The Business Roundtable (BRT) is an influential association of chief executive officers from leading U.S. companies that promotes sound public policy and a thriving U.S. economy. So, when BRT weighs in on a legislative, policy or regulatory matter, we tend to listen.
And when the Roundtable expresses pointed concerns about a significant global tax regulatory change – as it did on May 30 – we pay very close attention.
In a concise letter to U.S. Secretary of the Treasury Jacob Lew, Business Roundtable’s Louis Chênevert conveyed his association’s concerns about the OECD Base Erosion and Profit Shifting (BEPS) project. In addition to serving as the chair of the BRT’s tax and fiscal policy committee, Chênevert is the chairman and CEO of United Technologies Corporation. BEPS is designed – “ostensibly,” Chênevert emphasizes – to address potential gaps in the taxation of cross-border income and to strengthen tax coordination among different taxing jurisdictions to prevent so-called “nowhere income.”
That intention is all well and good, notes Chênevert, who recognizes the OECD’s longstanding efforts to promote global economic development and prevent double taxation through its development of international standards. But there’s a catch. In fact, there are numerous potential challenges for the BEPS project, which continues to evolve. (We’ve examined some of these issues, including BEPS’s country-by-country reporting [CBCR] template, which in virtually any form will add complexity to the tax function’s data management challenges.) The Business Roundtable’s concerns relate to the possibility that some jurisdictions will use the mandate to pile new taxes on U.S. business income. Here’s a passage:
“[C]urrent discussions among participants in the BEPS project are raising serious concerns among the U.S. business community and other observers that the project is being used by some governments for the purpose of imposing extraterritorial taxes on U.S. business income. At a minimum, the project is increasing business uncertainty on the taxation of cross-border income. At its worst, it will result in the imposition of new, unprecedented taxes on trade and investment that will freeze business investment and slow economic growth.”
The rest of letter examines how certain governments could exploit BEPS in a way that increases the likelihood of double-taxation, exposes U.S. companies to new intellectual property risks (via new public disclosure requirements) and ultimately creates new barriers to cross-border trade and investment.
The Business Roundtable’s request of the Department of Treasury also is expressed in concise terms: “stand firm in opposing the use of the BEPS project by other governments to redraw the international standards on the jurisdictional authority to impose taxes.”
While it remains unclear exactly how BEPS and its 15 action items will be finalized, enforced and monitored, BEPS clearly has U.S.-based global companies concerned about the impact of new reporting requirements and the possibility of new taxes on international trade. That’s why we will continue to track and monitor the initiative very closely.
Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information.