OECD to unveil global tax plans
The OECD’s measures to reform international corporate tax systems will cause Ireland fewer problems than forecast, but for eurozone countries it will be just the beginning of greater and more detailed change.
Following two years of constant meetings between tax experts from its 34 country members, the Paris-based body releases the second half of its 15-point action plan on combating base erosion and profit-shifting on Monday.
Heralded as the most ambitious and fundamental change to international tax rules in almost a century, it was first mandated by the G20 countries in 2012 as the developed nations sought to put the great economic crisis behind them.
The focus was on two primary areas — double non-tax, and regimes that allow profits to be geographically divorced from the activities that create them, both of which Ireland has been addressing.
From the beginning, Ireland said it was willing to change, but said it needed to be done globally to avoid first-movers being penalised.
Under huge pressure from the EU and the US, especially on the high-profile preferential tax treatment for Apple, significant changes have been made or are in the process of being made.
Last year, the Government announced the end for new companies of the double-Irish tax arrangement that allowed US companies escape liability for tax on intellectual property rights in the US or Ireland. It ends for existing companies in 2020.
Ireland is ahead of the posse as it has directly linked its guidelines on transfer pricing to the OECD model and will move further along those lines. It has also taken the step of being the first to devise a ‘knowledge box’ that complies with the OECD model.
Ireland is also moving on the country-by-country reporting, and this will be the first action everyone has agreed to implement.
However, the experts warn that while the OECD got to this stage remarkably quickly, the follow-up may not come as fast with some actions needing legal changes, while others set best practice.
The European Commission is adamant that there must be a harmonised base erosion and profit-shifting system for the eurozone — and the main mechanism will be the common corporate tax base, to be unveiled shortly, and followed up with the less-popular consolidated version.
The final base erosion package will be presented at the G-20 finance ministers’ meeting in Lima, Peru, on October 8. The big job after that will be to get countries, especially the US and China, to sign and implement.