H&M Tax Chief: OECD Global Tax Reform Will ‘Increase’ Disputes

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By Ben Stupples

The OECD’s tax policy reforms for multinational companies will lead to them facing more disputes with governments, according to the head of tax at Swedish clothing retailer Hennes & Mauritz AB.

Does the reform for large businesses “help to prohibit, avoid, or motivate and increase the number of disputes? I would say the latter,” Erik Knijnenburg said Oct. 12 at an international tax conference in London hosted by accounting firm Mazars. “Disputes are going to rise.”

The comments come amid the Organization for Economic Cooperation and Development’s efforts on the taxation of the digital economy, a challenging and unfinished part of its project to prevent multinational companies from avoiding tax by shifting their profits to low-tax or no-tax jurisdictions.

In the absence of a solution on the digital economy from the OECD, countries have introduced their own targeted measures, leading to an uptick in disputes in some jurisdictions.

Two years ago, the U.K. introduced its diverted profits tax amid growing concern that Google parent Alphabet Inc. and other global tech companies were engaging in tax planning to shift their profits to offshore havens. Since then, Australia and India have introduced similar measures.

The process behind the OECD’s reform started with “the naming and shaming of big companies,” Knijnenburg added in his conference talk, which focused on the purpose of the BEPS project. “But, since then, it’s one big circus of statements made by officials and official institutions.”

Two-Year BEPS Project

The OECD began its project against base erosion and profit shifting in 2013 with subsequent compulsory measures including global tax reports for large companies.

At the conference, head of finance at London-based clothing retailer Burberry Group Plc, Ian Brimicombe, said it was time for businesses to “suck it up” as they implement laws derived from the BEPS project.

The OECD has dealt via the 15-point project “with some of the landscape they wanted to attack: the offshoring of IP, offshoring of cashboxes—the worst excesses, as we called them,” Brimicombe said in a panel discussion at the conference.

“The OECD has brought a measure of certainty in the application of rules that deal with those excesses,” he added. “However, we do have an uncertain environment now” due to BEPS.

OECD’s Report to G20

Indicating how large companies are facing more disputes since the BEPS project, U.K.-based drinks company Diageo Plc, U.S. WiFi product-maker Netgear Inc., and Switzerland-based conglomerate Glencore Plc have all faced the U.K.’s diverted profits tax in the past two years.

After increasing its efforts earlier this year to develop a consensus among countries, the OECD will deliver a report to Group of 20 on the taxation of the digital economy in April 2018.

Speaking on the conference’s panel, OECD senior transfer pricing adviser Melinda Brown said the digital economy is “very much” an area of focus for the organization at the moment.

In a subsequent interview with Bloomberg BNA, she also rebutted Knijnenburg’s comments.

Putting aside the BEPS project, “there’s been more of a focus across countries on tax in audits, so an increase in disputes could have happened anyway,” she said at the sidelines of the conference. “If we think about that, it’s hard to put any rise at just the foot of the BEPS project.”

To contact the reporter on this story: Ben Stupples in London at bstupples@bna.com

To contact the editor responsible for this story: Penny Sukhraj at psukhraj@bna.com

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