The Organisation for Economic Co-operation and Development have recently suggested that rules designed to close tax loopholes used predominately by technology companies are not viable, due to the ever-growing digital presence within large parts of the economy.
Over recent months, technology companies have faced heavy criticism as a result of their aggressive tax planning, with a recent study suggesting that from seven US high-technology companies with aggregate sales of over $15 billion, the UK only collected £54 million in corporation tax.
Now, instead of specially designed rules to close tax loopholes used by such companies, the Organisation for Economic Co-operation and Development have announced that they are looking at the issue of how to crackdown on base erosion and profit shifting.
Such a move has been supported by the UK Treasury, who have called for “common principles” to apply to businesses whether they operate online or from a physical premise.
The proposals being considered by the Organisation for Economic Co-operation and Development would change the rules on permanent establishments, which will make it harder for businesses to claim that they have no taxable presence in a country.
In addition, the proposed changes are also intended to make it harder to shift intellectual property to tax havens, and address the split of taxable profits between locations.
For businesses who are concerned about the proposed changes or those who wish to discuss tax planning opportunities, our tax advisers in Stockton-on-Tees can assist. Find out how, by contacting us today.