Lowtax Network

Back To Top

the BEPS project's tentacles have spread

Kitty Miv, Editor
28 June, 2018

Kitty's Country Rankings are below, with a description of how they are compiled. This week, as every week, I give out Encomiums to countries which have done Good Things, and award Execrations for countries which according to my highly personal and partial views have done Bad Things.

For better or worse, BEPS has permeated deep into the fabric of the world's tax regimes. You can tell this by the sheer volume of tax developments that are related to, directly or indirectly, the issues discussed in the OECD's BEPS report each week. And the remainder of those tax developments that aren't exclusively about BEPS likely still reference them in one way or another.

From Liechtenstein to Luxembourg, from Andorra to Anguilla, the list of jurisdictions now incorporating new international standards on tax avoidance and tax transparency tells you all you need to know about how far the BEPS project's tentacles have spread into the tiniest jurisdictional nooks and crannies.

Combined with tax reform in the United States and elsewhere, for tax commentators, this is boom time – a fiscal Klondike Gold Rush, if you like, with a rich, golden seam of events to get your teeth into every day. It's a far cry from old, pre-BEPS/congressional deadlock days, when tax developments tended to ebb and flow. Now they just flow, thanks to the Paul Ryans, the Pierre Moscovicis, and the Pascal Saint-Amanses of this world, among many others. If only they'd tell a few jokes now and again. Because the downside is that the densely technical nature of many of these changes does make things challenging from the point of view of injecting a bit of humor into proceedings.

The courts are also playing their part too, as we saw in the US last week, with a potentially game-changing decision by the US Supreme Court.

Nobody ever seems to mention it, but there's something very appropriate about the name of the Supreme Court precedent, which had set the rules of the sales tax game in the United States. That is, until last week. It's called Quill, as in those ink pens made from a feather that they used back in ye olden days. And for all the use it's been recently, Quill may as well have been decided in 1792 rather than in 1992.

It was hoped that the Supreme Court's new decision in the Wayfair v South Dakota case, decided last week, would bring some much-needed clarity to the sales tax landscape in the US, following several years of confusion over the ability of states to tax the rapidly rising number of purchases made by consumers from remote out-of-state retailers via the internet. And while it may take some more time for the latest ruling to be fully digested by state authorities, businesses, tax advisers, and taxpayers, many will welcome the fact that the highest court in the land has at last taken account the vastly different, digitalized retail landscape that would have been unrecognizable to most back in the early '90s.

However, this might not be the end of the story. While the ruling suggests that state governments now have carte blanche to devise laws along similar lines to the one contested in South Dakota, I suspect that not everyone concerned is going to take that prospect lying down, least of all the remote retail sector. But more important perhaps, is how this ruling is received in Washington. The Supreme Court has long held the view that it is for Congress to ultimately decide this issue with federal legislation, but lawmakers have been sharply divided on the matter – even within party ranks – between those pressing for a level sales tax playing field and those arguing that e-commerce growth should not be impeded with what amounts to new taxation. Judging by recent comments by President Trump, he probably falls into the former category. But there are plenty of Republicans who belong to the latter camp.

Maybe the new decision will provide Congress with the jolt it needs to act and close this matter. Either way, while the Supreme Court's review was welcome, perhaps we haven't seen the last chapter of this saga yet. That the Supreme Court itself was divided – in a 5-4 decision – suggests that we haven't heard the last of this issue yet.

The Supreme Court's decision wasn't the only new take on an old idea last week.

A bit like a gift nobody really wants and can certainly live without, proposals for a common corporate tax base in the European Union have been repackaged and re-presented multiple times. And it looks like the CCTB could be the gift that keeps on giving for us commentators, after the French and German governments recently got their hands on the Commission's draft proposal and decided to make an already complicated issue more complex.

One observation to make is that the Franco-German CCTB position paper was probably significant for what it didn't mention. Much to the relief of Ireland, Hungary, and Bulgaria, there was no mention of a minimum EU corporate rate of corporate tax, a measure that would have been intended to put a stop to aggressive tax rate competition and the "race to the bottom" on the corporate tax rates.

Nevertheless, for an idea that is already hugely ambitious, controversial, and divisive, the position paper probably couldn't have helped the common tax base cause by substantially departing from the Commission's draft directive in some key areas, notably by calling for all companies liable for corporate tax to be included in the common tax base, regardless of size, and by envisaging a CCTB without tax incentives such as R&D incentives. As such, by wrapping up the idea of a CCTB in the wider project for deeper EU harmonization, France and Germany may merely have succeeded in prolonging what are likely to be very protracted discussions in the matter.

Indeed, it has been suggested that the Franco-German position paper is such a substantial departure from the Commission's recently repackaged proposal, it may well need to be re-re-packaged, and re-re-re-launched. If so, I recommend that the EU makes it a low-key affair. For one thing, everyone now knows what's behind the packaging – they've seen most of it before and were pretty disappointed then. What's more, the timing isn't great. Apparently, there's something of a CO2 shortage in Europe at the moment, so this is one launch party that could go down like a damp squib rather than a pop in more ways than one.

Kitty's Encomiums and Execrations

Methodology: each week (this is the 147th) one or more countries are given encomiums and one or more are given execrations. Those are the entries below with descriptive links. In the following week, each encomium counts as + 1 for that country, and each execration counts as - 1, being added to that country's existing score. Over time, therefore, a ranking will build up for each country, and further countries will join the listing. Germany is at minus 2, since in the second week it had an execration and in the first week it had an encomium, leaving it at neutral; then it had an execration in week four, thus dropping to - 1, and another one in week six, dropping to - 2; finally in week 13 it got something right, so it went back up to - 1; then in week 16 it gained a further star, so then it was in neutral territory until week 23 when it dropped back to minus one, but reverting to neutral territory in the following week, then dropping to minus one in week 50, and back up to plus one in week 51, then to plus two in week 52. Some weeks ago it dropped a place, but then quickly recovered one step. Etc etc.

The rankings are intended to be a proxy for business friendliness; evidently they are highly partisan, but as time goes by they are becoming useful for decision-making. For any country in negative territory, you should think carefully before starting a business there.

Kitty's Encomiums

United States jolt

Kitty's Execrations

France damp

Germany squib



Tags: Euro | Gold

About the Author

Kitty Miv, Editor

Kitty was born in Argentina in 1960 to a Scottish cattle rancher and his Argentine wife. Educated in Edinburgh and at Princeton, Kitty worked for the World Bank as an economist, where she met and married an emigre Iranian banker. During her time with the Bank, Kitty worked in a number of emerging markets, including a spell in the ex-USSR as a Transition Economies Team Leader. Kitty is now a consultant in Brussels and has free-lance writing relationships with a number of prominent economic publications. kitty@lowtax.net


« Go Back to Blogs

Blog Archive

Event Listings

Listings for the leading worldwide conferences and events in accounting, investment, banking and finance, transfer pricing, corporate taxation and more...
See Event Listings »