Tax Break

Who said tax is boring?

Nobody expects the Spanish Inquisition

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And now for something completely different…

As Inquisitions go, the Spanish one went quite recently. The last garroting took place in 1826, with abandonment of the 350 year-old program in 1834. Portugal had, by then, put that sad part of its history behind her, while the Papal States, and their offshoot The Vatican, finally got round to announcing their Inquisition’s requiem in 1908, and its requiem aeternam in 1965. Parting was, evidently, such sweet sorrow.

Despite the Renaissance and all that followed, and despite the receding risk of having one’s soul removed from one’s body by religious force, the Catholic Church (and in its wake, other Christian sects and religions) has historically been treated with kid gloves – nowhere more notably than in the field of taxation.

Several nations have agreements with the Vatican governing that institution’s extensive property holdings, which provide extensive exemptions from income tax and property taxes. In addition, for various reasons (e.g. in the US, the Establishment clause of the First Amendment; in other nations, the contribution to the public good) nations include religions of all stripes in their tax-free, not-for-profit legislation.

Where the real clash occurs is when a religious institution earns commercial income. Income tax is a dogmatic no-brainer (though not according to all those agreements); but property taxes are in another world.

Salvation has possibly come in the form of the European Union, the Godless machinery of which has just come up, for at least the second time, with a fortuitous deus ex machina.

On June 27th, the European Court of Justice issued a judgment that Spain’s municipal construction and building tax could apply to Catholic Church property used for educational purposes not funded by the Spanish government. This was despite a Spanish High Court ruling enforcing a 1979 agreement with the Vatican that no taxes could apply to property and earnings from property owned by the Holy See and its offshoots. The miraculous solution was unlawful state aid – which, in the EU canon, is up there with adultery and child-sacrifice. The case was referred back to the Spanish courts for consideration – the presiding judges of which will presumably not need to stretch Church representatives on the rack or burn them at the stake in order to enforce an equitable solution.

On a previous occasion, in 2012, thanks to pressure from the EU over the same unlawful state aid, then Italian Prime Minister Mario Monti was handed the moral strength to strong-arm the Vatican into paying taxes on commercial properties around Italy, which hitherto had been tax exempt if they included some token religious symbol, like a chapel in a converted monastery hotel. Meanwhile, the Vatican itself remained a tax sanctuary, although the cash-strapped city of Rome has in recent years been trying to get the pope, who happens to live there and has expressed personal support for taxation, to pass the collection plate among the moneychangers at the entrance to the Vatican museum and its lucrative shop.

Other countries, unable to brandish the symbol of unlawful state aid, that have been trying to reach a modus vivendi with the Church will welcome the ECJ’s decision; notably Zimbabwe, that paragon of taxation virtue, and Israel, where it all started when an idealistic young man exhorted his countrymen to ‘render unto Caesar the things that are Caesar’s ’. But then, in those days, all roads led to Rome.

 

 

Did you hear the one about..?

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French comedy at its (silent) best

This year’s Booker International prizewinner, ‘A horse walks into a bar’, follows the routine of an over-the-hill stand-up comic as he coaxes and manipulates his audience, painfully aware that one failed joke could send the entire act crashing through the stage floor.

I often wonder why modern politicians don’t take their cue from stand-up comedians. While much of what they say and do is laughable, they never seem to be afraid of wheeling out the old, failed one-liners. And, unbelievably, far from throwing rotten tomatoes, their constituents and the international community at large lap up their corny nonsense.

For example, did you hear the one about the French Finance Minister who walked into a press conference …?

Following five years of clownish misrule by socialist Francois Hollande, last month France’s independent auditor uncovered a budget shortfall of seven billion euros. Meanwhile, France has failed to meet the EU maximum deficit requirement of 3% of GDP every year for the last decade – a target that is particularly important for the stability of the single currency. And, then there is the protected labour market, with maximum working hours and early retirement, to name but two loony-left policies.

