By Tom Bergin
LONDON Oct 23 Big companies have pushed back
against an international drive to crack down on corporate tax
avoidance, documents published by the body charged with drafting
new rules showed on Wednesday.
The Paris-based OECD published letters from European
companies including Diageo and Gazprom and groups representing
the biggest U.S. multinationals asking it to reconsider proposed
measures on transparency and on tackling tax avoidance, saying
the plans could hit trade and investment.
But the head of the OECD's Centre for Tax Policy said that,
while the body would listen to companies, they had to realise
change was on its way.
"Sometimes I fear that business considers that it is
business as usual, and it's not business as usual, and a number
of business people, at some point, will have to understand
that," Pascal Saint-Amans said in a telephone interview.
"The leaders of the G20 have said that they want this," he
Big budget deficits and revelations that companies like
Apple and Google use structures that lawmakers
have labeled "contrived" to avoid billions of dollars in taxes,
have led to growing calls to close corporate tax loopholes.
The companies say they follow the existing tax rules.
In September, the Group of 20 (G20) major developed and
developing economies backed an OECD draft plan that advocated
allowing countries to ignore inter-company contracts which were
aimed at channeling profits into tax havens.
Businesses oppose giving tax authorities greater rights to
"recharacterise" transactions - that is, to insist that profits
be declared where the economic activity that generates the
profit takes place, rather than where inter-company agreements
say it belongs.
"The surprisingly frequent references to
"re-characterisation" in the draft are, in our view, largely
unnecessary, and may in their totality convey the wrong
message," Paul Fox, Tax Director at British drinks group Diageo
wrote, in reference to planned new rules on
inter-company payments for the right to use company brands and
other intellectual property.
Similar views were expressed by Russian gas producer Gazprom
, while the U.S. National Foreign Trade Council, which
represents over 300 companies including General Electric
and Google, questioned the "premise that the profits of a
multinational enterprise ought to be allocated across
jurisdictions in proportion to employees or tangible assets".
The companies said the existing practice of recognizing
inter-company transactions gave business greater certainty and
encouraged trade by helping ensure the same profits were not
taxed more than once.
Business groups were also cool on a proposal tabled in June
by the Group of Eight (G8) leading developed economies, that
companies should provide information to tax authorities on their
earnings and tax payments on a country-by-country basis.
The idea was that greater transparency would help tax
authorities - especially those in developed nations which lack
the investigative resources of richer nations - to spot when
companies were shifting profits out of their countries, and
thereby avoiding taxes.
But business groups including Britain's Confederation of
British Industry, the United States Council for International
Business (USCIB) and French employers' body Medef, expressed
concerns that business would face unreasonable administrative
burdens and risked having confidential commercial information
leak out to competitors.
"Because of these concerns, we suggest that the OECD ought
to consider alternatives to country-by-country reporting," wrote
William Sample, chairman of the tax committee at USCIB, whose
members include Microsoft and Exxon Mobil Corp.