I was wrong. I thought that The Organisation for Economic Co-operation and Development (OECD) had shrugged off its cautious, conservative tendencies with the issuance of its February 12 report entitled "Base Erosion and Profit Shifting." After my first read of the 91-page document I believed the OECD was willing, as it said, to think "outside the box." The report stated that "incremental approaches may help curb the current trends but will not respond to several of the challenges governments face."
But then on Friday my colleague Lee Sheppard reported, from London, the following:
- "Achim Pross of the OECD assured practitioners that the rules would not be materially changed. The OECD's action plan is due for the G-8 meeting in June. Pross wanted a multilateral solution so that members do not overreact to political pressure." ("OECD Base Erosion Project Being Eroded, Tax Notes, April 15, 2013.)
In light of this somewhat shocking statement that seems to flatly contradict the report's call for fundamental change, I re-read the OECD report and other commentary (here, here, and here) on the report. It now seems to me that the OECD views a large part of its mission as preventing overreach by governments under populist pressure to do something about large corporations not paying tax. "Civil society" is viewed as not being very well informed and so it is up to more responsible and knowledgeable parties, like the OECD staff and the business community, to devise a measured response.
Business wants the OECD rather than individual governments (who must directly respond to voters) to take the lead on preventing profit shifting. The ostensible reason is that OECD can provide a coordinated effort that will prevent double (or "multiple"!) layers of tax on business profits. My guess is the real reasons are that (1) in the past OECD has devised rules that multinationals like and the OECD is unlikely to move away from long-held core concepts and (2) the OECD's long deliberative process will give time for political pressures to cool down.
Of course I could be wrong again. I hope so.