Multinationals face greater scrutiny of intangibles

A group of anti-avoidance campaigners - led by Christian Aid - are calling for a major overhaul of the international system for taxing multinationals, claiming the current rules make it too easy for companies to shift their profits to less taxed jurisdictions.

The 58 organisations have published a briefing paper, No More Shifty Business which says that the Organisation for Economic Development and Co-operation (OECD) and G20 should work with the United Nations Tax Committee and governments in developing countries to define new rules for the taxation of multinationals, based on where their economic activities and investments are actually located.

The paper comes in response to the OECD's February report, Addressing Base Erosion and Profit Shifting, which campaigners say identified aggressive tax planning by multinationals as a fundamental cause of base erosion, and which highlighted accounting for intangibles as a particular area of concern.

Alex Prats, Christian Aid's Principle Economic Justice Adviser, said: 'If, as the OECD states, the current system is broken and does not reflect the way that businesses operate in today's globalised world, and if loopholes are exploited by some at the expense of everyone else, then the rules must be changed. The current tax system raises serious issues of fairness and compliance.'

At the same time, the global business community appears worried about the increased scrutiny on their tax planning - a survey of multinational companies conducted by global tax advisers Taxand found that 72% of respondents are concerned about the impact of tax planning activities on their brand reputation in the face of public scrutiny.

Taxand's Global Intangibles Survey says that 63% of respondents expect an increased focus by tax authorities on intangible assets such as patents, trademarks and copyrights, but that 61% have yet to perform an internal audit of their company's intangibles portfolio, and 70% of multinationals say they do not have a clear view of the intangibles in their business.

Three quarters (76%) of multinationals thought changes such as the new OECD guidelines on intangibles would result in an increased compliance burden and anticipate taking pre-emptive measures such as increased documentation.

Antoine Glaize, Taxand global tax partner and business restructuring leader, said: 'Many multinationals are facing the perfect storm of rising public scrutiny, inevitable tax audits and a heavier compliance burden in the intangibles arena. Technology companies in particular have been targets for public criticism, having been attracted to tax regimes where their large numbers of intangible assets are taxed in a much more accommodating manner.'

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Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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