The OECD has reached an agreement on its far-reaching corporate tax reform plans, following productive discussions with some of the hold-out countries which remained against the proposals; at the time of writing, Kenya, Nigeria, Pakistan and Sri Lanka remain opposed, whilst Ireland, Estonia and Hungary have agreed to sign up to the plans, subject to certain conditions.
As a result, sufficient international agreement has now been reached to go ahead with a new global minimum corporate tax rate of 15 percent, which will be introduced for large multinational enterprises (MNEs) from 2023, and represents Pillar Two of the Agreement.
Supported by 136 countries and jurisdictions representing more than 90 percent of global GDP, the agreement will also bring in new tax rules to reallocate to market jurisdictions taxing rights on profits earned by the world’s 100 largest and most profitable MNEs, representing … Read More »
Following the OECD’s announcement that 130 (subsequently revised upwards to 131) countries and jurisdictions had signed up to an international agreement on an overhaul to tax rules for the digitalized economy and for large multinational businesses, a number of lower tax and smaller financial centers expressed concerns.
For example, the Government of Liechtenstein stated that: “Liechtenstein’s position remains that everything must be done to find a global solution that does not interfere even more with the sovereignty of the individual states, does not hinder economic development, and leads to the lifting of unilateral measures. In particular, the positions of small and competitive countries must also be taken into account. Intensive work is still necessary to translate the global consensus into a globally implementable solution. The next meeting of the Inclusive Framework is scheduled for October 2021. Liechtenstein is coordinating intensively with various states … Read More »
At a multilateral level, the OECD has been busy over the last few weeks on the base erosion and profit shifting front, and on December 23 released new tools for tax administrations to gauge how they are performing in the area of tax debt management and the reduction of compliance burdens.
It announced that it has developed new “maturity models,” featuring performance benchmarks against which tax agencies can better self-assess how their processes are performing against best standards and their peers.
Tom Boelaert, the Administrator General of the Belgian Debt Management Agency, which led the work on this model, explained that: “Tax debt management plays a crucial role in ensuring the effective and fair operation of the tax system. We should therefore always challenge ourselves to do better. Within my own agency, this new maturity model has facilitated frank and in-depth conversations … Read More »
A report compiled by Irish business association, Ibec, has argued that Ireland may be affected significantly by the OECD’s proposals to modify how taxing rights are allocated among countries.
The OECD is developing new digital tax rules that would be presented for adoption internationally at the end of 2020, which will focus on two central pillars.
First, the OECD will review existing rules that divide up among jurisdictions the right to tax the income of multinational enterprises, including traditional transfer pricing rules and the arm’s length principle. It will look at how these can be modified to take into account the changes that digitalization has brought to the world economy. This will require a re-examination of the so-called “nexus” rules – namely how to determine the connection a business has with a given jurisdiction – and the rules that govern how much … Read More »
Thousands of words have been written across countless pages by the OECD to describe, analyze, and consider the tax challenges of the digital economy. Yet it took only a 97-word press release from United States Treasury Secretary to potentially consign them all to the trash can. He might as well have used Twitter.
Of course, Mnuchin’s statement, and the publication by the European Commission of a proposal for an interim digital tax, won’t kill the OECD’s work in this area any time soon.
Nevertheless, these developments tell us pretty much straight away that the OECD will struggle to attain the multilateral consensus that will be required to ensure that any new tax digital measures are workable. Statements issued by various EU member states, and also Switzerland, inform us of that.
While businesses and tax practitioners against this interim measure might hope these schisms might … Read More »
Last August we heard that the OECD’s Global Forum on Transparency and Exchange of Information was moving on to the issue of beneficial ownership of corporate entities in its fight against tax avoidance and evasion, and it certainly appears to be the case that once-reluctant jurisdictions are falling into line with this agenda as the next phase of global transparency boundary-pushing gets under way.
As with BEPS, the United Kingdom has set the pace here, having introduced its register of persons with significant control back in 2016. Now, all European Union member states are obligated to put in place procedures for the collection of beneficial ownership information under the Fourth Anti-Money Laundering Directive. Other countries, including Canada and Indonesia, are doing the same.
It was always thought that it would be difficult for the United States to toe this particular transparency line, … Read More »
It is claimed that the BEPS project is a global initiative, built on a worldwide consensus of OECD and G20 members, and other key economies. That’s true to the extent that these countries are regularly heard to pay lip service to the work of the OECD in all its anti-tax avoidance endeavors. But when you look a little closer, there are stark similarities between the OECD’s work and Europe’s vision of what worldwide corporate taxation should look like. Perhaps this is not surprising, as, after all, the OECD and its 2,500-strong team of technocrats, administrators, and academics are based in Paris. Indeed, Pascal Saint-Amans, one of the main supervisors of the BEPS project, is a former French civil servant. And the fact that 25 of the 34 OECD member countries are in Europe will naturally give much of the OECD’s … Read More »
Apparently, the numerous consultations that the OECD undertook with businesses and other stakeholders as part of the BEPS project generated some 12,000 pages of comment. I do wonder, however, how much of this verbiage the OECD actually took on board when formulating the final BEPS reports, which were announced, in that most modern of ways, via a webcast from OECD HQ in Paris, on October 5.
In reality, the content of the 15 reports, filled as they are with jargon, official-speak and complex tax concepts, is what most of us were expecting. What’s really quite worrying me is that the OECD seems to be utterly in denial that the BEPS recommendations, when (and if) implemented, could do any harm to businesses, investment, and economies. Indeed, I was astonished to hear Saint-Amans admit in his presentation that more double taxation is … Read More »
If the Volkswagen emissions scandal tells us anything, it’s that meeting ambitious emissions reductions targets is proving to be very testing (if you’ll pardon the pun). But governments are not helping themselves by continuing to subsidize fossil fuel usage to the tune of USD200bn annually in the form of tax breaks and spending programs, according to a recent report by the OECD. And this is just the combined total for the 34 OECD members and six key emerging economies. If we are to wean ourselves off our addiction to hydrocarbons, then clearly something very dramatic has to happen, and it has to happen soon, because the current hotchpotch of national energy policies clearly isn’t doing the trick. Something much more joined-up is required, but I don’t envisage that happening any time soon, Kyoto Protocol or no Kyoto Protocol. I don’t … Read More »
It is to South Africa I turn to next. In 2013, the Government set up a committee of tax experts to review the country’s tax system. The overarching aim of this exercise is — in the words of the Government — to “assess our tax policy framework and its role in supporting the objectives of inclusive growth, employment, development, and fiscal sustainability.” It’s a sentence that could have been lifted word-for-word from an OECD report on tax-to-GDP ratios. But it’s actually fairly easy to translate this official-speak: for phrases like “inclusive growth” and “fiscal sustainability,” read “more spending and more tax.” Being the cynic that I am, I suspect that the Government probably set up the Davis Tax Committee, as it has come to be known, in the hope that its conclusions would help to justify its argument for certain … Read More »