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Archive for the tag “BEPS”

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.

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.

 

Cogito ergo sum

Good old British liberal education

Good old British liberal education

Arguably, the greatest contribution to society of a liberal education is perspective. ‘Dah da dah da dah. DISCUSS’ was the way it went when I was at school, as opposed to the ‘A, B, C, D, E. Tick one’ of the modern era. Today, July 14, is only significant to the vast majority of the world’s population for being the day after July 13 and the day before July 15. In France, it is a national holiday. Back in 1989, the bicentenary of the storming of the Bastille, it was Oxford educated Margaret Thatcher who pointed out in an interview with Le Monde that: ‘ ”human rights did not start with the French Revolution,” a perspective the French were not prepared for.  Fortunately for the Iron Lady, she was guillotined by her own Government the following year, before the furious French could get their act together. Earlier today, the massively anticipated sequel to Harper Lee’s ‘To Kill a Mockingbird’ hit the bookstores. The fictional superhero of my youth ( along with Clark Kent and Bruce Wayne), Atticus Finch, now turns out – in his author’s eyes – to have been a bigot. We all missed that one.

So, with the gradual movement from education to knowledge cramming, it is perhaps no surprise that the entire tax world is out on a fanatically dogmatic witchhunt, not even stopping to breathe and get the whole thing in perspective. And it is embarrassing.

I refer, of course, to the twin tax bugbears of western society, BEPS and Automatic Exchange of Information. Europe (did somebody whisper OECD?) has decided that American (did someone say ‘foreign’)  companies pay scandalously and imorally little tax in their jurisdictions, and the world’s leading economies (did someone shout ‘the entire world’?) are singlemindedly trying to sort this out (with a constant look over their shoulders to check if the Americans are going to throw a wobbler and crush the whole thing). Meanwhile, thanks to the Americans (who feel that – far from taking too much tax away from the Europeans – their taxpayers are hiding their income there),  everybody is trying to make sure that their tax residents declare all their ill-gotten gains.

He tried to take shares in somebody else

He tried to take shares in somebody else

Dogma rules. If this can be sorted out, we are told, the world will be a fairer place. Perhaps. But there are two small issues here that should have been factored in. Firstly, it is by no means clear that companies should pay tax.  While Shylock could ask, ‘If you prick us, do we not bleed?’ joint-stock companies, like Pinocchio, do not have the same luxury. Companies are a legal fiction – the Walt Disney of the business world. As they do not have feelings (an accusation often aimed at me), they cannot suffer taxation. Taxation is paid by flesh and blood people – it is the customers who pay higher prices , the shareholders who make lower profits, and the employees who receive lower income. The company just sails on regardless – and, if it dies, does not even warrant a marked grave. There has always, therefore, been a strong movement to abolish company taxes in favour of taxes on individuals – income tax, withholding tax, value added tax. Company taxes, it is argued, distort economic performance.

Secondly, while the search for the hidden treasures abroad  of individuals is highly laudable,  white man speaks with forked tongue. The latest example of Orwellian Doublespeak is last week’s British budget where non-domicile status (institutionalized tax avoidance) was, with much fanfare, marginally tweaked. Rich foreigners will still be able to enjoy the English weather for substantial periods.

While BEPS and Automatic Exchange of Information are undoubtedly an improvement on the international tax scene that has been around until now, they are not a Utopian goal resulting from deep thought and discussion. They are  the result of an ‘I want’ philosophy of the electorates of the world’s leading nations. The elimination of company tax is controversial and may be totally impractical, but it, and other ideas including a simple move to regressive VAT as the main source of revenue, should have been part of  the debate that never came. Instead, the new world tax order – like so much else in the modern world – is being led by populism. And populism – thanks to a biased, disingenuous and largely ignorant press – is becoming increasingly dogmatic. Look what happened to the French in the 1790s.

