Taking control of the tax policy agenda
A plan for multinationals
For many years international tax has been primarily the domain of academics and tax professionals. The approach to tax has been driven by ensuring that large corporates stick to the rules and engage with tax authorities when policy proposals are announced. This has been managed mostly by tax departments within large corporates. But the world has changed and tax policy and fairness has become a political issue at the highest levels of government and an issue with NGOs and the electorate. These groups have a limited view of what multinational corporations are doing. They are making their views public and in the process large corporates are losing the debate.
Tax under scrutiny
In the EU, there are four State Aid investigations being actively pursued against corporates by the Competition Commissioner, Margrethe Vestager, focusing for now on Ireland, Luxembourg (two cases) and the Netherlands. This is only the tip of the iceberg. Mrs. Vestager has instructed her teams to carry out a structured analysis, which could then be used as a template for further investigations and legislative change. She has publicly stated that she will first evaluate and close the open cases before considering new ones. However, her sights appear set on a wider debate as she gave her word, in her first press briefing as Commissioner, that State Aid and initiatives on the broader tax agenda were a priority. Tax practices within an organisation cannot be determined by financial parameters alone. Europe’s politicians have made the tax debate about much more than that. As a multinational, it is no longer acceptable to say that what you are doing is legal within the rules set by the legislature. Multinationals with significant international interests must not only be compliant with the law but need to be ahead of the game as far as their own approach to taxation is concerned. A clear strategy with appropriate communication to investors, analysts, customers, tax authorities, politicians, NGOs and the wider public can only benefit at every level.