Cantillon: Big names begin to shift on tax avoidance

The long OECD campaign to eliminate aggressive tax avoidance by large global companies has already yielded some change, not least in Dublin where the Government is phasing out the contentious “double Irish” scheme.

Unilateral moves by Amazon and Starbucks to refine their business models also indicate that big-name corporates may be more inclined towards reform themselves than to have such manoeuvres imposed on them. Each of these firms has each been accused of avoidance.

Pascal Saint-Amans, the OECD official in charge of the base erosion and profit-shifting (Beps) project, says such moves are an indication that the “very aggressive tax planning of the past is over”.

It would be welcome if it was, for sure, and there are signs that companies are braced for change. But any declaration of victory at this point is premature.

For one thing, the OECD won’t produce final proposals for Group of 20 finance ministers until October. For another, resistance is mounting in the US to some of the most sweeping measures.

Last week Saint-Amans produced the OECD’s proposal on country-by-country reporting, a critical piece of Beps architecture which is supposed to put tax manners on global companies by obliging them to declare what money they make where they make.

Within days, however, US treasury secretary Jacob Lew received a warning missive from the two tax-writing committees in the Republican- controlled Congress.

Their support would be required to implement the Beps plan in US law but they are particularly doubtful of country-by-country reporting and all that would flow from it.

Not only that, but they clearly indicated that action to prevent country-by-country reporting might also be considered.

If this is an illustration of the US business lobby at work then the business lobby has been very busy indeed. Mandatory country-by-country reporting without US involvement wouldn’t amount to much.

While there’s been lots of political noise in Washington on corporate tax, the authorities there were always free to take action if they wanted. The Senate and the House make US law, not the OECD.