Tax reform a hot topic
Acceptance of the need for considered tax reform (presumably rather than trial by media) seems to be gaining ground, with a recent discussion at the OECD and a UN report. There is a consensus among the G20 countries of the need for action to tackle "base erosion and profit shifting". Apparently an action plan will be delivered to G20 finance ministers next month with a view to a short term impact on tax with proposals set to include dealing with mismatches, transfer pricing, tax treaties and promoting increased tax transparency.
Meanwhile the UN report addresses the need for action on the abuse of transfer pricing rules, for tax transparency and a more equitable system of corporate tax. David Cameron also wants to put tax and transparency on the agenda for the impending G8 summit.
One bit of good news is a sensible approach from some at the OECD meeting pointing out that the fact that some businesses were not being taxed "at the statutory rate" was not the fault of business. The approach was that if it is legal and you do not like the outcome you need to change the law but the big question is how do you make sure that the international tax rules are implemented between different countries. The arm's-length principle for transfer pricing works reasonably well but some things are difficult to measure – such as the value of intangible assets and the use of such assets.
The OECD further pointed out that unilateral and uncoordinated action could result in the risk of double, and possibly even higher, taxation with a consequent negative impact on investment, growth and employment.
The question of morality also cropped up in terms of interpretation of the law, the view expressed is that getting the law right is only a starting point. I am yet to be convinced on that; the views are too diverse to be generally applicable. There is though a presumption, which I have to question, that a higher tax take will automatically result in less poverty.
Date: 6th June, 2013
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