Update: 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.

My news story for Tax Analysts, published on December 2 (paywall), is now reproduced in full with permission:

BEPS Experts Ponder Uncertain Future for Arm’s-Length Principle (PDF)

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 ($)

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).

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.

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

BEPS implementation is the hard part, tax experts tell MPs

Tax experts have told members of Parliament on the UK’s Treasury Committee that implementation of the actions recommended in the OECD’s base erosion and profit-shifting project faces some difficult challenges and will depend on maintaining an international consensus.

Asked about calls for greater transparency regarding multinationals’ tax, they argued that public country-by-country (CbC) reporting would not necessarily help people decide whether a company such as Google is paying the right amount of tax.

Read more: My news story for Tax Notes, 15 June (paywall) published by Tax Analysts.

More than 20 countries sign up to automatic information exchange

The world is moving firmly in the direction of greater tax transparency, U.K. Chancellor of the Exchequer George Osborne declared after 19 European countries joined a pilot scheme for automatic exchange of information on beneficial ownership, launched by the G-5 European economies earlier this month. Read more: My news story for Tax Notes (paywall) published by Tax Analysts.