UK slow to benefit from multinational tax restructurings

The UK is failing to benefit from multinational corporations reshuffling their corporate structures to provide improved transparency for tax reporting, ahead of this week’s G20 summit to discuss the OECD’s tax reform plans.

Whilst the UK remains well placed to capitalise on this trend, continuing contradictory statements from the coalition government are causing uncertainty.

Investment structures and funds migrate to reputable jurisdictions

Over the last year, there have been clear signs of international corporations reconsidering their international tax investment and holding structures as the OECD has launched its Base Erosion Profit Shifting (‘BEPS’) initiative. Many of the less well regulated offshore tax locations, such as Grenadines, Nauru and the Seychelles are reporting significant drops in the number of incorporations for foreign investors. These jurisdictions are increasingly being associated with tax avoidance, and are attracting unwelcome focus from national tax authorities and tax reform campaigners.

Much of this business is re-emerging in the onshore locations, such as Ireland, Luxembourg and Switzerland.

BEPS is aimed at improving and harmonising national tax regimes to reflect the globalisation of trade and the loss of much-needed revenues through aggressive tax structuring.  It was heavily backed by the G20 at its last meeting in July in Moscow. Tax reform is being pushed again by the German government as the G20 leaders meet again in St Petersburg on 5 and 6 September.

UK should benefit but needs certainty

Following the reforms to the UK’s Controlled Foreign Corporation tax regime at the start of 2013, the UK has one of the best regimes for global corporations.  This is heightened by the falling Corporation Tax – scheduled to drop to 20% in 2015. However, the anticipated influx of foreign headquarters has been slower than anticipated as the Coalition government has continued to make public attacks on tax avoidance schemes used by large businesses.

Richard Asquith, Head of Tax at TMF Group, commented: “Global businesses are not waiting for the OECD tax reform; they are already making a flight to quality and transparency.  The UK should be reaping the benefits as a highly favourable and reputable jurisdiction, but companies want more certainty before they make the significant investment to relocate.”

 
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