All that misery led the new Prime Minister to announce earlier this month that President Emmanuel Macron’s campaign-promised tax cuts would have to wait until 2019 while the government set about balancing the books. That invited an immediate reaction, not from the opposition, but from the government’s Finance Minister, evidently acting with the backing of his boss’s boss. According to the quickly revised script, the first stage of the planned reduction of corporate tax from 33% to 25% would go ahead next year – down to a cordon bleu, mouth-watering 28%. Meanwhile, housing taxes would be reduced, and there would be a reform of wealth tax (the latter would be delayed).

The amazing thing is that the Finance Minister declared that the required budget deficit target would still be achieved in 2018 – the gap evidently to be closed by the expected additional tax revenues from the economic growth arising from the change. You can fool some of the people all of the time. History is full of no-hope fiscal promises from governments. A larger than expected deficit, plus labour rigidity that will take years to unravel, would be a no-brainer to any tenth-grade pupil who could think past his infatuation with his teacher. Short of a miracle – like the bonanza of more than a billion euro back-taxes the French courts refused to sanction from Google last week, or the Finance Minister getting lucky with the country’s foreign currency reserves on the tables at Monte Carlo – the deficit target is going to be missed once more.

I realize that politicians, more than most, do not like to be bearers of bad tidings, but what about the French equivalent of the man on the Clapham omnibus? Do people really just hear what they want to hear?

While governments and their cohorts can, at a price, mess with the money supply and the amount of fiscal spending, as well – in fairness – as tax policy, they clearly cannot micromanage the annual tax-take.

Lousy one-liners aside – in politics, like in stand-up, it is all a matter of timing…..

 

The Unsatanic Taxes

funnyroadNobody who has read Salman Rushdie’s classic ‘Midnight’s Children’ can be indifferent to the juxtaposition of India and Midnight in a phrase or sentence. So, the recent announcement that India’s new GST law (VAT by any other name would smell as sweet) would come into effect, amidst much fanfare, at midnight on July 1 was enough to make my heart flutter like a punkahwallah’s punkah.

The world’s biggest democracy has finally joined the vast majority of the globe’s tax-setters in a cross-twenty-nine-state system that, when the technological problems are sorted out, should improve India’s tax-raising efficiency and, thus, help that great country in furthering its economic growth.

That is not to say that VAT is the Mother Teresa of all taxes. Its biggest problem is that it is regressive –  it taxes consumption at the level of the poor-man-in-the-street who, the poorer he is,  spends a higher proportion of his income on surviving. This is traditionally combatted by lower rates or exemptions on basic things like food. Indeed, India – in keeping with its tradition of making everything as complicated as possible – has introduced five rates of VAT  plus a stratospheric concoction for dealing with untouchables like luxury goods and tobacco.

Of course, there will still be those who manage to get round the tax, legally or otherwise. Time will tell whether devious residents latch onto the ubiquitous Carousel Fraud phenomenon (involving the import and export of the same goods multiple times – a bunch of Brits were caught a few years back when they got lazy and stopped changing the plugs on phone chargers between France and England). And then there was the hard-to-believe wheeze of the Spanish theatre that sold VAT-exempt carrots for admittance to its performances together with a worthless piece of paper called a ticket. The only problem (apart from the Spanish tax garrotters catching up with them) was that hungry patrons couldn’t prove their right to re-entry to the auditorium after a toilet break during the intermission.

At the end of the day, VAT works. One of the few countries that does not seem to agree is the ‘biggest’ democracy (as opposed to the ‘biggest democracy’). A few years ago, at lunch at a conference in Berlin, a group of American experts were discussing ways of plugging the impossible US deficit, coming up with all sorts of supply-side ideas. Thinking that V.A.T was the sort of acronym (actually sayable, like M.A.D – Mutual Assured Destruction) that Americans would die for (especially when said with an English accent), I suggested that imposition of such a tax would surely solve all their problems. I was completely frozen out. V.A.T is a dirty acronym in the eyes of Uncle Sam. My luncheon partners looked like they wanted to drag me in front of Senator Joseph McCarthy’s Un-American Activities Committee. The irony, of course, is that while V.A.T undermines the ‘redistribution of income’ philosophy of most of the ’red’ nations (such as Britain and Europe) imposing it, the American belief in ‘equality of opportunity’ is completely at peace with its workings.

