Data 'dance' seen as challenge to world corporate tax crackdown

WASHINGTON, June 3 Tue Jun 3, 2014 4:56pm EDT

WASHINGTON, June 3 (Reuters) - Cracking down on corporate tax avoidance sounds like a winner, and officials are working on it, but the practical challenges are formidable and they dominated discussion at an Organisation for Economic Co-operation and Development conference on Tuesday.

The OECD, a Paris-based club of large economies, has an effort under way - known by the unwieldy name of the Base Erosion and Profit Sharing (BEPS) project - to tighten tax rules and treaties, and to increase government tax information-sharing.

BEPS has sent shudders through the international tax planning business, a thriving community of lawyers, accountants and lobbyists who devise, carry out and defend strategies, usually legal, to help multinationals cut their tax bills.

"I urge that your policy and legal determinations not be made without thoroughly considering the practical implications of these decisions," U.S. Internal Revenue Service Commissioner John Koskinen said in a speech at the OECD event.

BEPS is still a work in progress - completion is not expected until 2015 - and it will have no force in law, with national government actions needed to make it real.

Still, conference speakers generally agreed that, over time, changes will come and implementation will be difficult.

"The rollout won't be 'Ready, set, go,'" said Timothy Tuerff, managing partner at accounting firm Deloitte, which advises many businesses on taxes. Tuerff heads its Washington tax practice.

INFORMATION CHALLENGE

Not only will timing the debuts of BEPS-related laws be tricky, but just getting corporate and government tax information systems in sync will be a challenge.

"Trying to make all those statistics dance and link up ... is an enormous reporting requirement," Tuerff said, specifically regarding proposals to rein in "stateless income," or corporate profits managed so that no country can tax them.

Corporate tax avoidance re-emerged as a political issue in 2012-2013 amid a number of investigations. In one, a U.S. Senate panel found that technology powerhouse Apple Inc avoided $9 billion in U.S. taxes in 2012, using a strategy involving offshore units with no discernible tax home.

Like many other multinationals, Apple defends its practices and said it pays all the taxes it owes.

With the United States unable to muster the political will to overhaul its own tax code, the G20, a group of the world's top economies, last year asked for help from the OECD, which led to the 15-point BEPS project.

In its current form, BEPS urges tighter tax treaties; curbing excessive interest deductions and earnings stripping, or shifting profits from the United States to units in lower-tax countries. It also recommended closer oversight of how intra-corporate capital and asset transfers are priced; more disclosure of aggressive tax positions; and more tax information-sharing among governments.

Before any of these proposals can take effect, national legislative action will be needed, a step that cannot be taken for granted, suggested conference panelist Martin Kreienbaum, a senior official in Germany's Ministry of Finance.

"Everybody likes harmonization very much, as long as you don't have to change your domestic laws," he quipped. (Editing by Howard Goller and Jonathan Oatis)

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