/div>\n

\u00a0The suggestions made so far fall a very long way short of\u00a0delivering\u00a0any such possibility. In which case the question has to already be asked as to whether the OECD is about to fail us,\u00a0spectacularly, yet again?<\/div>\n","protected":false},"excerpt":{"rendered":"

The OECD report to the G20 finance ministers meeting at the weekend was interesting. It said (and I have abbreviated a little): The OECD\u2019s work
 Read the full article…<\/em><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[78,10,50,1],"tags":[],"class_list":["post-20267","post","type-post","status-publish","format-standard","hentry","category-oecd","category-tax-avoidance","category-tax-gap","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/20267","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/comments?post=20267"}],"version-history":[{"count":0,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/20267\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/media?parent=20267"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/categories?post=20267"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/tags?post=20267"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}