The Oxford University Centre for Business Taxation conference
on “BEPS and UK tax policy”
This event, hosted by University of Chicago Booth School of
Business, had an impressive speaker list. This piece focuses on the opening
speech by David Gauke, Financial Secretary to the Treasury.
He first posed the question as to whether the work on tackling
tax avoidance is done. Nobody was surprised by his answer. No. The efforts now
are focused on delivering successful outcomes from BEPS.
However, he immediately referred to the UK approach of
continuing to reduce the corporate tax rate, setting out its important impact
on increasing business returns on investment and hence productivity.
He repeated the mantra “Low tax, but tax that is paid”. A level
playing field leads to more efficient tax.
Reassuringly he then went on to make it very clear that
there are legitimate activities by large businesses. It’s important to distinguish what is within
the rules. However, when governments are making difficult decisions, and tax
planning becomes international issue, it is incumbent on government to take
action.
BEPS has been a success, but the UK would like to have seen
more on transfer pricing, to tackle separation of capital and income from
economic activity
The UK clearly supports BEPS CBCR with draft regulations
having set out the detail to implement the G20 and OECD supported form.
Interestingly David made no mention of the word “public”, but I’m sure we know
what the message would have been.
He also touched on the important work on tackling hybrids
and other areas. However two of the key points he highlighting where the “full
and proper attention” being given to all BEPS measures, including the
consultation on deductibility of interest. He also repeated support for the
patent box as an important tool to encourage growth in the UK.
On Diverted Profits Tax (DPT), David described it as a
targeted, narrow measure aimed at particular contrives arrangements. When asked
from the floor whether the DPT is a temporary measure, he was very clear. DPT
is here to stay. It is consistent with where BEPS is going and the direction of
travel. It complements BEPS, and does not, as some said, undermine BEPS. A little dig at those who criticised
unilateral measure there then. So that would be the OECD?
Interestingly, Grace
Perez-Navarro of OECD, who was up next, had a dig back at unilateral
measures, saying that part of the whole purpose of the BEPS work was to avoid
the disadvantages of unilateral changes, and the resulting uncertainly for
business.
It is a shame they were not on a panel together.
Another question from the floor asked how do we challenge
the “big bad MNEs” message.
David’s response was that we must be realistic about BEPS. We
shouldn’t claim everything is sorted. People who said nothing would come of
BEPS have been proven wrong. But its not time for a lap of honour! Implementation
remains important in tackling perceptions. Perception and reality are not always aligned,
but sometime they are.
On implementation, David said that countries delaying BEPS measures
take a risk by dragging their feet. Even in the US, where it is difficult,
there is a sense they are keen to make what progress they can, particularly in
administrative areas.
On developing countries, there was a question on whether
there remains a risk that rules just set by rich countries.
David said that the OECD is right forum. He does not think this
should be at UN, and the success of the BEPS project strengthens that. However,
there is an important role for government in helping tax authorities in
developing countries. Including on policy development. This needs to continue.
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