Controversy at OECD public consultation on international corporate tax

On 12-13 November 2013, the OECD held a public consultation on transfer pricing topics at the OECD Conference Centre in Paris.

The meeting was attended by delegates from more than 35 countries and by more than 150 representatives of business, academia, NGOs and the press and by David Sayers, Mazars international tax partner. The topics discussed at the meeting included:

  • public comments on the 30 July Revised Discussion Draft on Transfer Pricing Aspects of Intangibles, public comments on the 30 July White Paper on Transfer Pricing Documentation,
  • the BEPS Action Plan requirement to adopt a system of country-by-country reporting of selected company financial data to tax administrations, and
  • the appropriate scope of other transfer pricing aspects of the BEPS Action Plan.

The debate was adversarial. The governments believe public pressure is behind them in demanding increased country-by-country reporting of business activity, profits and tax liability. The business representatives vigorously resisted - both for the increased burden this would be on commerce and the fear that increased information will only give more opportunity for it to be misunderstood.

The line taken by the tax authorities was that where a business has a valuable intangible such as a trademark, copyright, patent etc., the profit from that intangible attaches to the substance of the operation – where the people producing the product, the factory or other physical necessities are located. In essence concepts such as legal ownership would be ignored. They justify this by asserting that the brand value cannot be detached from the product.

Also present at the consultation were a few representatives of non-governmental organisations. They did not have the depth of expertise of either the government or business delegations. David commented that the impasse may be solved by developing some of the suggestions made by the NGOs. 

Mazars will be contributing to the debates

Mazars will be making its voice heard to advocate a middle ground of greater transparency in reporting whilst disagreeing with the governments’ representatives' radical views as regards intangibles.