The Indians still have a long way to go. Their direct tax system leaves much to be desired – the witch-hunt of Vodafone to cover the seller’s capital gains in an offshore purchase a while back, and its treaty-defying Dividend Distribution Tax being but two examples of the rot.

As Rushdie put it in Midnight’s Children, ‘I admit it: above all things I fear absurdity.’ Thankfully, his beloved India is finally taking steps in the right direction.

There is an i in America

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In a sweltering, politically incorrect scene in Raiders of the Lost Ark, Indiana Jones – tired of the boastful swordsmanship of an Arab adversary – nonchalantly draws his pistol and shoots him dead. This could be a metaphor for the last hundred years: with a few exceptions, when the Americans have put their minds to it, their primacy in all things has meant they have the last word. And they know it.

So, I admit to remaining a little nervous about the impossibly named MULTILATERAL CONVENTION TO IMPLEMENT TAX TREATY RELATED MEASURES TO PREVENT BASE EROSION AND PROFIT SHIFTING which, had the Americans been among the 68 nations that signed it in Paris last month, would probably now be known for short by its acronym MCTITTRMTPBEAPS. But America was not among those 68 nations, so it is known affectionately as The Multilateral Instrument. In tax terms it is a miracle up there with splitting the Red Sea and walking on water but, to paraphrase Michael Jordan: ‘There is no i in team, but there is in America’ – the Americans are just not good at playing a team game.

The Multilateral Instrument is the most unlikely victor in the mammoth OECD Base Erosion and Profit Shifting enterprise of the last four years. In order to ensure a fairer playing field in the world of international tax, there was the daunting prospect of the need to adjust thousands of bilateral double taxation treaties – Mission Impossible. Then somebody – probably the sort of person whose optimism leads them to walk confidently over the edge of a cliff – came up with the idea of getting all the countries to agree to a super-agreement that would take precedence over the myriad treaties. Back in 2013, any sane human being would have said it was a case of Taxworld meeting Disneyworld.

But, by ingeniously including Get Out of Jail Free cards whereby member states could publicly opt out of individual provisions of the Multilateral Instrument, everybody who was anybody (apart from the biggestbody) was able to cherry-pick and sign up. As a result, within a couple of years, the game will be up for such fun pastimes as hybrid mismatches, treaty abuse, and permanent establishment avoidance. Against that will be improved dispute resolution, as well as the prospect of arbitration in intractable situations. Tax heaven (as opposed to haven) on earth.

So far, other than the United States, the only other G20 nations not to sign up are Brazil and Saudi Arabia. Perhaps the Saudi Arabians are still smarting from Harrison Ford’s one-upmanship nearly four decades ago, and are hanging out for the prospect of being the last nation standing. I can’t wait for the new Indiana Jones movie scheduled for 2020.

Doing it the people’s way

BESTPIX  U.S. President Barack Obama Visits Ireland

‘You’re not drunk, if you can lie on the floor without holding on.’ Dean Martin’s witticism has haunted me over the last couple of years as I have watched the impending self-destruction of the country of my birth (Brexit, the inevitability of a future Corbyn government), the temporary set-back to the United States (The Donald, the quack Republican leadership), and the reckless election of a National Assembly of Jeanny-come-latelys in France to rubber-stamp a completely untried new president. The world is becoming totally sozzled (heaven knows what is going to happen in the German and Italian elections) – and the tipple is the obsessive thirst of the mob for raw ‘knowledge’ that is used and abused to satisfy a primeval urge to thump those who thought they were in power.

It is no surprise that the parallel tax world is not immune to this troubling phenomenon.

Back in the good old days (four years ago, to be precise), when the British had a stable government and the Americans had a president who could string two words together without having to resort to ‘great’, the G20 of (then) sane countries instructed the sane OECD to come up with a sane framework for combatting tax avoidance and evasion, while individual members came up with a few ideas of their own. This call to action came in the wake of disclosures of perceived unsavory international profit shifting by certain multi-nationals. BEPS Action 13, dealing with Transfer Pricing, and the Automatic Exchange of Information had one thing in common – information was to be exchanged discretely between the tax arms of governments who would give it their expert attention.

