Trust Bloomberg Tax for the international news and analysis to navigate the complex tax treaty networks and global business regulations.
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.”
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.
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 firstname.lastname@example.org
To contact the editor responsible for this story: Penny Sukhraj at email@example.com
Copyright © 2018 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)