Concerns Expressed In US Over BEPS Plan

by Mike Godfrey, Tax-News.com, Washington

08 October 2015

Concerns are still being expressed over the possible targeting of US multinationals in the recently released OECD recommendations on tackling base erosion and profit shifting (BEPS), particularly the plans for country-by-country (CbC) reporting.

House of Representatives Ways and Means Committee Chairman Paul Ryan (R – Wisconsin) commented that "trillions of dollars of American capital are locked out of the United States and, as a result, US companies are being targeted by governments eager to tax away their earnings."

He added that, "while the details still require close review, [the BEPS proposals] will only increase the pressure for American businesses to move overseas. And could put huge new burdens on American job creators."

Ryan also said that he is troubled there has been no reply to questions on BEPS that he and the Senate Finance Committee Chairman Orrin Hatch (R – Utah) raised with the US Treasury Department in both June and August this year.

"We are not convinced that Treasury has the authority to require CbC reporting by certain US companies (including sharing the information with foreign governments)," they had written. "In addition, the benefits to the US Government, businesses, and workers from providing sensitive information in the CbC reports is unclear, at best." They were also concerned about the OECD's interest-deductibility limitation proposals.

Joe Kennedy, senior fellow at the Information Technology and Innovation Foundation, also expressed the view that "the BEPS project should not be an excuse for hidden tax increases. We are concerned that criticisms of transfer pricing may provide an excuse to shift tax receipts from the United States to other countries by levying taxes according to criteria other than where profits are actually earned."

In addition, Nancy McLernon, President and CEO of the Organization for International Investment (OFII), stressed that "the BEPS action plan is not a substitute for good tax policy, … [and] taxing growth by adding further restrictions on interest expense will lead to fewer US jobs, lower wages and decreased GDP."

She noted that a recent Ernst and Young report for the OFII found that further limits on interest deductibility would decrease US gross domestic product (GDP), reduce investment in the United States, and lead to lower wages and fewer US jobs. Capital-intensive industries, including manufacturing and real estate, would obviously be the most negatively affected.

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