WASHINGTON May 9 Tighter enforcement of
corporate tax laws by other countries could be a problem for the
United States if it means businesses pay more tax to foreign
governments and cross-border disputes increase, a senior U.S.
tax official said on Friday.
"It's disturbing ... If we're not careful, we're going to
see a lot of dispute, the U.S. tax base put increasingly at
risk," said Michael Danilack, a deputy commissioner at the
Internal Revenue Service, speaking at a conference.
Danilack raised concerns about the Organisation for Economic
Co-operation and Development's (OECD) fight against corporate
tax avoidance, known as the "Base Erosion, Profit Shifting," or
BEPS, project and its impact on global tax collections.
Launched last year, the project emerged from world
governments' concerns about tax dodging by multinational
companies. Those concerns led the Group of 20 most powerful
economies to ask the OECD to recommend solutions to the problem.
As the OECD works on its recommendations, Danilack said,
some foreign countries are using the BEPS project as a reason to
get more aggressive on companies' tax audits.
"The whole BEPS discussion has encouraged countries that
felt they weren't getting their fair share to be more
aggressive," he said, warning of "a great, big sucking sound" of
U.S. tax revenue declines.
The United States could lose revenue under BEPS, he said,
because the IRS offers foreign tax credits to U.S. companies for
taxes that they have already paid to foreign governments. The
idea is to ensure that companies do not pay the same tax twice
at home and abroad.
If a foreign government collects more taxes from U.S.
companies, then the IRS might have to issue more tax credits,
which could undercut U.S. corporate tax collections.
Another concern for the United States is that BEPS could
increase litigation between countries fighting for the same
corporate tax dollars, tax lawyers said.
The OECD has set a May 19 public meeting to hear feedback on
its most recent BEPS proposals.
(Reporting by Patrick Temple-West; Editing by Kevin Drawbaugh
and David Gregorio)