GOVERNMENT plans to introduce a diverted profits tax have caused embarrassment at the OECD, according to Pascal Saint-Amans [pictured], the body’s director leading the Base Erosion and Profit-Shifting (BEPS) project.
Appearing via video link before Australia’s Economics References Committee, Saint-Amans said Britain’s decision to implement the 25% levy – popularly dubbed the ‘Google tax’ – could push other countries to take unilateral measures and undermine the project.
Saint-Amans said the OECD had an “embarrassed view” of the levy, which will be applied to multinational businesses that shift profits made in the UK offshore.
“We have sympathy for the need to move and there is an electoral context…on the other hand, unilateral actions are not exactly in the sense of what we are trying to develop, which is, ‘let’s wait for a comprehensive package and then countries will decide’,” he said.
“You will be better informed with better instruments and with a lesser risk of having disruptive actions, which might push other countries… to take unilateral measures, which are not that great when you are negotiating a multilateral package.”
Many advisers believe the threat of the diverted profits tax is notional, with very few multinationals likely to admit they need to self-assess for an issue with the diverted profits tax.
Advisers have warned the levy could by difficult to apply and risks undermining the OECD’s work on profit shifting.
The BEPS project has sought to eliminate the practice of businesses shifting profits into favourable tax jurisdictions, away from where the profits were generated.