Survival of the Richest

Global developments 2016
Box 1
Concerns about BEPS
In August 2016, an All-Party Parliamentary Group in the
UK released a new assessment of the OECD base erosion
and profit shifting (BEPS) project. 38 Among other things,
the group highlighted that: ‘The OECD proposals are likely
to add to an already complicated global tax system. The
new complex rules could provide opportunities for new
loopholes to be identified by accountancy firms, banks,
lawyers and advisers remains.’ The group added that: ‘The
OECD’s proposals will reform existing rules and give tax
authorities better tools to crack down on tax avoidance.
However, these proposals are a “sticking plaster” on a
global tax system that is struggling to remain fit for purpose
with the growth of multinational companies operating in a
digital environment. The BEPS process should represent the
first step in a longer process of radical reform.’
Concerns have also been raised by other actors,
including the secretariat of the UN Economic and Social
Commission for Asia and the Pacific, which highlighted
that ‘dealing with complex international tax system
issues, such as those addressed in the BEPS project, is
beyond the capacities of tax authorities in smaller and
low-income countries with little expertise in the field,
while the policies, standards and practices recommended
by G20-OECD in this area might not always be the most
suitable for the region’s developing countries’. 39
Meanwhile, in September 2016, Grant Thornton
announced that: ‘A global survey of 2,600 businesses
in 36 countries finds little impact from the OECD BEPS
programme which was finalised last October, as 78
per cent of businesses say they have not changed their
businesses approach to taxation (...) The lack of impact is
even greater in the [Group of 7] (83 per cent), with 89 per
cent of US businesses and 86 per cent of UK businesses
saying that BEPS has had little impact on their tax
planning. According to the businesses surveyed, BEPS
has had the greatest impact on business tax planning in
the countries of Indonesia (35 per cent), Nigeria (38 per
cent) and India (36 per cent).’ 40
Regarding the question of whether the public should be
allowed to know where multinational corporations do
business, and how much tax they pay in those countries
(so-called public country by country reporting), the
BEPS outcome rejects this idea and instead requires
multinationals to share such information with tax
authorities only. The UK All-Party Parliamentary Group
highlighted that: ‘By failing to secure public country by
country reporting the OECD has missed a real opportunity
to open up the tax system. Transparency is the best
way to restore people’s trust and simply providing more
information to tax authorities is not enough. We need to
open companies’ affairs to proper public account. Only
when we know the activity that companies undertake in
every country, the revenues they earn in every country and
the profits they make from those revenues, will we be able
to see if the tax they pay is fair.’ 41
Civil society has also previously raised concerns that
BEPS failed to address the more fundamental problems
of international corporate tax dodging; that the proposals
to combat harmful tax practices are too unambitious
to be effective; and that BEPS in some cases ended up
endorsing practices that should have been abolished,
such as, for example, patent boxes. 42
Not only did BEPS fail to achieve the level of ambition
needed to put an end to tax dodging by multinational
corporations, the project has wider policy implications
that are very troubling from a tax justice perspective. The
OECD BEPS has become a way for some governments to
appear tough on corporate tax avoidance without having
to deal with some of the more fundamental problems
of an outdated international tax system, and without
addressing the interests of developing countries. However,
as highlighted next, issues that go beyond BEPS, including
public country by country report and more fundamental
reforms of the tax system, quickly came back on the
political agendas of many countries, and are now, for
example, being negotiated across Europe.
Survival of the Richest • 13