OECD BEPS tax avoidance plans fail to change tax approach

Nearly a year after release of the OECD Base Erosion and Profit Shifting (BEPS) anti tax avoidance action plan, which introduces changes to the treatment of interest deductibility and profit shifting, the majority of businesses have not changed their approach to tax compliance.

The major economies in the G7 (83%), nine out of ten (89%) of US businesses and an equally high level (86%) of UK businesses say that BEPS has had little impact on their tax planning.

When looking at the global picture, 78% of companies said they had not changed their approach to tax compliance, according to the survey by Grant Thornton from a poll of 2,600 businesses in 36 countries.

Those who said they had been most affected by BEPS were Indonesia (35%), Nigeria (38%) and India (36%).

As part of the BEPS plan, businesses are being asked to provide corporate tax information to local and international authorities. The research suggests the two greatest concerns are the additional administrative burden this creates (25%), followed by cyber security concerns (15%).

Additional administrative burden was cited by 35% of businesses in UK and by 32% in the US.

Francesca Lagerberg, global leader – tax services at Grant Thornton International Ltd, said: ‘It is fascinating that after the initial excitement around BEPS, and its potentially game changing elements, so few in the survey have taken active steps to change what they are doing.’

Lagerberg said the reasons for this could include reluctance to be the first mover in this area, plus uncertainty about how BEPs will work in practice.

‘Governments haven’t yet explained how or even if they will implement BEPS in some countries, so that leads to business caution.

“Equally, business leaders prefer the black and white to the grey on tax issues, so businesses would undoubtedly benefit from more guidance on what they should do next. Many will have been bitten by retrospective legislation or rule changes on tax in recent years and will be nervous about action before the ground rules are clear.

‘The recent EU action against Apple and its agreements with Ireland does not help make these tax issues any clearer for businesses,’ she said.