David Gauke Outlines UK’s Response To BEPS Reports
David Gauke, the Financial Secretary to the UK Treasury, has said that international agreement on the OECD’s base erosion and profit shifting (BEPS) reports “is just the start of the process of reform.”
In a speech to EY’s 34th Annual International Tax Conference, Gauke said: “To ensure timely, effective implementation, there’s a lot of work still to be done both internationally and domestically.”
He said the UK is “moving swiftly on a number of fronts” and is part of a group of 20 countries committed to mandatory and binding arbitration as a way of resolving tax treaty disputes. The Government recently released further details of plans to implement country-by-country reporting requirements and has consulted on the introduction of new rules to counter hybrid mismatch arrangements, he said.
Gauke also took the opportunity to explain the rationale behind the introduction of a Diverted Profits Tax (DPT). He said: “Its objective was simple, and chimes with the BEPS objective: to ensure that when economic activities giving rise to profits take place in the UK, then that is where those profits are taxed.”
“It is a targeted measure, designed to counter the use of aggressive tax planning techniques used by some multinationals to divert profits from the UK. These contrived arrangements have to be between related parties – that is, companies within a group. They must create a tax mismatch whereby a group pays less than 80 percent of the tax that would have been due in the UK without these arrangements. And they must be designed to reduce tax and the tax benefits created must outweigh the non-tax or commercial benefits,” Gauke said.
According to Gauke, the DPT ensures that profits are taxed where they are made and sends a “powerful worldwide signal that we take this seriously.”
