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UK: a new approach to multinational tax avoidance?

In commenting on multinational tax avoidance and the OECD’s endeavours to tackle Base Erosion and Profit Shifting (BEPS), Baker Tilly has emphasised that the ideal of concerted, global action will require massive, coordinated efforts.

Today, the House of Lords Select Committee on Economic Affairs has published its report on tackling tax avoidance which asks whether a new approach is needed. The Committee’s main recommendations are:

1. Parliament should establish a joint committee, made up of MPs and Peers, to exercise greater parliamentary oversight of HMRC and the settlements it reaches with multinationals.

2. The Treasury should urgently review the UK’s corporate tax regime and report back within a year with proposed changes to be made in the UK and pursued internationally, especially through the OECD.

3. As part of the Treasury’s work on the OECD’s BEPS plan, the Committee recommends consideration of other approaches to the taxation of multinational companies, such as a destination-based cash-flow tax.

4. The Treasury should review some of the fundamentals of the UK’s corporation tax regime, including the differential tax treatment of debt and equity and the scope for introduction of an allowance for corporate equity.

5. In addition to current government plans, such as the naming and shaming of promoters of tax avoidance schemes and the self-certification of tax compliance by companies bidding for public contracts, the Committee recommends:

i. regulation of tax advisers;

ii. measures to penalise users of failed tax avoidance scheme;

iii. a requirement on companies to publish a summary of their corporation tax returns, in the interests of greater transparency.

6. HMRC should be better resourced to deal effectively with the tax affairs of multinationals.

It seems to us that UK initiatives which are consistent with the eventual outworking of the OECD BEPS plan may well be helpful. However, to the extent that the UK decides to go it alone in implementing tax changes which are inconsistent with the OECD approach, any short-term gains will be followed by long-term inconsistencies. Nevertheless, couched as they are in terms far more measured than those adopted by the Public Accounts Committee, these latest proposals deserve serious attention.

This was posted in Bdaily's Members' News section by George Bull .