Francesca Lagerberg welcomes moves towards global taxation transparency
"Tax is sexy" reads the postcard on the wall of my office. The irony is inescapable but tax is certainly never far from the headlines these days. Corporate tax inversion deals – such as the Burger King buyout of Tim Hortons and Pfizer’s attempted purchase of AstraZeneca – are creating waves and have become the latest stick to bash businesses with.
The business reasons for such deals are clear: Burger King will now be paying 15% corporation tax in Canada as opposed to 35% in the United States. The broader implications are somewhat murkier. The spate of inversions has caused concern in Washington about the threat they pose to the corporate income tax base. And earlier this week the US government issued new regulations which will make shifting tax domiciles more difficult, including toughening up ownership limits that investors can retain in an inverted company.
It all goes to show how complex taxation is for businesses. On one side, companies have a duty to their shareholders and investors to maximise profits. On the other, there are calls from politicians and the public to support their country by paying their ‘fair share’. What businesses need is clarity, a fact underlined by our International Business Report (IBR): three in five businesses are calling for more transparency in what is acceptable tax planning and updated tax rules for a modern, digital economy.
I was therefore heartened to see the overwhelmingly positive reaction of the G20 to the first draft of the OECD proposals on BEPS (the Base Erosion Profit Shifting project) which addresses some of the issues such as increasing transparency, limiting the use of tax havens and better ways of taxing digital companies. Creating global standards is a frighteningly complex task but the majority of the measures were agreed to by 44 economies which account for 90% of global output. It’s only the first step down a long, rocky road; but it’s a significant step forward.
While some business leaders will welcome this attention on transparency there are undoubtedly others who might have hoped the global focus on tax would blow over. But the momentum towards a global far-reaching agreement is building and businesses of all sizes – not just multinationals – need to prepare for and implement the changes (our recent report is a good place to start). Tax may well not be the sexiest thing on a business leader’s plate, but it is unavoidable.
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