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It's gone quiet after G8 tax promises

George Bull, senior tax partner at Baker Tilly, looks at the fallout from the G8 tax transparency deal.

Hasn’t it gone quiet? When will all the words begin to make any difference?

Prior to the G8 meeting, tax was the buzzword. Now the big word is ‘should’. In the ten-point Lough Erne Declaration, there are 13 ‘shoulds’.

Every NGO, most (but not all) governments’ tax-raising departments and pretty well every campaigning group will find something to approve of here. All ten points address serious concerns. But the last provides, perhaps unintentionally, a side light on how difficult it will be to implement any of them: “Governments should publish information…so that citizens can hold them to account”. Few would regard that aspiration as falling within the comfort zone of most politicians.

On the tax side, the UK Prime Minister has endeavoured to close the circle by persuading the Crown Dependencies and Overseas Territories to commit to information exchange, by promising to create registers of ultimate ownership which will help governments track down tax evaders and tax avoiders, and to rebut charges that the UK is becoming a tax haven by pledging that the promised low 20% corporate tax rate will be applied rigorously and fairly to small and large businesses alike.

Words are easier than actions.

Even so, monumental effort has been required to persuade these nations to sign up to 13 shoulds. That effort is a pale intimation of the stupendous labours which will be required to translate the shoulds into actions, creating the promised new tax framework to address the challenges of mobile wealth, international business and internet trade. The UK’s published action plan and some of the more detailed papers released by the Prime Minister’s Office set out what we can expect to see in the UK. On an international scale, the next big step is the publication of the OECD recommendations to combat base erosion and profit shifting (BEPS). We will be commenting on these in our Weekly Tax Brief when they become available.

For now, many will be hoping that the G8’s declaration on tax and transparency is more successful in achieving change than global conventions intended to combat climate change. And, if the tax-planning opportunities provided by current complexities disappear, then we can be sure that multinational corporations will be quick to press for a simpler tax code.

This was posted in Bdaily's Members' News section by George Bull .