 

 

 

Celebrity Squares

1101500102_400Adolf Hitler is, for me, ancient history, while Churchill is almost pinchable. Why the distinction regarding two implacable foes, the height of whose infamy and fame coincided exactly? It is simply because, by the time I was born, Hitler had been dead for over a decade, while I remember Churchill’s funeral,  50 years ago next week, vividly. Hitler was in black-and-white. Churchill was in colour.

We tend to think back on our childhood as steady-state. I was 10 years old when Colour TV came to Britain and  have always thought of it as a major revolution in British life. In fact, although the BBC had started broadcasting in 1936, few homes had TVs until around 15 years before Colour hit the living room. The story of the last hundred and fifty years has been one of continuous change.

Change has been as true of Celebrity as of any other field. Although the early twentieth century brought images of mute silver-screen stars to the world’s movie theatres, it was Charles Lindbergh who, thanks to his groundbreaking transatlantic flight in 1927, was the first true international celebrity. World leaders were not seriously heard until the 1930s, so that, when the British people had the lion’s heart in the dark days of 1940, Churchill’s roar was quite a novelty. It wasn’t surprising that the Old Man was crowned Time Magazine’s Man of the Half-Century in 1950 (he was beaten for the full century by Einstein), or that he was later voted, almost by acclamation, as the Greatest Englishman, whatever that may mean.

High Flyer

High Flyer

Through the second half of the twentieth  century, celebrity had two significant branches – entertainment and glitzy wealth on the one hand, and politics on the other. If you were not an embarrassing extrovert or a politician, you could expect to live your life in blissful anonymity. Then came the Information Revolution. Everybody was out there with the potential to reach the world – even if the world wasn’t really that interested in being reached by most of them. But who cared? It was cheap and worth a go.

Which brings me to my point. I am a tax advisor. I am, despite what it says in the sub-headline to this blog, boring. Tax advice is something to be practiced behind closed doors by consenting adults. Should I ever become a celebrity, it will not (or at least, should not) be because I dispense advice about the laws and practices of taxation.

But, it appears, the times they are a’changing. After the OECD Centre for Tax Policy and Administration aired its maiden internet TV broadcast last year, its head – the drop-dead gorgeous Pascal Saint-Amans – has now been declared Person of the Year by none other than Tax Notes International (which you will be forgiven for never having heard of). In a wide-ranging interview on the progress of the world-famous BEPS project, he declares that he is ‘the luckiest person in the tax world’. Now, go steady there, Pascal. A tax attorney who pocketed a $10 million success fee might argue that you are in second place. We know you are an important bloke, and you and your team have to philosophise a lot about the future of taxation, but – as I have written in the past – philosophy is to international taxation what a bicycle is to a fish. You, and the world-famous Tax Notes International, may think that the BEPS project is up there with the Theory of Relativity and World War II, but frankly it isn’t.

Dazzling

Dazzling

When tax bureaucrats become celebrities – and I stress that I am sure Mr Saint-Amans is amazingly good at whatever he does from 9 to 5 – it is time to think about hanging up ones Oxford Shoes.  A good tax advisor is someone who has a broad view of the business and political environment around him. There is plenty more to read about than irrelevant bla-bla regarding  tax people similar to himself.

So I say to the editors and my fellow readers of Tax Notes International: ‘Get a life!’

 

Yes we can!

barak_l2014 was the year when ‘Yes, we can’ finally became ‘No, I couldn’t’. It is all over bar the shouting, and Mr Obama is reduced to bumping wedding couples off Hawaiian golf courses so that he can get on with one of the remaining functions of his office.

In fairness, it isn’t just the President who should be swallowing his words. Congress will discover in 2015 that in one area at least –  international taxation – it is being hoisted on its own petard.

The FATCA  ‘spill-the-beans-to-Uncle-Sam-or-he’ll-rip-out–your-windpipe-with-a-pair-of-pliars’ rules  that were conjured up in 2010 have spawned a revolution in international taxation. The big loser is going to be the US of A.

When the Foreign Account Tax Compliance Act was legislated, it was designed to ensure that  income rightly taxable in the US could not be sheltered overseas. Execution involved steamrollering the rest of the world into accepting horrific compliance costs, just so Uncle Sam could relax at the side of his Florida condo pool.

