OECD warns business: Playtime is over
The time of gaming the international tax system is over for big business, following the endorsement of the OECD’s Base Erosion and Profit Shifting (BEPS) project
Corporations have to realise that “playtime is over, now you have to come back to school and play with the new instruments”, said Pascal Saint-Amans, the OECD director, centre for tax policy and administration today.
Last month G20 finance ministers officially provided their endorsement of reforms to the BEPS Project at a meeting in Lima, Peru.
The OECD wants multinationals to report their tax planning so it can be broken down into a country-by-country basis, with more emphasis to be put on the profits created in each country, making it more difficult to shift profits to low-tax jurisdictions.
Revenue losses from BEPS are estimated to be $100-240bn (£66-£158bn) a year, or roughly 4-10% of global corporate income tax revenues, according to the OECD.
Speaking today at a Thomson Reuters event, Saint-Amans said “now the work starts” as the non-legally binding OECD oversee implementation, monitor and determine cost of non-compliance.
He rejected the significant criticism from NGOs over the lack of developing nations at the decision-making table, but admitted, “Is it good enough? Probably not.”
He argued that it is impossible to get everyone around the table at the same time, “We saw an opportunity and we took it.”
He agreed that some countries needed to have their feet held to the fire, but praised the US for compromising and putting pen to paper on a deal that is “meaningful”. Saint-Amans added that said he was not “naïve” in thinking that bipartisan US politics had the capacity to hinder the process, however.
The UK government’s controversial Diverted Profits Tax had made the process “slightly more difficult” but it was “smart engineering”, said Saint-Amans.
He rejected that the idea that the current economic global slowdown could cause countries to become more protectionist and in turn blunt BEPs implementation, adding, “If anything it could help us.”
He was not surprised by the animosity from the big corporations during the consultation process, saying that some larger companies in the US had pushed for the OECD to be defunded.
