According to an OECD announcement reported in the FT of Oct. 9, 2015 by Chris Giles and Vanessa Houlder new rules developed to mitigate against the risk of ‘corporate tax avoidance’ and address ‘public anger’ at the perceived unfairness of global tax strategies and tax law arbitrage will be implemented. This plan to prevent base erosion and profit shifting (“Beps”) will apparently not change U.S. law. This suggests that Beps’ effects on fraud examination and financial forensics will be minimal in a similar way that widely disseminated vows to reduce fraud, waste, and abuse in public sector expenditures actually reduce fraud, waste, and abuse in public sector expenditures.
However one feels about corporations / trusts (which seem to be primarily legalized and effective Halloween masks to limit controlling individuals and beneficiaries’ exposure to risk) and tax avoidance (which seems to be an objective that everyone should share, especially when one ponders the potentially penurious effects of tax liability maximization), the real challenge for those in my discipline (broadly, public management) is to understand how OECD announcements, including Beps, accompanied by solemn assertions by finance ministers that the public has a rational basis to be angry will work in practice. Beps purportedly imposes some minimum standards to which some governments have acquiesced, but the overarching issue in practice is rarely how many laws and regulations can be crafted to adopt and publish in the rulebook: Instead, it is about enforcement. Is Beps an extension of self-regulation? An expression of spirituality in common with the public?
Having access to global jurisdictions within which to hold and (re)distribute assets, rights to profits, and reported profits (actual profits are a topic for another day) is better than residing in a mansion in Beverly Hills, Long Island, or the hills of Vermont (I imagine). Individuals with Halloween masks can discover those nooks and crannies – that’s how their attorneys and accountants earn generous incomes of their own. Of course, one possible remedy – the Empire / One-World Government – can be imagined, but I am not sure this would comprise an improvement to the present conditions, notwithstanding public anger, tax avoidance, and finance minister solemnities, though it would certainly meaningfully change the landscape of regulation and enforcement.