U.S. multinationals to have say on OECD tax-base erosion project

WASHINGTON (Reuters) - U.S. multinationals will next month be able to weigh in for the first time on recent proposals from the Organisation for Economic Co-operation and Development (OECD) on tightening oversight of tax-reducing “transfer pricing” strategies.

These financial strategies, involving how multinationals value and price assets they move around the globe from one unit to another, have been criticized by tax fairness advocates and the OECD, a Paris-based club of rich countries.

At a public hearing in Paris set for November 12-13, companies will get to voice their concerns about the OECD’s “base erosion and profit shifting,” or BEPS, project, unveiled in July. It calls for curbing tax-avoidance through transfer pricing.

The United States Council for International Business (USCIB), representing about 300 U.S. multinationals, has asked to participate at the hearing, said Carol Doran Klein, USCIB’s tax counsel, on Monday.

A number of U.S. companies, including E. I. du Pont de Nemours and Co, DD.N and Starbucks Corp SBUX.O, have raised questions about the BEPS project with members of Congress and the Obama administration, according to corporate lobbying disclosures filed earlier this year.

Most recently, eBay Inc EBAY.O listed the "OECD proposals to modify international tax rules," in an Oct 7 lobbying filing.

LinkedIn Corp LNKD.N and Inc PCLN.O have told their shareholders that the outcome of the BEPS project could adversely impact their tax bills, according to filings with the Securities and Exchange Commission.

The OECD’s suggestions to its member countries have no force in law. Its recommendation can be influential, however, in guiding governments toward new policies.

Transfer pricing can be managed in many ways. One, for instance, is to shift corporate assets such as intellectual capital into a low-tax country, then charge units in other countries royalties or other fees for use of those assets.

Under existing international standards, the fees charged are supposed to be set using an “arm’s length” approach, meaning one that replicates market-level values. In practice, fees are often skewed so that profits can be shifted into the low-tax country where the assets are located and out of higher tax countries.

These practices are legal, but tax fairness activists and some less-developed countries are complaining about them.

The OECD had no immediate comment on Monday.

Reporting by Patrick Temple-West; Editing by Kevin Drawbaugh and Andrew Hay