Even then, there was a small breach in the wall of discrete sanity– Cameron decided on a Beneficial Ownership Register OPEN TO THE PUBLIC. It has been downhill ever since.

The EU Parliament – about which Kipling might have said: ‘Power without responsibility: the prerogative of the harlot throughout the ages’ – this month legislated for PUBLIC AVAILABILITY of multinationals’ country-by-country transfer pricing reporting, as well as recently delivering on Cameron’s dream of an open Beneficial Ownership Register.

If you are not a tax specialist, this may all seem eminently sensible. Make public as much information as possible, and then use the public sphere to bash the avoiders and evaders to ensure that everyone pays their fair share of tax. You are in good company – Brexit, Trump, Corbyn and Republique-En-Marche seem eminently sensible to large swathes of the populations of three of the most advanced nations on Planet Earth. But, my hunch is that most of the discerning people reading this don’t think much of the large swathes.

There is a fundamental problem here. Feeding the mob with incomplete information, or information they are not programmed to fully analyze, will create distortions that are bound to affect the efficiency of the markets, and lead to loss of privacy in totally legitimate situations. In short, public, populist, semi-informed opinion will almost certainly get it wrong. Is tax planning automatically wrong, even when it (legally) irons out patent errors in half-baked legislation? Do a Scandanavian’s potential in-laws need to know how much money he has when planning a wedding? Is hiding ownership from public view undesirable in countries where ‘kidnapper’ is a school leaver’s career opportunity? Far better to leave it to the regulatory authorities (tax or banking) of the world’s nations to share and compute the information, and do the work of their masters, the representative governments. It is in the interest of each state to ensure they receive their fair share of revenues, while clamping down on money-laundering. Can Mob Rule beat that?

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Alexander Pope said: ‘A little knowledge is a dangerous thing’, Dean Martin’s Ratpack colleague sang: ‘I planned each charted course; Each careful step along the byway.’ The world could do worse than heed the words of both gentlemen.

Taking axes to taxes

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How Hungary chose its tax rate

En route to a tax conference in Malta earlier this month, circumstances led me to muse about the renewed race to the bottom of international corporate tax rates. Donald Trump had not yet surprised the world with his election win, so his promises of madly reduced US corporate tax rates were the stuff of fantasy. But lowly Hungary had just come up with the first single digit rate in the EU, leapfrogging on its way down the traditional cut price nations of Ireland and Cyprus. And since Britain’s decision to ditch the EU, its surrogate Prime Minister Theresa May and her Cabinet have been titillating the markets with talk of even lower rates, though this week’s Autumn Statement reiterated the, once promiscuous but now modest, 17% target for 2020.

All sounds wonderful? Well, here was the first lesson in Tax Policy 101 at 35,000 feet. A certain Italian international airline, which shall remain nameless, was offering the cheapest Business Class travel to my destination. This was not the first time I had flown with them, but triumph-of-hope-over-experience is my middle name.

As Milton Friedman famously said: ‘There is no such thing as a free lunch’,

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It took their minds off crashing

but in the case of this airline, for the first hour and a half in the air, there was no such thing as a free glass of water. The single attendant assigned to Business Class clearly felt the need, inspired by his socialist Prime Minister Matteo Renzi, to redistribute his time to the proletariat at the back, and offer free access to the Business Class toilet because – as he pointed out – he had 150 people on the flight needing facilities; Airbus (and the Italian airline) obviously hadn’t taken that fact into account when configuring the seat lay-out. The meal would not have disappointed a five year old kid with a five dollar budget at McDonalds.

But it wasn’t all bad. The plane did manage to stay in the air for the entire three and a half hour flight – no small feat when considering Italian aviation history, especially in the early 1940s.

