BEPS experts ponder uncertain future for arm’s-length principle

The arm’s-length principle for international transfer pricing continues to have widespread support, a senior OECD official told a London conference amid concerns about the effectiveness of the base erosion and profit-shifting project.

A discussion on the future of the arm’s-length principle on November 29 was hosted by the Oxford University Centre for Business Taxation, whose director Michael Devereux noted that the BEPS project has “triggered a material hike in the complexity of applying” the principle. Richard Collier, an associate fellow at the Centre for Business Taxation, warned that “a continued vulnerability to avoidance will present recurrent and profound difficulties.”

Tomas Balco, the recently appointed head of the transfer pricing unit at the OECD’s Centre for Tax Policy and Administration, offered a personal perspective of “where countries think we are” in relation to the arm’s-length principle … Noting that a previous speaker argued that the principle may not have a long-term future, Balco said feedback from delegates to the OECD’s Working Party 6 on transfer pricing suggests that “nobody thinks the patient is dying.” Read more:

My news story for Tax Analysts, December 2 ($)

How should we tax multinationals?

My Tax Analysts news story on the debate hosted by the Women in Tax network on November 20 is now free to view.

Governments considering how multinationals should be taxed must address the erosion of public trust in tax administrations, while businesses continue to stress the importance of certainty in tax matters, panellists told a conference hosted by the Women in Tax network at Pinsent Masons’s London office.

UK lawmakers question OECD as forum, urge tax transparency push

A continuing lack of transparency in the UK’s overseas territories and crown dependencies will significantly hinder efforts to curb global corruption, and more must be done to ensure that developing countries’ voices are heard on international tax reform, according to a cross-party committee of members of Parliament.

The International Development Committee welcomed the work done by the OECD through its flagship base erosion and profit-shifting project. “However, international tax discussions must be fully reflective of international concerns, including those of developing countries, and we remain concerned that the OECD – due to its composition – is not adequately reflecting the needs of the poorest countries in its policy outcomes,” the committee said in a report titled “Tackling Corruption Overseas,” published October 19.

Read more: My news story for Tax Analysts October 20 (paywall).

Tax experts criticise penalty proposals amid UK tax avoidance rhetoric

UK government proposals to penalise enablers of tax avoidance schemes could prevent some taxpayers from getting expert advice on complicated issues, according to the Chartered Institute of Taxation. The proposed penalties should be better targeted at those who deliberately seek to profit from avoidance, CIOT said in an October 12 press release.

Separately, Michael Izza, chief executive of the Institute of Chartered Accountants in England and Wales, has warned that politicians have unfairly singled out accountants in their criticism of professional advisers over avoidance.

Read more: My news story for Tax Analysts, October 13 (paywall).

HMRC announces new structure as critics call for public tax returns

A reorganization of HM Revenue & Customs suggests that the department is thinking “more broadly in taxpayer terms,” a leading tax expert said, as a review commissioned by the Labour Party noted “considerable public dissatisfaction” with the quality of service at HMRC and called for the publication of large companies’ tax returns.

“As HMRC develops its digital services, it is a positive step to see it prioritizing changes to the customer-facing team,” Paul Aplin, vice president of the Institute of Chartered Accountants in England and Wales, said in a statement. “At a time when Brexit has created new challenges for businesses and growth is key to economic recovery, it is vital [that] businesses and their advisers can get simple actions done effectively and efficiently by HMRC.” Continue reading HMRC announces new structure as critics call for public tax returns

UK paves the way for public country-by-country reporting but stresses multilateral approach

Tax transparency campaigners have welcomed the UK government’s decision to accept a Finance Bill amendment that will enable HM Treasury to make regulations requiring large multinationals to publish country-by-country reports of their profits and taxes. The government, however, stressed that it intends to seek international agreement on a reporting model before using the new power.

Customers and taxpayers expect big companies to “play fair by them and by the country in which they operate,” Labour member of Parliament Caroline Flint said during a House of Commons debate on September 5. “It sometimes seems as though we are trying to catch jelly.”

Read more: My news story at Tax Notes 7 September (paywall) published by Tax Analysts.

UK lawmakers to debate public country-by-country reporting as tax expert urges caution

Members of the U.K. Parliament have been urged not to risk “confrontation” with U.S. lawmakers by breaking ranks on public country-by-country (CbC) reporting, as they prepare to debate for a second time a finance bill amendment that would pave the way for mandatory public CbC reporting by large multinationals.

