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Businesses sceptical of OECD BEPS project

Businesses across the world are sceptical about the success of the Organisation for Economic Co-operation and Development's (OECD)'s Base Erosion and Profit Shifting (BEPS) initiative, due to a lack of clarity and guidance on what constitutes acceptable tax planning, according to Grant Thornton International.

A survey of 2,500 businesses across 34 countries conducted in May this year by Grant Thornton International found that only 23% believe the OECD's BEPS Action Plan is likely to succeed.

Grant Thornton International global head of tax services Francesca Lagerberg said although the OECD's "much needed" attempt to take on the "project was laudable, hurdles are likely to persist.

"We caution the business community that finding a global solution will be very difficult and will not be speedy," she said.
"Many of the objectives of the BEPS Action Plan are valid," she explained, "They include the elimination of loopholes that allow profits to 'disappear' for tax purposes.

"The concern is that the scope is so broad it touches 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."

Grant Thornton International's findings echo the wider climate of scepticism that has greeted developments in the BEPS project.

While some in the business world have expressed concern that companies might "jump the gun" in an attempt to counter the confusion surrounding licit and illicit tax planning, others have complained that the project is not ambitious enough in its review of the international tax system.

Continuing challenges and complex networks of stakeholder expectations may yet prove obstacles for BEPS to overcome, but the drive towards tax transparency is one that seems to be shared by governments and businesses alike.

Another survey conducted by Grant Thornton International in 2013 saw 68% of respondents declare themselves in favour of increased global cooperation and guidance from tax authorities on what constitutes unacceptable tax planning, even if such cooperation were to limit opportunities for tax reduction across borders.

Further, recent high-profile shifts in tax policy, including the closing of the "Double Irish" system and the imposition of the so-called "Google Tax" in the UK, are cause for hope that businesses will start feeling more confident about meaningful change, added Lagerberg.

However, "businesses need things in black and white," she cautioned.

"They have a responsibility to their investors and shareholders to keep costs down. Simply telling them to pay their 'fair share' is not a viable alternative to a clear set of rules or principles."

Related articles:

Fair corporate tax regime faces uphill task

OECD tax avoidance recommendations: talking the big talk or game changer?

Ireland's tax arrangements: in search of a place in the sun

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