Can BEPS Help US Tax Reform Along, or is it Just Misplaced Optimism?
Pascal Saint-Amans, director of the Center for Tax Policy and Administration at the Organization for Economic Cooperation and Development (OECD), says that despite widespread agreement amongst many of the deficiencies and urgent need for reform of the US corporate tax system, “the push for US corporate tax reform has been all talk, with no action for 30 years.” However, he believes the Base Erosion and Profit Shifting (BEPS) project reforms could be a catalyst for US corporate tax reform.
Saint-Amans and Thomas Neubig (formerly of the US Treasury, EY, and the OECD) made the comments in a recent blog post for The Hill.
The stated goal of BEPS is to realign the taxation of multinational enterprise (MNE) profits with the location of economic activities. Easier said than done! There is, however, much disquiet in the United States – by politicians and companies – about the potential effects of BEPS. They see it as a threat to US companies and to US tax revenue.
BEPS has in part been concerned about the potential double nontaxation of MNEs, but many MNEs and other companies are equally concerned about avoiding double taxation, as revenue authorities around the globe jump on the BEPS bandwagon and call for their “fair share” of tax from MNEs.
Query whether the OECD and the G20 can really motor merrily on their way in the cause of international tax reform without the United States being fully onboard?
What will a Clinton or Trump administration do? Trump favors cutting the US company tax rate dramatically to 15 percent. Clinton has not promised a corporate tax cut but, like Trump, has called for closing loopholes that corporations use to avoid taxes. Bernie Sanders wants to raise substantial revenue from large MNEs that have shifted profits offshore.
The stumbling block has been, and still is, the US Congress. As Reuters has noted, “despite years of talk about the importance of tax reform, neither President Barack Obama nor lawmakers on Capitol Hill have been able to agree on a reform agenda that many say is needed to boost the economy and bring sanity to a tax code of Byzantine complexity.”
Will that change after the November presidential election?
Terry Hayes, BBus, CPA, CTA, is a senior tax writer with the Tax & Accounting business of Thomson Reuters in Sydney. Terry heads the Thomson Reuters Australian tax newsroom with responsibility for all the company’s Australian tax news services, as well as the ASEAN Tax Bulletin. He is also the technical editor of The Australian Financial...