Big companies push back against G20 tax avoidance plan

Reuters

By Tom Bergin

LONDON, Oct 23 (Reuters) - Big companies have pushed backagainst an international drive to crack down on corporate taxavoidance, documents published by the body charged with draftingnew rules showed on Wednesday.

The Paris-based OECD published letters from Europeancompanies including Diageo and Gazprom and groups representingthe biggest U.S. multinationals asking it to reconsider proposedmeasures on transparency and on tackling tax avoidance, sayingthe plans could hit trade and investment.

But the head of the OECD's Centre for Tax Policy said that,while the body would listen to companies, they had to realisechange was on its way.

"Sometimes I fear that business considers that it isbusiness as usual, and it's not business as usual, and a numberof business people, at some point, will have to understandthat," Pascal Saint-Amans said in a telephone interview.

"The leaders of the G20 have said that they want this," headded.

Big budget deficits and revelations that companies likeApple and Google use structures that lawmakershave labeled "contrived" to avoid billions of dollars in taxes,have led to growing calls to close corporate tax loopholes.

The companies say they follow the existing tax rules.

In September, the Group of 20 (G20) major developed anddeveloping economies backed an OECD draft plan that advocatedallowing countries to ignore inter-company contracts which wereaimed at channeling profits into tax havens.

Businesses oppose giving tax authorities greater rights to"recharacterise" transactions - that is, to insist that profitsbe declared where the economic activity that generates theprofit takes place, rather than where inter-company agreementssay it belongs.

"The surprisingly frequent references to"re-characterisation" in the draft are, in our view, largelyunnecessary, and may in their totality convey the wrongmessage," Paul Fox, Tax Director at British drinks group Diageo wrote, in reference to planned new rules oninter-company payments for the right to use company brands andother intellectual property.

Similar views were expressed by Russian gas producer Gazprom, while the U.S. National Foreign Trade Council, which represents over 300 companies including General Electric and Google, questioned the "premise that the profits of amultinational enterprise ought to be allocated acrossjurisdictions in proportion to employees or tangible assets".

The companies said the existing practice of recognizinginter-company transactions gave business greater certainty andencouraged trade by helping ensure the same profits were nottaxed more than once.

Business groups were also cool on a proposal tabled in Juneby the Group of Eight (G8) leading developed economies, thatcompanies should provide information to tax authorities on theirearnings and tax payments on a country-by-country basis.

The idea was that greater transparency would help taxauthorities - especially those in developed nations which lackthe investigative resources of richer nations - to spot whencompanies were shifting profits out of their countries, andthereby avoiding taxes.

But business groups including Britain's Confederation ofBritish Industry, the United States Council for InternationalBusiness (USCIB) and French employers' body Medef, expressedconcerns that business would face unreasonable administrativeburdens and risked having confidential commercial informationleak out to competitors.

"Because of these concerns, we suggest that the OECD oughtto consider alternatives to country-by-country reporting," wroteWilliam Sample, chairman of the tax committee at USCIB, whosemembers include Microsoft and Exxon Mobil Corp.

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