MPs defeated a similar amendment in June by just 22 votes. Labour MP Caroline Flint’s revised amendment, set to be debated on September 5 or 6, has the support of a cross-party group of 60 MPs.

Then-Financial Secretary to the Treasury David Gauke told Flint during the June 28 debate that the government shared her aims of increasing transparency and clamping down on avoidance. The government had “led the way in calling at an international level for public CbC reports,” he said. But Gauke argued that the amendment was technically flawed and that there would be “disadvantages for the U.K.” if Parliament acted unilaterally.

Read more: My news story for Tax Notes, 3 September (paywall) published by Tax Analysts.

Tax professionals urge UK government to delay interest expense reform

The U.K. government’s timetable for implementation of a key base erosion and profit-shifting project reform is too ambitious, tax professionals have warned.

There is “no need to rush” a review of U.K. law on deductibility of interest because existing rules already limit deductibility, the Chartered Institute of Taxation said …

The proposed restrictions are likely to have “significant adverse consequences” for heavily geared infrastructure and energy projects whose viability is often reliant on tax relief for interest, said Eloise Walker, partner at Pinsent Masons LLP, in a client briefing … Continue reading Tax professionals urge UK government to delay interest expense reform

New UK chancellor stresses commitment to reduce corporate tax rate

The UK economy is well placed to respond to the “shock” of last month’s EU referendum decision, newly appointed chancellor of the exchequer Philip Hammond told members of Parliament, saying that the government is committed to ensuring that the UK has a competitive corporate tax system that encourages innovation and business investment.

“We have already announced a reduction in corporation tax to 17 percent – the lowest rate in the G20 – and we are reducing the [property tax] business rates burden by £6.7 billion,” Hammond said July 19. He made no reference to his predecessor George Osborne’s aim, reported in the Financial Times shortly after the Brexit vote, to set a long-term target of less than 15 percent for the corporate rate.

Read more: My news story for Tax Notes, 22 July (paywall) published by Tax Analysts.

UK tax practitioners question 15% corporation tax target

After Chancellor of the Exchequer George Osborne said that he wants to set a target rate of less than 15 percent, tax practitioners suggested that further reductions in the U.K.’s corporation tax rate are not a top priority for businesses and may not have the desired effect.

Osborne is planning to “slash corporation tax” in order to woo businesses deterred from investing in a post-Brexit Britain, the Financial Times said in a July 3 report, noting that the move could alienate voters.

The Confederation of British Industry welcomed the announcement. “The chancellor is right to be considering moves that support economic growth and send out the signal that the U.K. is open for business at this critical time,” said CBI chief economist Rain Newton-Smith.

Read more: My news story for Tax Notes, 6 July (paywall) published by Tax Analysts. Stephanie Johnston contributed to this story.

Does the UK need even more corporation tax cuts?

George Osborne has told the Financial Times that he wants to set the lowest corporation tax rate of any major economy, announcing “a target of 15%”. The current rate is 20%. The paper reported that:

[Osborne] said Britain should “get on with it” to prove to investors that the country was still “open for business”.

The FT added that before the EU referendum the chancellor had “threatened to make £30bn of tax rises or spending cuts” in a post-Brexit emergency Budget:

He is now striking a more cautious note, awaiting official forecasts before announcing any new measures in the Autumn Statement.

The FT also noted that the move could alienate some voters, and Labour’s shadow chancellor John McDonnell has tabled an urgent question for today, 4 July, on the corporation tax proposal. Continue reading Does the UK need even more corporation tax cuts?

UK lawmakers approve corporation tax cut

The UK’s low corporation tax rate attracts jobs and investment, and it would be a grave mistake to cancel a further cut to 17 percent planned for 2020, Financial Secretary to the Treasury David Gauke warned members of Parliament before they approved the cut by a vote of 308 to 255.

A Committee of the Whole House completed its consideration of the finance bill June 28 after several hours of debate. MPs defeated by just 22 votes an amendment implementing public country-by-country reporting, and defeated by 37 votes a new clause on tax transparency moved by Margaret Hodge, Labour MP and former chair of the House of Commons Public Accounts Committee.

Read more: My news story for Tax Notes, 30 June (paywall) published by Tax Analysts.