The world, sick of being cowed into submission by the western juggernaut, struck back. What was good for the goose was good for the gander. Countries demanded reciprocal arrangements – which the US agreed to, comfortable in the knowledge that Federal Law did not permit the gathering of such information. America was still riding high.

But if reciprocal arrangements were on the cards, why stop at bilateral arrangements with the US? There was a serious, and soon to be succesful,  move towards the Automatic Exchange of Information between just about everybody.

Golf - Putin style

Golf – Putin style

Aye, Mr United States Congress, there’s the rub. Because, once old orders disintegrate, there tends to be a domino effect. If the game was up for dirty money, why not deal with slightly-soiled money as well? National Parliaments started to make noises. Then came the Base Erosion and Profit Shifting initiative of the OECD, sold to the world by David ‘I play cricket’ Cameron and Vladimir ‘I play dirty’ Putin. All of a sudden, bringing together the international community to ensure that multi-national companies pay their fair share of tax in countries hosting their activities was not just a pipe dream. Meaningful transfer pricing based on real activity, country-by-country reporting, sharing the cake of the digital economy, updating archaic permanent establishment rules and unravelling hybrid transactions, were all within sight. What is more, it didn’t really matter if the BEPS action plan would be formally adopted or not – the international mood was to enact unilateral legislation and take it from there.

The bottom line is that, in 2015,  Uncle Sam’s FATCA is going to turn around and bite him on his bum. Why? Because the vast majority of reshifting of profits will be away from the US. It is true that much of the profits now being claimed from US multinationals by countries such as the UK and France are currently parked offshore – but, were the dysfunctional US Congress and President to stop squabbling like alley cats in a garbage can, they could pull in those earnings at the stroke of a pen. That will not be the case, however, once they disappear legitimately into the coffers of other sovereign states.

A typical 2015 day at the White House

A typical 2015 day at the White House

So, President Obama, Senator McConnell and Speaker Boehner, the message from the world beyond New York Harbor is: ‘Yes, we can’. And we are going to. Anyone for golf?

And now for something hardly different

Speaks for itself

Speaks for itself

The surviving members of the Monty Python team must be cock-a-hoop over the cover of the (just about) current issue of The Economist. Under the headline: ‘Europe’s Economy’, a parrot lies dead receiving an infusion, while Angela Merkel comments, ‘It’s only resting’. No further explanation required. Forty-five years on, the Parrot Sketch is part of the lingua franca.

The other instantly recognizable  Python sketch is ‘The Four Yorkshiremen”, in which a group of wealthy, aging northerners  each vie for the distinction of  most deprived childhood. In fact, that piece is almost a case of imitation being the sincerest form of flattery. It started life in the 1967 series “At Last The 1948 Show”, was adapted for the radio series, ‘I’m Sorry I ‘ll Read That Again’ in 1969, and only made it to Python in a live show in 1974.  ‘Almost’ imitation, because Cleese and Chapman were co-writers of 1948, together with Marty Feldman (the  most unlikely Jewish Yorkshireman ever) and Tim Brooke-Taylor (who did ISIRTA together with Cleese).

Tax authorities take this imitation business quite seriously, even if their material is far less original than Monty Python’s.

What's in a name?

What’s in a name?

Despite the hammering of Harmful Tax Practices, first more than a decade ago by the OECD and EU, and more recently by the OECD BEPS project and an extensive transfer pricing review, there has been an upsurge in the introduction of copy-thy-neighbour special IP regimes. To fool the enemy, they carry all sorts of different names and precise terms – Patent Box, Innovation Box, and – the latest Irish smokescreen –  Knowledge Development Box.

The ostensible justification for these schemes is the incentivization of R&D expenditure by offering reduced tax rates on associated revenue. But, with the exception of the UK innovation box, which was for self-defense, what countries are clearly doing is standing on street corners raising their skirts above their knees in an effort to attract new clients. Switzerland is proposing a scheme, as it preempts the forcible closure of its House of Ill Repute by undertaking a comprehensive tax reform. Ireland, meanwhile, no longer able to tempt Apple with its harmful double-Irish position, can at least claim not to be plagiarizing – it had the first scheme in the early seventies which it discontinued in 2010.

