OECD defends relationship with business as it is reported to be ‘alienating’ allies in industry
A leading tax lawyer urged George Osborne today to avoid taking unilateral action to force multinationals to pay more UK tax, while a prominent critic of tax avoidance claimed that the chancellor had ‘bamboozled people into thinking he is fighting tax dodgers’.
‘If the UK “jumps first” it will succeed only in deterring in-bound investment and potentially driving away companies with an existing UK presence,’ said Michael Wistow, head of tax at the law firm Berwin Leighton Paisner. He noted that ‘wheels are already in motion internationally’ to address tax base erosion and profit shifting.
Last month OECD secretary-general Angel Gurría said aggressive tax strategies used by some multinationals ‘erode the tax base of many countries and threaten the stability of the international tax system’. A number of indicators showed that the tax practices of some multinationals had become more aggressive over time, raising ‘serious compliance and fairness issues’, the OECD said in its report Addressing Base Erosion and Profit Shifting (BEPS).
An action plan, to be drawn up with governments and business and submitted to the G20 leaders in July, will ‘provide concrete timelines and methodologies for solutions to reinforce the integrity of the global tax system’.
The corporate structuring that has repeatedly hit the front pages in the last couple of years is ‘by far the costliest’ tax avoidance, according to Richard Brooks, the Private Eye journalist and author of The Great Tax Robbery.
Writing in today’s Guardian, Brooks said ‘scheming’ of the type targeted by the UK’s proposed general anti-abuse rule was ‘a relative minority sport … generally defeated by judges increasingly intolerant of tax avoidance anyway’.
He noted that last week the House of Lords economic affairs sub-committee on the Finance Bill warned that there was ‘a misconception that GAAR will mean the likes of Starbucks and Amazon will be slapped with massive tax bills’. Committee chairman Lord McGregor said: ‘This is wrong and the government needs to explain that to the public.’
Many tax professionals and some academics maintain that multinationals using tax havens and low tax jurisdictions to reduce their effective tax rate are not engaging in avoidance.
But Brooks wrote: ‘Such corporate manoeuvrings do not officially constitute tax avoidance even if, on any common sense view, that is exactly what they are … Outside the official definition of tax avoidance, the offshore schemes of Britain's biggest multinationals have not just escaped any clampdown, they have been rewarded with a rewriting of corporate tax law that makes them more irresistible than ever.’
Brooks did not mention the OECD project, but claimed that through the GAAR and ‘a regular stream’ of smaller specific anti-avoidance announcements, Osborne would ‘sustain the illusion that tax avoidance is being fought on all fronts, confident that his bamboozled audience will never notice the abject surrender on the most important one of all’.
However, BLP suggested that Osborne ‘needs to clean up the poisonous atmosphere which is clouding positive tax reforms’.
‘Whilst there have been some positive reforms including the patent box exemption and lowering of corporation tax, the poisonous anti-business climate could undermine much of the progress made through tax reform,’ the firm said.
OECD ‘under growing pressure’
Bloomberg reported today that after many years of enjoying a ‘close relationship’ with industry, the OECD was now ‘taking the uneasy first steps toward reform – and alienating its industry allies’.
Jesse Drucker suggested that the OECD had played ‘a pivotal role’ enabling some global corporations to ‘dodge taxes by shifting profits into offshore subsidiaries, costing the US and Europe more than $100bn a year’.
Drucker quoted Pascal Saint-Amans, director of the OECD’s Centre for Tax Policy and Administration, as saying that in the past ‘governments did not ask for any change and there was no political push to move into the direction of addressing profit shifting’. Now, however, the OECD was ‘under growing pressure from governments’.
Saint-Amans defended the OECD’s relationship with business: ‘If you are going to find solutions in the tax area you need to talk to all the players, whether it’s academics or business,’ he said. ‘You want solutions that will work for business and will work for government.’
OECD defends relationship with business as it is reported to be ‘alienating’ allies in industry
A leading tax lawyer urged George Osborne today to avoid taking unilateral action to force multinationals to pay more UK tax, while a prominent critic of tax avoidance claimed that the chancellor had ‘bamboozled people into thinking he is fighting tax dodgers’.
‘If the UK “jumps first” it will succeed only in deterring in-bound investment and potentially driving away companies with an existing UK presence,’ said Michael Wistow, head of tax at the law firm Berwin Leighton Paisner. He noted that ‘wheels are already in motion internationally’ to address tax base erosion and profit shifting.
Last month OECD secretary-general Angel Gurría said aggressive tax strategies used by some multinationals ‘erode the tax base of many countries and threaten the stability of the international tax system’. A number of indicators showed that the tax practices of some multinationals had become more aggressive over time, raising ‘serious compliance and fairness issues’, the OECD said in its report Addressing Base Erosion and Profit Shifting (BEPS).
An action plan, to be drawn up with governments and business and submitted to the G20 leaders in July, will ‘provide concrete timelines and methodologies for solutions to reinforce the integrity of the global tax system’.
The corporate structuring that has repeatedly hit the front pages in the last couple of years is ‘by far the costliest’ tax avoidance, according to Richard Brooks, the Private Eye journalist and author of The Great Tax Robbery.
Writing in today’s Guardian, Brooks said ‘scheming’ of the type targeted by the UK’s proposed general anti-abuse rule was ‘a relative minority sport … generally defeated by judges increasingly intolerant of tax avoidance anyway’.
He noted that last week the House of Lords economic affairs sub-committee on the Finance Bill warned that there was ‘a misconception that GAAR will mean the likes of Starbucks and Amazon will be slapped with massive tax bills’. Committee chairman Lord McGregor said: ‘This is wrong and the government needs to explain that to the public.’
Many tax professionals and some academics maintain that multinationals using tax havens and low tax jurisdictions to reduce their effective tax rate are not engaging in avoidance.
But Brooks wrote: ‘Such corporate manoeuvrings do not officially constitute tax avoidance even if, on any common sense view, that is exactly what they are … Outside the official definition of tax avoidance, the offshore schemes of Britain's biggest multinationals have not just escaped any clampdown, they have been rewarded with a rewriting of corporate tax law that makes them more irresistible than ever.’
Brooks did not mention the OECD project, but claimed that through the GAAR and ‘a regular stream’ of smaller specific anti-avoidance announcements, Osborne would ‘sustain the illusion that tax avoidance is being fought on all fronts, confident that his bamboozled audience will never notice the abject surrender on the most important one of all’.
However, BLP suggested that Osborne ‘needs to clean up the poisonous atmosphere which is clouding positive tax reforms’.
‘Whilst there have been some positive reforms including the patent box exemption and lowering of corporation tax, the poisonous anti-business climate could undermine much of the progress made through tax reform,’ the firm said.
OECD ‘under growing pressure’
Bloomberg reported today that after many years of enjoying a ‘close relationship’ with industry, the OECD was now ‘taking the uneasy first steps toward reform – and alienating its industry allies’.
Jesse Drucker suggested that the OECD had played ‘a pivotal role’ enabling some global corporations to ‘dodge taxes by shifting profits into offshore subsidiaries, costing the US and Europe more than $100bn a year’.
Drucker quoted Pascal Saint-Amans, director of the OECD’s Centre for Tax Policy and Administration, as saying that in the past ‘governments did not ask for any change and there was no political push to move into the direction of addressing profit shifting’. Now, however, the OECD was ‘under growing pressure from governments’.
Saint-Amans defended the OECD’s relationship with business: ‘If you are going to find solutions in the tax area you need to talk to all the players, whether it’s academics or business,’ he said. ‘You want solutions that will work for business and will work for government.’