On 4 February 2015, we submitted our response to the consultation in respect of the introduction of the new tax, to be called the Diverted Profits Tax ("DPT"). Our primary recommendation to the
On 4 February 2015, we submitted our response to the consultation in respect of the introduction of the new tax, to be called the Diverted Profits Tax ("DPT").
Our primary recommendation to the Government was that the introduction of DPT should be postponed until after the OECD has released its report on Base Erosion and Profit Shifting ("BEPS"), which report will address the shifting of profits of multinational groups to low tax jurisdictions and the exploitation of mismatches between different tax systems.
DPT is anticipated to raise only £360m a year by 2017/18. It is anticipated that the OECD's report will be released by the end of 2015. Hence, postponing the introduction of DPT until after the OECD has concluded its work on BEPS would have all but no impact on the quantum of the fisc's tax take. A comparatively short period of consideration would enable the UK to address the harm of the perceived tax avoidance in a way that is consistent with that to be adopted by other countries and it could be used to ensure that the DPT legislation is clear and targeted, and compliant with both EU and international law.
Our three fundamental concerns with the draft legislation are:
(1) Gambling on all of the UK's double tax treaty partners accepting that DPT falls outside the ambit of the treaties is akin to forcing the UK to risk its position in the global economy on rounds of Russian roulette where all but one of the chambers have been loaded.
(2) There is, at the least, significant doubt as to whether DPT would be lawful as a matter of EU law, and, accordingly, there is a significant risk that the legislation would be the subject of, perhaps concerted, challenge on that basis.
(3) Its complex procedural framework would impose a significant, and disproportionate, compliance burden not only on a vast number of companies, many of whom, as the Government accepts, will not be liable to pay the tax, but also on HMRC.
If you would like a copy of our detailed submissions to the Government, please contact Hartley Foster (020 7861 4257; hartley.foster@fieldfisher.com).
Our primary recommendation to the Government was that the introduction of DPT should be postponed until after the OECD has released its report on Base Erosion and Profit Shifting ("BEPS"), which report will address the shifting of profits of multinational groups to low tax jurisdictions and the exploitation of mismatches between different tax systems.
DPT is anticipated to raise only £360m a year by 2017/18. It is anticipated that the OECD's report will be released by the end of 2015. Hence, postponing the introduction of DPT until after the OECD has concluded its work on BEPS would have all but no impact on the quantum of the fisc's tax take. A comparatively short period of consideration would enable the UK to address the harm of the perceived tax avoidance in a way that is consistent with that to be adopted by other countries and it could be used to ensure that the DPT legislation is clear and targeted, and compliant with both EU and international law.
Our three fundamental concerns with the draft legislation are:
(1) Gambling on all of the UK's double tax treaty partners accepting that DPT falls outside the ambit of the treaties is akin to forcing the UK to risk its position in the global economy on rounds of Russian roulette where all but one of the chambers have been loaded.
(2) There is, at the least, significant doubt as to whether DPT would be lawful as a matter of EU law, and, accordingly, there is a significant risk that the legislation would be the subject of, perhaps concerted, challenge on that basis.
(3) Its complex procedural framework would impose a significant, and disproportionate, compliance burden not only on a vast number of companies, many of whom, as the Government accepts, will not be liable to pay the tax, but also on HMRC.
If you would like a copy of our detailed submissions to the Government, please contact Hartley Foster (020 7861 4257; hartley.foster@fieldfisher.com).