Innovation boxes are currently, effectively, under a three-pronged attack but are still spreading. There is Action 5 of BEPS dealing with Harmful Tax Competition – and what could be more harmful tax competition than this race to the bottom? Then there is Action 8 which deals directly with intangibles and the concept of value creation.  Finally, there is the long-running saga of OECD Working Party 6 on ‘The transfer pricing aspects of intangibles’. All these projects seek to prevent the maintenance of intangibles in ‘the second draw, third office along’.  Even if the whole caboodle gets caught up in bureaucracy and self-interest, and is not adopted internationally, something is bound to stick. And that something is likely to be the need for boots on the ground in any jurisdiction claiming the right to substantial returns due to intangibles ownership.

Where countries support large workforces of savvy individuals, the on-the-ground development  of intellectual property makes sense. But if all the country is offering is a crisp suit, a law office and a plaque, the whole thing could easily unravel.

Some called this British humour too

Some called this British humour too

A couple of years ago I made a one day trip to England to see Tim Brooke-Taylor and his colleagues doing a live recording of a long-running radio show – ‘I’m Sorry I Haven’t a Clue’. Over its forty-year run, shows have often ended with the announcement of late arrivals at some ball or other. Among the late arrivals at the Aggressive Tax Planning Ball might have been: ‘From the Republic of Ireland, Mr and Mrs O’Vation- Box and their son N. O’Vation-Box.’ You get the idea. It is called British humour. Patent Boxes and Innovation Boxes are full of it.

Viva, Barcelona!

Words didn't come easy to him

Words didn’t come easy to him

‘In the beginning was the word’ might have been the take on things in the Gospel according to John, but by my calculation, the oldest profession has never had much use for words (other than when haggling over price), and the second oldest profession (mine) has always relied on numbers; in any event, some years ago we merged.

The first international tax conference I ever attended was in Florida around twenty years ago. It was one of the highlights of my (now) long career. Closeted for three days in a glorious hotel with some of the best tax brains I have ever met, it was an orgy of diagrammatic flip-charts, 1929 Luxembourg Holding Companies, Belgian Coordination Centres, and ridiculously aggressive globe-embracing tax structures. Numbers and boxes. Heaven.

Of course there was a price. Tax advisors were universally viewed as geeks with psychopathic tendencies who should only be allowed to meet clients if accompanied by a responsible, audit practicing adult.

What a difference twenty years can make.

I am writing this post at 35,000 feet, on the way home from the latest conference in a very wet Barcelona. Nowadays, not only are we allowed to consort with clients, we invite them to join us, unaccompanied, at our get-togethers.

And what events they have become . It was a gradual process. Out went the numbers and flip-charts. In came the sharp spot-lights on a background of blue-haze; and words,words, words. I don’t think I saw a single number over the whole two and a half days except the occasional heart- warming statistic. It seems we have joined polite society.

Unfortunately, he couldn't make it this year

Unfortunately, he couldn’t make it this year

Our gurus talked in sound-bytes worthy of a British news anchor, about the rise of ‘compliance’. Compliance! When did the Detroit of the international tax world become sexy? Any color as long as it’s black! Boring! Not anymore. We listened to the Tax Emperor of one of the world’s very largest companies explain that his compensation algorithm no longer includes the effective tax rate, but instead is weighted towards his level of success in meeting all the group’s international reporting requirements. To put it more succinctly – promiscuity is a thing of the past. Today is all about Safe Tax.

An issue that had a lot of traction was BEPS (Base Erosion and Profit Shifting), about which I wrote a few weeks ago. The latest OECD update had been fortuitously issued a few days previously and this was a chance for sound-byting about the 15 constituent topics. After a panel of talking heads had compromised their integrity to impress the super-intelligent moderator (who is also a genuine ITV News Anchor),  it was left, implausibly, to the Chinese participant to remind everyone that BEPS was not going anywhere without the Americans. And the Americans are not going anywhere. Period. Good night, and good luck.