At the end of the day, it is simple economics that if you cut the budget something has to give. In the case of the Italian airline, it was service that flew out of the window. In the case of countries recklessly hacking corporate tax rates without stopping to think, they are condemning their populations to austerity today, or austerity tomorrow.

Of course, what each government is trying to do is bring in more foreign investment, expand employment and, thus, the tax base. However, while there is considerable evidence that free trade, by forcing nations to concentrate on their areas of comparative advantage, potentially leads to an increase in the size of the overall pie, tax competition is, if anything, distortive to international trade leading to suboptimal results, at the same time delivering reduced public investment that may have been needed to expand the economy.

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Where is he when we need him?

After years of careful planning following the 2008 financial crisis, we are now entering a period of knee-jerk decisions in international economics alongside knee-jerk decisions in international affairs.

At least it will not be boring.

 

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Was the Battle of Europe lost on the playing fields of Eton?

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What was that about Freedom of Movement in the EU?

‘History doesn’t repeat itself, but it often rhymes.’ That aphorism, attributed to Mark Twain, has been much on my mind  lately.

Anybody wanting to get inside the minds of the wrong-headed majority that tragically voted the UK out of the EU (and probably lit a fuse to both those abbreviations) could do worse than read one of Dickens’s less known novels, ‘Barnaby Rudge’, about the Gordon riots against Catholic legislation.

Although the situation in 1780 became violent while last week’s referendum ensured peaceful mob rule,  the cynical manipulation and ignorance that led to the riots should have been a cautionary tale taught to every schoolboy and schoolgirl  in the last century and a half.

In the weeks, months and years ahead experts will assess the carnage to be irrevocably wrought on the UK and Europe, .

From a tax viewpoint, the immediate damage would appear to be to the UK Holding Company regime, as well as Finance Companies and IP ownership. This arises from the future removal of the parent/subsidiary directive, and interest and royalties directive. These two directives guarantee exemption from dividend withholding tax and withholding tax on interest and royalties, respectively,  when paid by the other 27 EU countries to the UK. Following the UK’s withdrawal from the EU, withholding tax will be applied according to treaty. This will mean that Holding Companies, exempt from tax on their dividends, and Finance Companies and Patent Box companies paying low tax, will be at a disadvantage compared with EU jurisdictions. As the UK does not withhold tax on dividends according to domestic law, the UK is currently very popular as a holding jurisdiction – a popularity that is likely to disappear very quickly (like, tomorrow morning).

Thanks to the OECD’s BEPS project, most other disadvantages of the Brexit will already have been swept up in wider international agreements, while there may be some small advantage in not being penalized by the EU for offering State Aid to companies.

It is well known that Boris Johnson and David Cameron studied at the same elite school. While the Duke of Wellington may have declared that the Battle of Waterloo was won on the playing fields of Eton, it would appear that  the Peace of Europe may have been lost on that same dot of England’s green and pleasant land.

It’s simply not cricket.

Pupils huddle during the Eton Wall Game at Eton college in Eton, near London

Meeting of a future Tory Cabinet

 

 

 

 

Going it alone?

It would appear Americans have long preferred blondes

It would appear Americans have long preferred blondes

Ever since Marilyn Monroe’s less famous namesake, James, came up with his Doctrine almost two centuries ago, America has toyed with isolationism. They tried it in the First World War, and it didn’t work. They tried it in the Second World War, and it didn’t work. And Barack Obama has spent his presidency unsuccessfully trying to raise the drawbridge to the Middle East.

But there is a bit of isolationism going on at the moment that is not catching everybody’s eye: Tax Isolationism.

As the nation fires its engines for the four-yearly circus that is the Presidential Election, candidates for the Republican nomination are outdoing each other in unpassable and unworkable tax reform proposals. Meanwhile, the nominee-presumptive for the Democratic ticket has made her own comments on the issue.

What is remarkable is that all the candidates have concentrated on lowering tax rates and closing loopholes, conjuring up numbers they each know they will not have to justify. After all, America is one of the few countries in the world where the Government’s Budget is a wish-list rather than a statement of intent (Congress never passes Budgets as proposed). They are looking at America as if it were a self-contained island. Their sole material tip of the hat to other countries is the universal objection to inversion transactions, which have been rife in recent years and serve to reduce the US tax base.

