The Organisation for Economic Co-operation and Development (OECD), signalled a growing interest in international tax with the publication of a draft of guidelines on tests that investment managers in the UK need to meet before profits from offshore hedge funds can remain outside of the UK's taxing authority, hedgeweek.com reports. Critics, including UK partners of Big Four accounting firms and Senator Mitch McConnell (R-Ky), according to Mike Franc, writing for humanevents.com, accuse OECD of stifling tax competition among nations through a misplaced emphasis on national enforcement and proposals such as the new tests that will limit tax-free offshore accounts.
Quoting a colleague, Dan Mitchell, Franc describes OECD as âa handful of bureaucrats in Paris . . . [who] want to insulate governments from the discipline of market forces.â He reports that language introduced into the U.S. State Department's (DoS) spending bill by Senator Mitch McConnell, prohibiting the OECD from using U.S. taxpayer contributions for âactivities or projects ... designed to hinder the flow of capital and jobs from high-tax jurisdictions to low-tax jurisdictions or to infringe on the sovereign right of jurisdictions to determine their own domestic policiesâ, was immediately attacked by the OECD's office in Washington and by Foreign Relations Committee Chairman Richard Lugar (R.-Ind). Congress provides $85 million for the support of OECD, which has an annual budget of $400 million. Thirty nations, including the United States are members of the little known organization, which is based in Paris.
Senator Lugar said that the McConnell provision threatens future tax agreements between the U.S. and our trading partners that âInclude comprehensive exchange of information provisions.â Franc interprets this to mean the U.S. supports "the OECD's ongoing efforts to compel financial institutions in market-oriented nations to share our most confidential financial information with tax authorities in the high-tax regimes,â humanevents.com says.
A statement from KPMG UK critized an OECD-sponsored tax forum held in South Korea last month because it emphasized the enforcement of national tax laws but did not address the basic problem in tax compliance worldwide, which is the âlack of trust between taxpayers and governments.â OECD's Seoul Declaration focused instead on better cross-border exchange of information on tax planning schemes and an international review of the roles of intermediaries in tax planning, accountingandfinance.com reports.
Both taxpayers and governments have an interest in sustainable growth, Louglin Hickey, KPMG's global managing partner for tax said, âstimulated by private sector investment, often from foreign sources, and government programmes funded by tax revenues. Tax intermediaries share this interest and have a key role in enabling taxpayers to comply with ever more complex legislation.â
âMultinational corporations are actively shopping around the world for the best deal on taxation,â Hickey went on to say, according to accounting and finance.com, âand those governments that realize this are redrawing their corporate tax systems to encourage inward investment.â
Since 1961, when the OECD took over from the Organization for European Economic Cooperation (OEEC), which was founded to administer the Marshall Plan after the end of World War II, the Organization has had building strong economies in its member countries as its primary mission, the Website says. But the organization says that it is changing its scope to include policy dialogue with nonmember countries in Southeast Asia and Latin America. Instead of focusing on how a national policy works within the boundaries of a member country, the group, according to a statement on the Web site, will analyze âhow various policy areas interact with each other, across countries and even beyond the OECD. How social policy affects the way economies operate, for example.â
The OECD also published a statement last week expressing concern about the Financial Accounting Standards Advisory Board's (FASAB) proposed change in accounting for Social Security benefits. The OECD said the proposed rule change, as âclassifying these transactions the same as private sector liabilities is wrongâ and could confuse the public, United Press International (UPI) reports.