Action plan on BEPS

Last week the OECD published its Action Plan on BEPS. Links to related materials are here.

4 replies on “Action plan on BEPS”

The global support for reform is in this area is surprising in particular for Irish policy makers who believed the unanimity rule in the EU on tax harmonisation would protect the status quo.

The muted response from Irish lobby groups tells its own story: IBEC, Chartered Accountants Ireland, the American Chamber of Commerce in Ireland and the Irish Taxation Institute did not respond to the OECD report.

The tide is flowing against them. What’s the point in flogging a dead horse?

The support for reform reflects the impact of direct action, coinciding with massive tax avoidance and grim times.

As recently as 2010 UK Uncut, a group of mainly women activists began protesting in the UK retail stores owned by Philip Green, a UK billionaire, who had moved his tax residency to Monaco.

I have been researching and writing about this area for a decade and recent developments do not surprise me.

The level of tax avoidance became so extensive in markets where US multinationals had significant sales, that some reaction was inevitable.

It also became blatant how different rules appeared to apply to domestic and international operators of businesses such as coffee shops and bookshops.

In Ireland the Revenue touted its success against offshore personal tax evaders while turning a blind eye to what was going on in the corporate area.

The expected changes in rules will make Ireland less attractive as a location but the advantages of facilitating massive tax avoidance were limited.

The country already needs a new jobs strategy.

I await the official explanations in some years for plunges in services exports from ministers (they will likely get away with saying nothing), the Central Bank, the ESRI and commercial economists who once again will be shown to be peddlers of fairytales!

The Independent reports: “Speaking at an Oireachtas sub-committee on global taxation, the OECD’s director of its centre for tax policy and administration Pascal Saint-Amans said definitively that Ireland does not fill any of the relevant criteria for the OECD to class this state as a tax haven…The support of the OECD will be of comfort to the Government.

That’s surely reassuring…Switzerland, another OECD member, is of course not a tax haven and the Netherlands is certainly not!

Dutch daily De Volkskrant is no mouthpiece for its government and commented yesterday:

“After the G20’s promises the Netherlands’ evasive and dismissive stance was no longer tenable. So as a member of the OECD the Ministry of Finance reluctantly agreed to join in the effort of working out a plan. With its reputation as a tax haven this is the very least the Netherlands can do. Transparency and equality are basic prerequisites for a functioning global economy. It is morally indefensible for companies not to pay taxes in countries to which they deliver goods and services or from which they purchase raw materials. Social inequality is the one of the main threats to sustainable growth and political stability. For the sake of their own interests, the political leaders can no longer afford to ignore this.”

The Financial Times commented:

“The best outcome would be an international agreement on how to link tax bases to real economic activity and limit the creation of brass-plate subsidiaries whose sole purpose is to locate the most profitable parts of businesses in low-tax jurisdictions or in no jurisdiction at all. But a global deal is a tall order and the OECD sets aside such radical reform in favour of a more incremental approach. It remains to be seen whether states can rise to the challenge and act together under the OECD’s aegis. … Without such action, the risk is that they will act unilaterally to the detriment of global trade. The report is a start but there is much work to do.”

Trinity economist Professor Frank Barry said on Monday that there was little interest from the United States in reforming tax laws that have seen Ireland and other countries accused of being tax havens and dozens of multinationals use Ireland to avoid paying billions of dollars in corporation tax.

Speaking at the Institute of International and European Affairs, Prof Barry said the system was unlikely to change any time soon.

@ Michael Hennigan

I think that Professor Barry is right (although I would not qualify the activities of US multinational corporations – or those from any other country for that matter – as a form of “soft power”).

There is the added complication that the OECD is not set up to conduct the form of international negotiations required. An international conference specifically convened and with a clear mandate might do the trick. No sign of that on the horizon!

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