Friday 19 January 2018

Multinational corporation tax under scrutiny as OECD announces new plans

George Osborne
George Osborne
Colm Kelpie

Colm Kelpie

Global efforts to clamp down on corporate tax avoidance by multinational companies will take centre stage this week, with two important announcements that are likely to have an impact in Ireland.

First up today is the final set of recommendations from international think-tank the Organisation for Economic Cooperation and Development (OECD) on its so-called Base Erosion and Profit Shifting (BEPS) project to tighten corporate tax rules.

Corporate tax avoidance has, for some years now, become a hot political topic following media coverage and parliamentary investigations into the arrangements many big companies use to cut their tax bills.

The global body unveiled its first seven recommendations last year, which ultimately led to the Government announcing an end to the controversial Double Irish in Budget 2015.

One of the most talked-about potential aspects of the OECD package is the possible recommendation of country-by-country reporting obligations for multinationals, which some experts say has led to uncertainty for big business.

Since 2013, the OECD has been working on its 15-item BEPS action plan with the aim of closing "loopholes" that allow multinationals to drastically reduce their taxes. Along the way, the project has faced criticism that it neglected developing countries.

The BEPS programme work initially included only the OECD's 34 member countries and the G20 countries, eight of which are emerging economies but aren't OECD members. Responding to criticism, the OECD in the past year has worked to include more countries that aren't members of either group in BEPS consultations and meetings of the Committee on Fiscal Affairs, although they have had only observer status.

Not everyone is happy with the OECD's efforts.

Christian Aid described the project as simply a "sticking plaster approach" which will leave global companies in a position to continue to cheat poor countries out of billions every year.

Its head of advocacy and policy, Sorley McCaughey, said the OECD hasn't been allowed to prescribe the correct cures.

"It is frustrating to see that the OECD correctly diagnosed the tax-dodging crisis but has not been allowed to prescribe the right cures. Instead we have a sticking-plaster approach, which may provide limited improvement in some areas but is a long way from the comprehensive, effective solution that is required."

While the BEPS details will be unveiled today, attention shifts tomorrow to Luxembourg where European finance ministers are expected to reach political agreement on the proposal for a directive on cross-border corporate tax rulings.

This marks a significant progression from the existing provisions which gives total discretion to the member states in deciding whether to provide information on so-called tax rulings, which the Revenue Commissioners point out do not exist here, to another Member State.

The Commission believes that failure to exchange information allows aggressive tax planning and tax fraud to flourish.

Elsewhere, UK Chancellor of the Exchequer George Osborne may provide details on future spending and taxation plans when he addresses the Conservative conference in Manchester today, while Eurozone finance ministers meet today to discuss Greece's progress on steps needed to receive bailout loans for the first time since the country's elections. The International Monetary Fund releases its World Economic Outlook tomorrow, followed by a press conference in Lima. The fund in July cut its forecast for global growth this year to 3.3pc from the 3.5 pc pace projected in April.

Irish Independent

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