OECD puts multinational tax affairs in spotlight

The announcement by the UK government that it is introducing a 25 per cent so-called Google tax on "contrived arrangements" within multinationals was one of the issues raised with the OECD during a webcast yesterday.

The Paris-based organisation’s Pascal Saint-Amans said the UK move was “extremely interesting” as it served to illustrate the level of political concern that exists about the practice of tax avoidance by multinationals.

However, he was quick to point out that it would be the OECD’s wish that the political concerns about multinational tax avoidance were addressed by way of the multilateral action being prepared by the OECD’s base erosion and profit shifting (Beps) project, rather than through unilateral actions by governments.

Any unilateral actions taken by the London government would, he hoped, be compatible with the new policies being worked on by his organisation.

What is needed, according to the director of the centre for tax policy and administration at the OECD, is a co-ordinated approach that is not detrimental to either government revenues or business investment.

Saint-Amans and his colleagues at the heart of the Beps project must be surprised to find that what was once considered to be among the most boring and obscure of topics – tax treaties and transfer pricing – is now centre stage not just politically but on the media agenda.

During the webcast Saint-Amans referred to “recent news” and then went on to welcome the steps announced by the European Commission in the wake of last month’s Lux leaks controversy. He said he was “extremely glad” there would now be a system of exchanging advanced tax rulings between member states and pointed out – as did the organisation’s head of tax treaties, transfer pricing and financial transactions division, Marlies de Ruiter – that the planned new country-by- country reporting regime being worked on for companies will oblige multinationals to declare certain categories of tax rulings.

This will mean a jurisdiction that, for instance, was minded to suppress a tax ruling that might have an adverse impact on another jurisdiction’s tax take would run the risk of having its reticence exposed by the company by way of its country-by-country report.

The way the OECD is working to have its various new rules and structures add up to an integrated and internally reinforcing whole is one of the advantages to working on a multilateral – as against a unilateral – basis. It also illustrates another point: the multinational tax avoidance scandal is a creature of the way global business has escaped from national controls.

The effort to resolve egregious multinational tax planning requires global political catch-up. Clever thinking is needed in Merrion Street as Ireland’s room for manoeuvre is being squeezed.