IntheBlack, February 2017
Read it as it ran here
Has there ever been a global tax initiative as bold as the OECD’s base erosion and profit shifting project – swiftly abbreviated in global commerce to BEPS? It is an attempt to rewrite the rules of global taxation in a hundred places at once, to change the behaviour of the world’s most powerful multinationals, and to do so at uncommon speed.
But no project as ambitious as that achieves its objectives without some casualties.
BEPS refers to tax avoidance by multinational companies, usually by shifting profits from a high tax jurisdiction – often the US or a European country – to one with low or no tax. This is considered unfair from several perspectives: the country that loses out on corporate tax revenue, the domestically-focused company that is at a competitive disadvantage to a tax-dodging international one, and even the individual who loses faith in the fairness of their tax system when they believe global heavyweight companies aren’t pulling their weight.
These problems have got worse with the development of the digital economy, and in the post-GFC world where every dollar matters to an economy a little more than it once did, the situation requires amendment. “For decades countries have entered into tax treaties to stop double taxing of the same profits,” says Paul Drum, Head of Policy at CPA Australia. “The BEPS agenda is about ensuring that, as well as there being no double taxation, there’s also no profits that are not getting taxed anywhere.”