Tax avoidance by multi-nationals – the issue that dare not speak its name
Given all the publicity about tax avoidance by multinationals over the last year or more, the clamour for action to be taken, and the government’s commitment to do so, Mr Osborne might have been expected to make at least some reference to this subject in his Budget speech.
In fact, he said nothing. However, amongst the various documents released immediately afterwards was a 45 page “position paper”, issued jointly by HM Treasury andHMRC.
As expected, this essentially endorses the 15-point action plan on base erosion and profit shifting (BEPS) published by the OECD in July last year. In doing so, it recognises that unilateral measures by the UK alone cannot effectively address the issues involved and commits the government to coordinated, multilateral action.
It also endorses the OECD’s timetable to report back with its recommendations on each of the 15 actions, ranging from as early as this September to no later than December 2015.
This is important for international business, because although the OECD’s recommendations have not yet been made, its terms of reference and timetable are clear. What is also now clear is that the UK government has hitched its wagon to the OECD’s star. Businesses can therefore plan, taking into account the range of possible outcomes for these “known unknowns”.
They’ll also not have to wait long before these become “known knowns”, as only earlier this week, the OECD issued its first discussion draft on its recommendations on one of the 15 topics, with two more promised over the next couple of weeks. The direction of travel is therefore very rapidly becoming clear.
Although there are no surprises here, there was a real danger that the government might have taken ill-considered unilateral measures to appease what was at times little more than a baying mob. They are to be commended for not succumbing to these pressures and opting instead for a considered, multilateral consensus approach, to an ambitious, but realistic, timetable.
This should ensure that whatever new international tax rules that emerge are properly thought through and workable, and provide a framework within which business can operate with some degree of certainty, even if the new landscape is somewhat different from the old.
Credit: B Daily