OECD To Discuss Employee Stock Option Concerns

by Robert Lee, Tax-News.com, London

14 November 2001

A working party comprising tax officials from 30 OECD member states is set to meet next week to discuss guidelines for the taxation of employee stock option schemes (ESOPs).

According to reports, the forum will be looking whether stock option schemes should be considered as tax neutral and taxed as normal income, or whether they should be afforded preferential tax treatment. The working party will also discuss at what point options are taxed, whether they should be subject to social security as well as income taxes, and whether the scheme costs should be deductible for the company which offers it.

Chris Heady, the OECD official in charge of the working party, illustrated the horns of the tax dilemma upon which the multilateral organisation is stuck: 'There are arguments for and against giving special treatment to ESOPs,' he explained. 'Even if they are a good thing for staff retention and motivation, questions exist as to why tax authorities should lose out by offering tax breaks.'

According to Mr Heady, the aim of next week's meeting is to provide guidelines for member states on the ESOP issue, not to set in motion a plan for harmonisation of tax treatment for stock option schemes. 'A number of states are considering special provisions for taxing option schemes,' he told Legal Media Group Euromoney earlier this week. 'What we want to do is to provide them with all the arguments so that they can move ahead.'

Recommended