In the meantime, BEPS is fast taking shape, and the US Treasury is belatedly realizing that, as European nations apply the rules and import more profit to their shores, in a zero-sum game the big loser is the U.S. of A. which is by far the busiest player in the international economy.

The big question now is whether the US will try and torpedo part of the BEPS program. At this late stage that would not go down well internationally. As regards automatic exchange of information, America may end up trailing much of the world since the Federal authorities evidently have limited legal right to demand States’ statistics.

What did he see in her?

What did he see in her?

On the other hand,  America’s antithetical view to John Donne’s meditation, ‘No man is an island,’ may not be all bad. As Mrs Arthur Miller herself once observed, ‘If I’d obeyed all the rules, I’d never have got anywhere’.

Putting a Price on Morality

The only relationship between morality and tax?

The only relationship between morality and tax?

‘If you prick us, do we not bleed?’ Well, not if we are a company. This was the point on which I was reduced to a state of heckling at the Lisbon conference described in my previous post. A Breakout ‘Conversation’ – Breakout ‘Sessions’ are SO last decade –  on ‘Tax and Morality’ was irresistible. (Look, when you are choosing between ‘Documentation requirements under BEPS’ and ‘Tax and Morality’,  irresistible is a relative concept.)

That the first question was simply whether tax and morality went together like a horse and  carriage (not precisely those words, but definitely the idea) was unacceptable. Corporate Tax and Personal Tax, as conceded by the moderator in dealing with my outburst, needed to be treated separately, even if the ultimate conclusion might be ‘yes’. Companies are Children of a Lesser God (their shareholders), and it is nigh impossible to pin anything high and mighty on them.

To me, all this populist corporate morality  posturing over the last few years, embarrassingly sparked off by a British Parliamentary Committee chaired by the alleged beneficiary of a Liechtenstein trust, has been one long yawn of poppycock. The most convincing argument regarding Corporate Morality came from a British colleague and old friend, who managed to dredge up the Parliamentary Proceedings leading to the enactment of certain joint-stock companies in the 17th century, that included some kind of public purpose. (I have been unable to confirm this in independent research, but he is a good bloke, so he probably knows what he is talking about.)

On returning home, thanks to an obituary in The Economist, the issue of Morality and Personal Tax was placed into focus. Irwin Schiff, who died in a Federal Prison last month, was a self-styled libertarian who refused to pay Federal Tax in the United States and, often with time on his hands in various open facilities financed by the idiots who did pay their taxes, wrote several books on the subject.

What was remarkable, and so typical of the different approaches of Europeans and Americans to tax, was that his lifelong struggle had nothing whatsoever to do with morality. In America, to this very day, morality is to taxation what a bicycle is to a fish. You pay taxes because the law forces you to. If the law is an ass and doesn’t close a loophole that allows you not to pay tax, you are an ass if you pay. C’est tout.

The late (literally, and with his tax filings) Mr Schiff attacked the income tax on the basis of it being unconstitutional. Now, I admit to not understanding this (and, neither, it appears did various US judges over the years who sent him to cool off in correctional facilities). The income tax was never popular. It was instituted during the Civil War when, to get at citizens clearing off from the land of the free and the home of the brave, it wasn’t escaped by leaving the US – a price still being paid by US Citizens overseas , and currently copied only by that other regional superpower, Eritrea. It was removed in the 1870s and only made it big-time when Congress passed the 16th Amendment to the Constitution in 1913 (the wrangle in recent years over Obamacare revolved around whether the required federal payments by individuals fell within the Amendment).

I personally do believe (as discussed in a number of earlier posts) that there is a moral responsibility on individuals to pay personal tax. However, there is something simple and attractive about the American approach. We Europeans could not begin to understand Mr Schiff. He lived (when not incarcerated) in Nevada, who few would dub the moral capital of the world. He dressed like a second-hand car salesman and represented himself in court (presumably because no self-respecting lawyer thought he had a case – his arguments  drew heavily on ridiculous sophistry).

