|OECD headquarters, Paris|
Finance ministers of the G20 group of nineteen leading developed and emerging economies, meeting in Cairns, Australia, at the weekend, confirmed their support for the interim global corporate tax proposals that were published last week by the Organisation for Economic Co-operation and Development (OECD). Meanwhile in an illustration of the rapid pace of change that have naysayers reeling, Ibec, Ireland's top business lobby group, has urged the Government to take pre-emptive action to scrap the 'Double Irish Dutch Sandwich' scheme, the main legal arrangement used in Ireland by American companies to avoid global corporate taxes - as with the property bubble Finfacts has moved from being an outlier to being part of the new conventional wisdom.
Ireland will retain several advantages in attracting FDI (foreign direct investment) and the biggest risk is that policy makers continue to believe their own propaganda/spin and do not seriously recognise the challenges as well as the opportunities - - most Irish Government reports are typically full of platitudes and aspirations with little if any space for acknowledgement of weaknesses.
Joe Hockey, Australian treasurer, at the weekend in Cairns said the attempt to tackle global tax evasion by multinational companies has met an "extraordinary effort" by global finance ministers, with tax regimes about to experience "structural reform at a global level."
According to The Sydney Morning Herald, Hockey said the OECD and the G20 had made an "extraordinary effort" to clamp down on global tax avoidance by multinational corporations in recent months by delivering half of the promised actions from its base erosion and profit shifting (BEPS) action plan.
"We welcome significant progress achieved to date on the two-year action plan with roughly half the actions delivered this year as promised," he said. "This is an extraordinary effort and I congratulate the OECD and the G20 membership which unanimously endorsed that effort. This work is structural reform at a global level."
As part of the G20's efforts to crackdown on global tax evasion, Hockey said finance ministers had agreed to introduce a 'common reporting standard' so the Australian Tax Office knew when someone opened a bank account anywhere in the world.
"We cannot let any small economy in the world, even the smallest island, not be a part of this process," he said. "We are going to help the developing world actually implement these sorts of tax initiatives so there is nowhere for the tax cheats to hide."
The G20 finance minister and central bank governors' meeting in Cairns concluded on Sunday, with Hockey saying G20 finance ministers are now 90% of the way towards meeting a 2% target for additional global growth.
This year has been marked by remarkable progress against international tax evasion and corporate tax avoidance.
For example Austria and Luxembourg had held up an amendment to the EU’s savings directive for six years to protect banking secrecy and then in 2014 they agreed to sign an OECD protocol on automatic exchange of bank information.
The Algirdas Šemeta EU tax commissioner said last March:
“Switzerland and the four other countries now accept that the automatic exchange of information (AIE) must be at the core of their relations with the EU in taxation.
“This would have been inconceivable even a year ago, and it shows how far we’ve come in changing mind-sets globally.”
Switzerland would never amend its 1934 bank secrecy law was the conventional wisdom!
More than 65 countries and jurisdictions have already publicly committed to implementation of the OECD’s standard, while more than 40 have committed to “a specific and ambitious timetable leading to the first automatic information exchanges (AIE) in 2017.”
AIE is very important because the existing system that applies in many countries is that foreign tax authorities have to apply for information on a case-by-case basis.
"Almost overnight legal business practices become unacceptable,” said Patrick Odier, president of the Swiss Bankers Association, this week at the group’s annual general meeting. “I’ll put it simply: the banks in Switzerland accept AIE. We’re not doing it because it’s the best solution. We’re doing it because it has prevailed internationally,” said Claude-Alain Margelisch, chief executive of the association.
Many are shocked by the progress and the OECD will publish its final proposals in a year.
Political gridlock in Washington DC will not stall progress.
“The OECD’s initial guidance…, if adopted by key OECD member countries and observers as expected, will have a significant impact on US multinationals with overseas operations, whether or not the US makes changes in regulations or practices as a result of the recommendations,” said Manal Corwin, national leader of International Tax at KPMG LLP and a former deputy assistant secretary for tax policy for international tax affairs at the US Treasury Department, according to The Wall Street Journal.
OECD & Tax: Everything grand in Ireland's Republic of Spin?
OECD proposes biggest reform of global business tax rules since 1920s
Finfacts submission to Department of Finance consultation on corporation tax reform
OECD BEPS Project submission from Finfacts: Ireland should embrace corporate tax reform - - includes analysis of underperforming indigenous tradable sector.
Irish corporate tax policy like property bubble driven by short-term interests
IMF explains “Double Irish Dutch Sandwich” tax avoidance
US company profits per Irish employee at $970,000; Tax paid in Ireland at $25,000