Starbucks, Amazon and Google and Treaty Policy

As the Public Accounts Committee prepares to hear the big 4 on Thursday 31 January, I’ve been thinking more about the fallout from their last hearing. I attended the Vienna conference “Developing a Tax Environment for Growth and Competitiveness” and there was plenty of focus on the Starbucks/Amazon/Google issues. The conference was held under Chatham House rules so I won’t quote anyone but its useful I think to summarise some of the contributions.  There was clearly a lot of concern about the planning, but equally there was pushback that corporation tax is based not on sales but profits (which some politicians seem to have missed).

There were some interesting discussions about how European countries could tackle the planning and this fitted into the discussions about the BEPS project. Many contributors said it was for governments to address the mismatches within the international tax system and that the BEPS project and EU work should focus on what was unacceptable, name it and draw up a programme and timetable to address it.

In practical terms what can be done to tighten the system , without throwing the baby out with the bathwater? Well US outbound tax plannig is pretty complex but there are some clear areas that would repay study to address the concerns which politicians have voiced. There was a discussion as to which fisc suffered from the planning opportunities for outbound US MNCs? Was it the US effectively giving up the right to tax offshore profits? Or was it non US fiscs who suffer aggressive tax planning because the US doesn’t seek to tax the income?

So what to do? What to focus on? Well here are a few things that were mentioned:

Should European tax treaties have Limitation of Benefit clauses which pick up income conduited through EU treaty companies to tax havens?

Does the tax treatment in some EU countries of conduit income facilitate this? If so, what should be done about this and the regimes involved?

Should fiscs focus on a functional analysis to allocate taxing rights to solve this issue? If they did, what would be the outcome – who would get which proportion of tax?

And finally, as someone said to me “Is the check the box regime the key foundation for base erosion and profit shifting?”

Much to think about.

 

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