12th June 2014
US lawmakers have joined a chorus of doubters over the efficacy of a global effort to limit companies’ ability to offshore profits to low-tax countries.
Republican politicians warned that proposals from the Organisation for Economic Co-operation and Development (OECD) are simply a way to “increase taxes on American taxpayers”.
Representative Dave Camp and Senator Orrin Hatch, members of the House Ways and Means Committee, said the Base Erosion and Profit Shifting (BEPS) scheme would amount to a "raid" on the US Treasury.
“When foreign governments – either unilaterally or under the guise of a multilateral framework – abandon long-standing principles that determine taxing jurisdiction in a quest for more revenue, Americans are threatened with an un-level playing field,” they said in a joint statement.
BEPS, they added, would put pressure on Washington to respond by “asserting taxing authority over foreign activity generating US-source income on similar grounds”.
The big worry among lawmakers and a growing number of companies, is that the BEPS project would mean US firms having to pay more in tax overseas. But despite the oppostion from some camps, there is broad support within the G20 for reform.
Pascal Saint-Amans, director of the OECD Centre for Tax Policy and Administration, stressed that the Paris-based body would seek to address US concerns. The measures “cannot be adopted without the consensus of all member countries”, he said in a statement in which he also said the process raised “serious questions” about the ability of the United States to fully participate in the negotiations.
Ultimately, while conceding that the proposals could have “far reaching and negative consequences” for Americans, Mr Saint-Amans said it is up to the US to enact comprehensive tax reforms to lower the corporate rate to a more competitive level, as well as modernise a “badly outdated and uncompetitive US international tax structure”. He added: “Such reforms would put American companies on a more level playing field with their foreign competitors and reduce the pressure on American companies to engage in elaborate tax planning.”