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UK Diverted Profits Tax 'Interesting' But Renegade: OECD

by Ulrika Lomas,, Brussels

19 December 2014

In what was the Organisation for Economic Cooperation and Development's (OECD's) first response to the UK's plans, Pascal Saint Amans, the Director of the Center for Tax Policy and Administration at the OECD, said its plans for a diverted profits tax (DPT) are interesting but should only be undertaken at a multilateral level.

In the Autumn Statement, UK Chancellor George Osborne announced plans to levy a 25 percent diverted profits tax on profits "artificially" shifted out of the UK, as part of a package of anti-avoidance measures presented to discourage companies – and in particular multinationals – from avoiding UK taxes.

During the OECD's December 15 webcast on progress towards its BEPS Action Plan, Saint Amans was asked whether he considers that the diverted profits tax is compatible with the Action Plan and the OECD's recommendations, to which he replied:

"We are still looking at the 18 pages of draft legislation which have been issued late last week. I think the UK initiative of diverted profit tax is extremely interesting as it shows the relevance of the BEPS Action Plan."

"It shows that there is a highly political concern about tax avoidance, and it shows that Governments are not shy [about] taking action unilaterally."

"What we wish, of course – and that's the other philosophy of the BEPS action plan – is that this be addressed through multilateral action. So we hope that the UK move, which again shows a very strong political stake in these international tax topics, will be compatible with the development of Action 1, of the report on the digital economy, of the solutions which will be provided, so that at the end of the day we have a coordinated approach which is not detrimental to investment [or] detrimental to Government revenues."

Saint Aman's comments come after criticism by UK accountants and US businesses that the UK proposals are "jumping the gun" on tackling BEPS issues ahead of international consensus. They warned that the UK's competitiveness will take a hit, at a time when the nation is seeking to attract multinationals with the joint lowest corporate income tax among the Group of Twenty nations, due to be 20 percent from April 2015.

TAGS: tax | investment | business | tax avoidance | interest | Organisation for Economic Co-operation and Development (OECD) | United Kingdom | multinationals | legislation | transfer pricing | Tax

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