Offshore tax optimization, we spoke to you about it several months ago, has attracted the attention of the Organization for Economic Cooperation and Development (OECD). On Friday, July 19th, before the finance ministers of the G20 Summit, the OECD introduced its plan of action to combat “tax base erosion and profit shifting” (BEPS). The in-depth analysis of this plan is ultimately reassuring because the plan maintains the freedom to optimize taxes offshore.
An evolution of regulations that, for many, date back almost a century:
In this period of crisis, governments find it increasingly difficult to respect their budget. They are obliged to make broad budget cuts while tax administrations scrape the bottom of the bowl. This is the main reason why the processes for Offshore tax optimization practiced by the major groups have now come underattack. The tax authorities were not prepared for globalization and it is in this difficult context that the OECD hopes to update regulations dating back to the 1920s.
15 measures to optimize your taxes
The OECD has proposed 15 measures in its plan of action BEPS, with the main objective being to control the digital economy. Here are the main points: the obligation for companies to communicate their tax payment schemes to the IRF, a change of regulations on transfer pricing and even a willingness to tackle “hybrid” structures. The OECD has prepared a multilateral treaty to amend all of these regulations that is expected to come into effect in 2 years. A very ambitious goal since it will involve getting all of the parties to reach an agreement.
No unitary tax at the global level and measures that still remain unclear:
The excellent news is that there was no recommendation to implement a unitary taxation at the global level. To treat all subsidiaries as a single and same group would have greatly weakened this plan since the task is politically impossible. In addition, the measures announced are unclear and their actual implementation would not be easy. It will be necessary to follow the developments closely in order to adapt and press on with Offshore tax optimization.
Conclusion: Rather than speaking of Offshore tax optimization, it would be more appropriate to speak of “tax competition”. In perfectly legal circumstances, nothing can keep a company from capitalizing on the different tax rates between countries, it being understood that the avowed goal remains to save money on income tax in order to re-invest it in the business.