There was a spellbinding lecture on the mushrooming effect of Big (stored digital) Data on our lives, delivered by a remarkably competent stand-up comedian who triples up as a successful author and university professor. He, too – in what was starting to look like a conspiracy – incredibly avoided numbers, other than those that were so big the conference participants were unable to comprehend them ( a place in their heads previously occupied by lawyers’ fees).

Overall, it was a very successful few days – another strip of asphalt in the long road to acceptance by Society.

Happy New Year to anyone celebrating this week

Happy New Year to anyone celebrating this week

When I get home, I shall put my best suit back in mothballs and hang up my silk ties. Like Cinderella after the ball, it will be back to the daily drudge. No spotlights. No blue-haze. No News At Ten anchor. But lots and lots of numbers. Yippee.

 

 

 

 

 

The Battle Of The BEPS

The storm clouds were already gathering at the G8 Summit

The storm clouds were already gathering at the G8 Summit

A hundred years after the countries of Europe drew their battle lines in France and promptly got stuck in the mud, the Paris-based OECD looks like it is facing a long period of trench warfare. Originally predicted to be half-finished by Christmas, the BEPS plan – if it is to be instituted at all – will almost certainly be wrangled over for months and years ahead.

Base Erosion and Profit Shifting was always going to be an ambitious project, but when the G8 (since deflated to the G7) and, subsequently, the G20 (G19) put their weight behind it in 2013, its prospects  started to look up. At a time when major western nations were hemorrhaging taxable profits to offshore and cheeky onshore jurisdictions, there was unanimous support for clobbering tax avoidance. Although Dave ‘Selfie’ Cameron and Vlad ‘The Impaler’  Putin led the charge (Putin displaying his famed respect for international law and order), it looked clear that the Americans, fresh from their FATCA foreign account disclosure victory, would quickly take over.

There is naive, and there is naive with knobs on.

The Americans, in the persons of Rep. Dave Camp and Senator Orrin Hatch, soon realized that the companies making the most bucks around the globe owe ultimate allegiance to Uncle Sam. Some, like Apple and Google, might have successfully sheltered much of their income offshore pending repatriation to the mainland, but that could be dealt with by Congress and the IRS without recourse to all those Europeans who were not even capable of winning or losing their World Wars on their own. BEPS, while having some strong points, was ultimately an attempt to wrench taxable profits out of the hands of the Americans.

Another hybrid white elephant

Another hybrid white elephant

Battling furiously to meet the September 2014 deadline for the first part of the 15 point project, OECD apparatchiks slogged overtime to produce heaps of words on transfer pricing and country-by-country reporting, treaty abuse, hybrids and the digital economy. While the transfer pricing recommendations were greeted with derision, the hybrid proposals were so complicated that they would require more acumen to implement than went into all the previous hybrid planning. And, as for the digital economy, the OECD more or less came out with its  hands up – apart from a recommendation about raising taxation through VAT (which many of us could have happily told Dave and Vlad back at their first meeting and saved them the money).  If none of this gets off the ground, one good thing that will have come out of  it all is that the Hybrid Mismatch document includes some great ideas for future tax avoidance. Somebody at the OECD also, rather belatedly, woke up to the fact that developing countries may have specific problems implementing BEPS; the technical guys have picked up their pens once more.

The proposals are now at various stages of public consultation – for ‘public consultation’ read ‘being rubbished’.

google taxMeanwhile, thanks to FATCA, the Automatic Exchange of Information project , which is running parallel to BEPS, continues to advance rapidly through the battlefield. It may well be that,  taken together with enhanced domestic anti-avoidance legislation by individual countries, this will bring a real solution to much of the tax avoidance and profit shifting that BEPS aims to stop –  in addition to dealing with tax evasion which is its raison d’être. As we have already seen in the wake of the British Parliamentary inquisition of Google, Amazon and Starbucks, although their practices were totally legal, the ability to ascertain and publicise their financial information led to a public backlash. Modern multinationals cannot afford the bad publicity – times they are a changin’.

