Can the OECD Be Trusted on Base Erosion?

Can the OECD Be Trusted on Base Erosion?

by Jeremy Scott

After years of creating rules that allow multinational corporations to shift profits and income to whatever jurisdiction they like, the OECD is now very concerned about base erosion. In fact, it is drafting a major report on base erosion and profit shifting (commonly called BEPS). Pascal Saint-Amans, director of the OECD Centre for Tax Policy Administration, has been making the rounds asserting that the OECD is now very serious about protecting national tax bases. But just how concerned is the OECD about preventing BEPS, and does its position really matter?

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Viewed in the most positive light, the OECD is playing catch-up. Many European and developing world governments are disgusted with the state of international taxation, and the consensus in favor of the arm's-length method, at least as developed by the OECD, has completely broken down... In the most negative light, the organization, which has been accused of being a tool of U.S. and U.K. multinationals, wants to blunt the momentum toward tougher BEPS rules by proposing milquetoast reforms at the edges of the system...

Companies should realize, however, that regardless of what the OECD and the United States do, many tax administrators are not going to allow the same level of profit shifting that they have in the past...

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View Jeremy Scott's opinion in its entirety on the taxanalysts® Blog.

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