UK, Germany to tinker with corporate tax avoidance

Following the Starbucks tax scandals, and many others, there have been breathless headlines in the FT and elsewhere  saying that the UK Chancellor, George Osborne, and his German colleague Wolfgang Schäuble, want, as the FT puts it, "to act on corporate tax avoidance."

Is a new leaf being turned? Well, no, not really.

The governments certainly have to be seen to be doing something. But here's our core beef.

"Germany and Britain called on the G20 to back work by the Paris-based Organisation for Economic Co-operation and Development on tackling “base erosion and profit shifting”."

And that is the problem. The OECD is a highly reactionary - and dominant - force in the global tax arena. Even though expert after expert has lined up to denounce the OECD's systems for taxing multinational corporations as unfit for purpose, the product of a global economic system that disappeared half a century ago, they have jealously, and at times viciously stuck to their utterly unworkable systems of transfer pricing.

Real, serious, radical alternatives have been proposed - notably unitary tax (with formula apportionment) and others - but the OECD has subjected them to withering fire, egged on by the global accountancy profession which makes billions in profits from designing strategies for multinationals to help them escape their tax bills.

This is just a short blog, reacting to this morning's news; we will be bringing you a longer discussion of this - combined with a new analysis by top transfer pricing expert Michael Durst - in the next day or two.