bEPS, destination-based-cash-flow, G20, G8, HM Revenue & Customs, House of Lords, Member of Parliament, Multinational corporation, OECD, Organisation for Economic Co-operation and Development, Tax, Treasury
The House of Lords Economic Affairs Select Committee has added its voice to the global debate on tackling tax avoidance.
Almost a week after the OECD’s Action Plan on Base Erosion and Profit Shifting (BEPS) was endorsed by the G20 Finance and Central Bank Governors, the Select Committee has yesterday published its views on what the UK should do differently to deal with corporate and individual tax avoidance.
The following six recommendations from the report are instructive:
- 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.
- 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.
- 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.
- 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.
- 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. the 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.
- HMRC should be better resourced to deal effectively with the tax affairs of multinationals.
While the final design of the OECD BEPS Plan may be at least two years away it is prudent to be concerned about any plans to fast-track a UK solution to international tax problems.
Certainly the House of Lords report is the beginning of a very long journey to reaching agreement on exactly what can and should be done to reform international tax policy and regulation.
The debate continues…