Will the coming months herald the Battle of the BEPS, as the OECD  Task Force breaks through enemy lines on its way to victory? Or, will they usher in the Great Phut (one day, when the OECD tries the same gambit again,  to be known as the First World Phut)? Without the Americans joining in the war, and with professionals engaging it in hand-to-hand combat, the prospects are not high that the OECD staff will be home for any Christmas soon.

 

The Tax Business

This week's edition has come back to Earth.

This week’s edition has come back to Earth.

If proof were needed that the Silly Season is upon us, it turned up in our mail box a few days ago. Slowly ripping open the envelope housing last week’s Economist, I noticed an ‘x’ peeping out at me from the partially-revealed cover. Excited by the prospect of ‘tax’ finally having  hit the headlines of  the world’s most venerable newspaper, I rapidly finished the job, the publication  falling unceremoniously onto the kitchen table.

Well, it seems that tax doesn’t sell newspapers at airport newsstands in midsummer. The normally sober Economist had gone for the lowest common denominator, running a feature: ‘The Sex Business’. Having seen the article, all I can say is that there will have been a lot of disappointed vacationing punters out there who would not have been able  to get their money back because, by the time they realized their mistake, they were half way round the world.

If the Economist can be silly in August, so can I.

Something that has been bothering me for ages is the complete lack of respect for the English language in certain  tax publications. My firm subscribes to a number of leading journals. Most are pure hardcore professional jobs that pay no attention to format, but provide their product in a raw and timely manner.  However, there is at least one (which I will not mention by name for fear of reprisal), from a highly respected stable, that presents itself as a glossy, ‘hip’ magazine. Sixty pages, lots of colour pictures, a ‘funny’ (spare me, please) back page, plenty of adverts and a $200+ cover price (in fairness, internet access is thrown in). The articles, generally written by tax professionals who I assume are not paid, are often highly informative, justifying the subscription. But, what I cannot abide, is the wanton lack of editing which, frankly, is more-or-less all that is left for the editors and publishers to do.

Here is a recent example:

As those involved in the OECD’s base erosion and profit shifting (BEPS) project reach for the halftime oranges and energy drinks, our special BEPS feature looks at the progress made to date and explores the hurdles that litter the track ahead as the bell rings to signify the last lap in this race against an ambitious timeframe to produce meaningful outcomes.

If you pay peanuts....

If you pay peanuts….

Oh dear! This would have got me a miserable fail  – and a whack round the head –  in primary school. Apart from the lack of punctuation (one comma in an unforgiveably long sentence), the  metaphor is horribly jumbled; although no great athlete, I do not recall half-time in races – even marathons. I could go on and on, but I will not try your patience.

The saddest thing about this ‘sentence’ , apart from the enormous angst it must have caused the myriad readers for whom English is not their mother tongue, is that it was part of the introduction (the rest was no better) to a full-blown feature section. With no appetite to proceed, I dipped into the first article, which included in the first sentence the expression “most well-known’. Unless he had been paid by the word (and well-known counted as two), the average mortal would have gone for the better recognized:  ‘best known’. At that point, I realized: ‘Houston, we have a problem’, and made a mental note to take 2 aspirin half an hour before attempting to read on.

She even edits the text on her tee-shirts

She even edits the text on her tee-shirts

It is high-time they took some of their income from the advertising and $200+ cover price to employ a good copy editor.  If currently between books, E.L. James or Danielle Steele would  do a wonderful job with the syntax and punctuation, at the same time coming up with unthought-of teasers for a three-letter word ending in ‘x’ (in case you were wondering, I was referring to ‘tax’).

And before you start gratuitously red-marking this post – rest assured that, when you start paying me $200 a shot for this Blog, I will employ a copy writer.

Happy Silly Season.

 

 

 

 

 

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