The tax changes, expected to be backed by the G20 Finance Ministers’ meeting in Lima on Thursday and the full G20 Leaders’ Summit in Turkey on 15 November, will affect all businesses with cross-border operations.
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“Many of the proposals are weak, and will still provide multinational companies with opportunities to move profits away from the countries where those profits are generated, and in doing so reduce tax revenues”, said TJN. More than 60 countries were involved in drawing up the new rule book, as well as “stakeholders” from business, academia and civil society organisations.
Arun Birla is head of tax at global law firm Paul Hastings’ London office. The Government has, in the previous two Budgets, moved to shut these, including the so-called Double Irish. The suggested range is from 10% to 30%. “It will be important that the Actions are implemented over the next two or three years with consistency, so as to minimise the risk of double taxation”.
OECD has unveiled further proposals that aim to crack down on companies that avoid tax. The views of some of the world’s worst corporate tax dodgers are clearly reflected in the action plan.
The nexus approach uses expenditure as a proxy for substantial activity. Most of the treaties are based on a standard OECD template which has hardly been updated in almost a century. For example, the significant administrative burdens that will be created for firms.
The big exporters do not do research that merits patenting. “You can have an Intel invested here as a creator of jobs but it’s primarily a manufacturing investment”.
There is not usually an impact on growth figures as inward flows are matched by outflows but there are distortions to productivity data and innovation indicators.
The report set out a method for assessing whether there is substantial activity in a jurisdiction.
He has called for a number of measures including entrepreneurship education, financial supports for young companies and resources like subsidised office space.
He said: “The proposals on transparency will be very interesting and I think the OECD will trumpet them as being a huge success”. Intel also has engineering applications here with 300 employed in Shannon. Tax partners from PwC, Deloitte and Baker Tilly all broadly welcomed the announcements.
He added that the measures proposed by OECD “will put an end to double non-taxation, facilitate a better alignment of taxation with economic activity and value creation, and when fully implemented, these measures will render BEPS-inspired tax planning structures ineffective”.
The restriction would apply to all interest, including amounts paid to third parties, with no “arm’s length” escape route. This, it said, was specifically the case for corporate tax reforms, which included the abolition of certain preferential tax regimes.
The rule changes are mainly invited to be incorporated into thousands of bilateral tax treaties that form the arteries of global trade. Generally it looks like larger economies will win out over smaller economies.
Will the new rules make any difference or will these companies just find new tax loopholes? However, all of these suggestions are “best practice” in nature and there should be flexibility for governments in relation to implementation.
The main reason for the 2015 overshoot is that corporation tax payments by companies are well ahead of target. Pross insisted that it was not only the 34 mostly wealthy member countries of the OECD who worked out the plan.
Competition between countries trying to attract business with low tax rates is not going to disappear as a result of the OECD’s plan, according to Pross. “This is not about hammering large multinationals”.
‘Globally there is likely to be an increase in tax.
Amazon recently restructured its business to pay more tax in the UK.
The report also set forth specific recommendations for rules targeting worldwide tax schemes, as well as for developing and implementing more effective information exchange and cooperation between tax administrations.
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Mr O’Brien says the countries that should probably be more concerned about today’s measures are those “brass plate” locations. “But what we are saying is: Compete on a level playing field”.
