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NZ Firms Fear BEPS Agenda Will Fail

by Mary Swire,, Hong Kong

29 July 2014

Only 26 percent of New Zealand business leaders believe that the Organization for Economic Cooperation and Development's (OECD) base erosion and profit shifting (BEPS) Action Plan is likely to be successful, according to a recent survey by Grant Thornton New Zealand.

The percentage, according to the survey, turns out to be even lower globally. Out of 3,000 businesses who took part in the survey across 40 countries, only 19 percent expect the BEPS Action Plan to have the desired effect.

The survey reveals that although there was a great sense of countries working together at the start, some countries are stepping back from consensus as the BEPS project progresses. It indicates a widely held expectation that many countries may selectively implement only the changes that suit them, giving rise to added complexity and compliance burdens for business.

Greg Thompson, Partner and National Director for Tax at Grant Thornton New Zealand, said: "The concern is that the proposals could have a disproportionate impact on mid-size multinationals, as few have the resources or capabilities to comply and adapt in the envisaged timelines. Companies relying on the development of ideas, innovations, and creative content (including media and technology) are likely to be particularly affected."

"The Action Plan is set to add yet more complexity to an already fast changing and politically fraught tax landscape. We urge all companies to develop a clear understanding of what the proposals mean for their business."

He continued: "Many of the objectives of the BEPS Action Plan are valid. They include the elimination of loopholes that allow profits to 'disappear' for tax purposes. The concern is that the scope has broadened to such an extent that the Action Plan will touch almost every area of international taxation. It's as if, in an attempt to get rid of some traffic black spots, the authorities have decided to overhaul the entire road network and require every driver to modify their car. Mid-size companies are going to be swept up in the tide of the changes and face extra work in complying, even though they're often not the ones using the avoidance schemes the Action Plan is seeking to eliminate."

"Companies face considerable uncertainty over how to structure business going forward, which could hold up investment and stifle creativity," concluded Thompson.

TAGS: compliance | tax | investment | business | tax compliance | tax avoidance | law | Organisation for Economic Co-operation and Development (OECD) | corporation tax | enforcement | group taxation | offshore | agreements | multinationals | legislation | tax planning | transfer pricing | New Zealand | G20 | tax reform | standards | regulation | Tax | Tax Evasion

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