Countries take cross-border tax lead, despite OECD plans

COUNTRIES are moving ahead with their own cross-border tax legislation, despite plans to seek global co-ordination on cutting down on egregious profit-shifting.

Some 40% of EY’s tax policy leaders across the globe saw “significant” tax reforms being undertaken in their country of operation, despite final recommendation on the OECD’s base erosion and profit-shifting project still awaited.

A third said that legislation has been enacted, or is set to be, in relation to tackling hybrid mismatch arrangements. These arrangements exploit the difference in tax treatment of an entity under the laws of two or more jurisdictions to lower tax bills. The OECD has proposed a “linking rule” between the payer jurisdiction and payee’s, aligning their tax outcomes and eliminating any mismatch.

Chris Sanger, EY’s global tax policy leader, said governments are choosing to “react now and adapt later”, rather than wait for recommendations.

Sanger said: “Businesses need to develop robust processes and policies to achieve certainty. By studying the drivers of policy change and understanding which countries are adopting new policies, they can gain a clearer picture of where the tax agenda is moving to next.

“In these times of change it is even more important that the impact of the options facing policymakers on business investment is readily understood. This means that, despite the ever- increasing demands on tax directors, a key part of their role is to act as a tax diplomat. Only through this dialogue can the tax system contribute to a better working world.”