The Chancellor today published a paper setting out the UK’s priorities for the G20-OECD project on Base Erosion and Profit Shifting (“BEPS”).
The paper, titled “Tackling aggressive tax planning in the global economy: UK priorities for the G20-OECD project for countering Base Erosion and Profit Shifting” re-affirms the UK Government’s commitment to adopt any BEPS compliance measures in as far as they are in line with long established UK international tax principles and existing international obligations.
The position paper is in my view a welcome move on the part of government at a time when the BEPS project is entering a crucial phase. This is because there is growing anxiety on the part of Multi-National Enterprises (“MNEs”) as to whether the implementation of the Action Points (“APs”) coming out of the BEPS project will be as joined up and multilateral in practice absent a total commitment to respecting generally accepted international tax principles. The fact that some countries (key examples being Australia and Canada) have already unilaterally introduced BEPS compliance measures ahead of the final adoption of the APs is indeed troubling and in a sense undermines the integrity of the BEPS process. How can tax payers be sure that the measures will have multilateral effect if some countries are already taking unilateral legislative positions and thereby pre-empting the final APs?
Critics and cynics alike will no doubt point to the paper’s implied ‘ring-fence’ protection for the UK banking sector from what the UK may perceive to be the threat of any unduly punitive BEPS compliance rules aimed at the banking sector. Such ‘ring-fencing’ betrays some of the nervous tensions that are at play amongst G20-OECD member states as they try to hammer out a consensus-led approach to BEPS compliance measures. If the UK is careful to ensure that its banking sector is protected, it stands to reason that other states may take a similar view regarding other sectors that are important to them. There is a real danger that in the final analysis the BEPS project may prove to not be as far reaching as first envisaged.
The above notwithstanding, MNEs at least have some measure of certainty that HMRC’s approach to the implementation of BEPS compliance measures will be in line with the general international tax principles that the UK has long subscribed to and in that sense it is good news!