Offshore Tax Competition Battles Heats Up

Two of the world’s biggest mining Companies BHP Billiton and Rio Tinto have reportedly joined global tech firms in lobbying against efforts to stop major multinational corporations from shifting profits to tax haven jurisdictions.


In submissions to an OECD draft paper, the mining companies said measures to prevent firms from abusing tax treaties would create ”unintended consequences” for dual-listed entities such as themselves.


Multinational firms including big pharmaceutical and global tech firms have made submissions rejecting proposals in the discussion draft. The draft proposes that the hitherto lawful practice of companies ”treaty shopping” for the most tax effective places offshore to bank untaxed profits be blocked.


It follows a push by governments around the world to limit the amount of money lost through offshore tax-minimising structures such as those used by Google and Apple.


Irish law firm Matheson, which advises seven of the top 10 global technology companies and over half of the 50 largest banks, said the proposals unfairly targeted small jurisdictions and big companies.


It defended the practice of corporations to set up smaller subsidiaries in offshore locations.


”Multinational groups frequently have intermediate companies in their corporate structure, for various commercial reasons including centralising risk management,” it said.


”The [proposals] should recognise this, and permit treaty access in such situations where sufficiently active business functions are being carried on with respect to such investment management operations.”


BHP and Rio Tinto, both listed on the Australian and London stock exchanges, said dual-listed entities would be unfairly affected. They said they should be exempt from the provisions ”in order to avoid what we believe would be unintended consequences”.


Australian accounting firm Pitcher Partners also made a submission claiming the proposals would result in hefty compliance costs for small-to-medium enterprises and make it ”more difficult for any taxpayer to access the benefits of a tax treaty”.


The OECD paper stands at the vanguard of global efforts to prevent companies who do business in multiple countries from channeling income through legal offshore tax-avoidance or offshore tax minimisation structures. In reality this is but a pathetic attempt by the fat OECD member welfare states to avoid the inevitable political fall out at home that would entail from their committing to reform their dated high spending (and high tax dependent) economies.


The old world welfare states think by frustrating international tax competition they will avoid the sting of the electorate and remain in power?


Like the boy who thought he could hold back the ocean by sticking his finger in the dyke there’s only so long these dinosaurs can hold back the creeping tide of economic reform….


Here’s hoping that more people see the OECD anti tax competition push for what it really is (that is, a con).


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