Ahead of a year end update from the OECD on its Base Erosion and Profit Shifting (BEPS) project, Grant Thornton (GT) is warning that many businesses are highly sceptical about its potential success and want more clarity about what is acceptable tax planning
GT surveyed 2500 businesses in 34 countries earlier this year and found that only 23% think BEPs is likely to be successful.
Francesca Lagerberg, global leader of tax services at GT International said developments since then such as Ireland eliminating the ‘Double Irish Dutch Sandwich’ and the UK imposing a diverted profits tax ‘Google tax’ on multinationals had shown that government action can be effective.
‘But we caution the business community that finding a global solution will be very difficult and will not be speedy. Many of the objectives of the BEPS Action Plan are valid. The concern is that the scope is so broad it touches almost every area of international taxation. It’s as if in an attempt to get rid of some traffic black spots, the authorities have decided to overhaul the entire road network and require every driver to modify their car,’ Lagerberg said.
A separate global business survey conducted by GT in 2013 found the majority (68%) would welcome more global cooperation and guidance from tax authorities on what is acceptable and unacceptable tax planning, even if this provided less opportunity to reduce tax liabilities across borders.
Lagerberg said: ‘Businesses need things in black and white. They have a responsibility to their investors and shareholders to keep costs down. Simply telling them to pay their “fair share” is not a viable alternative to a clear set of rules or principles.’
Last week the OECD hosted a workshop for officials from 14 developing countries as part of its strategy to deepen engagement from developing countries with BEPS. In a statement, participants said there was a ‘pressing need’ to reform international tax rules ‘as soon as possible’.
Several also emphasised the need to achieve a balance between developing a tax infrastructure designed to attract inward investment and collecting corporate income tax and compliance, and requested that outputs were practical, easy to implement, and supported by efforts to increase awareness at all levels.
Members of the BEPS project team are hosting a webcast this afternoon, 15 December, to provide an update on developments. More details here: http://www.oecd.org/tax/beps-webcasts.htm