Promo or mugshot?

Promo or mugshot?

Schiff made a fortune with such Pythonesque titles as ‘The Biggest Con: How the Government is Fleecing You’ and ‘How Anyone Can Stop Paying Income Taxes’, but the bit I find hardest to comprehend could best be summed up in that wonderful exchange between the legendary Jack Benny and a thug: “Your money or your life?….Look bud, I said ‘Your money of your life’.” …”I’m thinking, I’m thinking!” Forget morality, it seems even freedom has a price in the land of the free.

 

 

Let slip the dogs of war

Even the Portuguese have a Triumphal Arch (what for, exactly?)

Even the Portuguese have a Triumphal Arch (what for, exactly?)

I have just emerged from a fascinating two-day conference in rain-soaked Lisbon. Despite the headline title, the real theme was inevitably the prospects for the Base Erosion and Profit Shifting project of the OECD, the rump of which is due to be approved by the G20 shortly.

The public proclamations on BEPS have displayed populist triumphalism while, in the course of the two days – to anybody who had any doubts before – it became clear that the actual prospects are far more modest.

Firstly, by not allowing the Americans to think this was an extension of their work on FATCA, the OECD didn’t manage to bring them to the party. The Americans never join anything anybody else comes up with first – take the Second World War, for example, where the fun only started after Pearl Harbor.

Secondly, by making the Digital Economy the flagship topic, even if the Yanks had been convinced it was all their idea, they were not going to Kamikaze pilot themselves into their own ship – all Digital Economy reforms are, by definition, anti-American.

Thirdly, as two former senior politicians, gentlemen who almost gave me back the naive faith in politicians of my youth, made blatantly clear – no nation, be it America or the other God-knows-how-many countries currently on Earth, was going to give up on any serious opportunity to tax.

Then there was Pascal Saint-Amans, the Frenchman behind the BEPS project, who  explained how he had charismatically convinced everybody to accept his proposals. It was a case of working towards ‘consensus’ rather than ‘unanimity’. And that says it all. Never trust a Frenchman with your wife or long English words. Consensus is a synonym for unanimity. He was trying his luck on us, a group of grey accountants, for whom words are things to be kept under the bed (where the Frenchman may also be hiding). Obfuscation (go on Pascal, look that up in your Collins English-French Dictionary) seems to have been the name of the game. Sell the OECD a pile of words and confuse everyone into thinking something is happening. People may think Saint Amans has worked miracles (if the Pope canonises him will he be Saint Saint-Amans?), but the real deliverable looks a lot more down to earth.

That is not to say that BEPS is a failure (you may be wondering, after all I said above, how I am going to climb out of that one). Transparency – Country-by-Country reporting, international exchange of rulings, examination of holding and conduit companies, and dispute resolution will all become reality, alongside the unrelated Automatic Exchange of Information.

But, sorry Pascal, you don’t get all the credit for that.

BEPS was trumpeted as the first major breakthrough in international taxation in a hundred years. In reality, there has been some breeching of the fortifications, but no breakthrough.  Thanks to populist ‘uprisings’ following the 2008 Financial Crisis, taxation has been under the spotlight. Transparency is the minimum required to appease the masses, and even that would probably  have fallen  apart had it not been for the American obsession with FATCA. Many mistake the noise made by the British and French legislatures over the lack of tax being paid by American multi-nationals as part of the equation. Wrong. These are unilateral acts by Governments looking after themselves – the diametric opposite of the BEPS philosophy.

The G20's greatest internationalist

The G20’s greatest internationalist

The end result looks remarkably like the Allied approach to the Second World War. Frenchman Pascal Saint-Amans, like General De Gaulle,  made a lot of noise, was overrun, but declared victory. The British plodded on alone trying to break the multi-national enemy. And then the Americans came in and did whatever they wanted. I am not sure where the Russians fit in – but let’s wait and see what surprises Putin has up his sleeve if he is invited to the G20 summit (which, otherwise, will not be the G20). Interesting tax times.

 

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