Corporate Tax: OECD’s Saint-Amans says “Double Irish Dutch” sandwich tax scheme will be axed

Corporate Tax Reform: The Organisation for Economic Co-operation and Development (OECD) held a briefing and webcast at its Paris headquarters Wednesday on its Base Erosion and Profit Shifting (BEPS) project and Pascal Saint-Amans, the director of the OECD’s tax centre confirmed that “Double Irish Dutch” sandwich tax schemes, which involve global revenues of services giants being routed through Ireland and transferred via the Netherlands to Irish offshore companies  in Bermuda and the Cayman Island will be axed.

We have highlighted how the Department and Finance, the Central Bank and the ESRI have ignored the true sources of rising services exports – –  in coming years, Ireland will see a plunge in both output and exports.

At the webcast, senior members from the OECD’s Centre for Tax Policy and Administration provided an update on: (1) transfer pricing documentation and a template for country-by-country reporting; (2) tax treaty abuse: (3) the tax challenges of the digital economy; (4) hybrid mismatch arrangements; and (5) consultation with developing countries.

Saint-Amans said the project is “on track” to be completed by the end of next year and he denied that small countries such as Ireland are being unfairly targeted.

Countries such as Ireland could benefit from the changes as they would end up competing with higher tax, rather than zero-tax countries, he said. “It is about putting an end to the divorce between profits and tax allocation, not about putting an end to tax competition,” he added.

On transfer pricing, which is an issue that could hit how pharmaceutical companies shift profits to Ireland through artificial prices to other subsidiaries, the OECD’s Joe Andrus clarified that the ‘masterfile’ that a company would be required to send to the tax authorities containing details about its activities was designed to be only a “high level overview.”

KPMG in the US said that earlier this week, an OECD official speaking at a 31 March conference, addressed among other items proposals for transfer pricing documentation and country-by-country reporting pursuant to the OECD’s base erosion and profit shifting (BEPS) action plan.

According to statements made at the conference in Paris: The OECD received close to 1,400 pages of comments and representations on the BEPS action steps for transfer pricing documentation and country-by-country reporting. OECD officials met last week with “interested stakeholders” and engaged in a discussion with Working Party No. 6 of the OECD Committee on Fiscal Affairs.

Tentative decisions of Working Party No. 6

Based on statements made during the conference, it is reported that the Working Party No. 6 has tentatively determined that country-by-country reporting:

Will require only aggregate reporting (rather legal entity reporting);

Will require reporting such as revenue, pre-tax profit, the amount of taxes (cash) paid, current year tax accruals, number of employees, amount of capital, and value of tangible assets, capital and accumulated earnings;

Will not be part of the “master file”;

Will delete the last six columns of the country-by-country that concern the transactional information on royalties, interest, and service fees;

Will require, on a second page, a complete list of entities, per country, with business codes provided;

Will provide flexibility on the source of statutory data (but will require consistency in application);

Will remove the obligation to provide information about the 25 highest paid employees in the Master File.

Credit: Finfacts