US Treasury, Deputy Assistant Secretary Robert Stacks has indicated that he is not satisfied with particular moves made by the British Government in the effort to clampdown on multinational companies and prevent profit shifting across borders. Internationally this clampdown was found necessary as multinational companies by shifting the profits to lower tax jurisdictions, paid lower tax in the countries were the profits were actually earned. This simply meant that the individual tax payers and smaller local corporations ended up paying more than their share of taxes. This is a problem that could not have been handled separately by any country. Hence there was a need for a global solution.
In 2013, Britain had declared its commitment to join with the other nations in the global clampdown on unfair tax practices adopted by multinational companies. Britain had agreed to fair international taxation at the G8 talks in Lough Erne, Northern Ireland and again endorsed it through a G20 Declaration in St Petersburg in September, 2013.
OECD was delegated to design and develop the proposed rules. The final OECD proposals for the new rules are to be presented to the G20 Finance Ministers on 8th October, 2015. There have been efforts made to establish processes and standards to prevent multinational companies to unfairly shift their profits across borders to lower tax jurisdictions to take tax advantage.
Robert Stacks said that the self-interested moves and negotiating tactics by David Cameron’s government are not helping. For instance, Britain’s decision to establish its own 25% levy on of ‘diverted profit tax’ which would hit multinationals for allegedly shielding profits from the UK.
Again, the UK government had amended the rules in 2012 for Controlled Foreign Corporations (CFCs), which offered tax advantages to those headquartered in the UK. The rules exempted foreign profits from UK tax by allowing credit for the foreign tax paid. This move it is stated, was aimed to attract companies to base the parent entity in the UK. It was said that the recent proposals to introduce multi-lateral CFC rules so as to benefit all countries faced considerable push back from the UK.