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Newsletter | Articles OECD recommends moves to combat ‘aggressive’ tax planning Moves to combat ‘aggressive’ tax planning have been recommended by the Organisation of Economic Co-operation and Development (OECD) in a special survey. The study, commissioned by the OECD’s Forum on Tax Administration (FTA) in September 2006, looks closely at the role tax advisers play in the increasingly complex tax environment, examining the work they undertake in helping their clients comply with the requirements of existing tax codes and complex tax legislation. The report recommended a UK-style approach for large corporate taxpayers, tax intermediaries and tax authorities and suggested governments should attempt to reduce the demand for aggressive tax planning by encouraging more constructive dialogue between revenue bodies, taxpayers and tax advisers. According to the OECD, this is an approach which Her Majesty's Revenue and Customs (HMRC) began to develop in April 2006 when the terms of reference for the Review of Links with Large Business (also known as the Varney Review) were published. The UK’s initiatives, which are part of the OECD's recommendations, include launching a risk-based approach to allocating resources to large corporate taxpayers and desiring a move to an environment of "real-time" working with these businesses. The UK’s moves were debated by around 30 business tax professionals from FTSE 350 companies at a recent event organised by accountant KPMG. Whilst they were largely supportive of real time working and a risk-based approach, they wanted to see tangible benefits in terms of earlier certainty and a reduced compliance burden if they were to move to a system of much earlier and fuller disclosure. Head of Tax in the UK at KPMG Europe, Sue Bonney said: “An enhanced relationship in the form of increased collaboration between taxpayers, tax authorities and tax advisers, real-time working and a risk-based approach to allocating resources all make sense if they achieve earlier certainty on a business’s tax position, and it is encouraging to see the OECD recommending that all parties move in this direction. The UK experience so far suggests that this is an area where real action on the part of all parties is required to accomplish such a step change in the way of working.” The report concluded that “the vast majority of tax advisers help their clients to avoid errors and deter them from engaging in unlawful or overly-aggressive activities”. However, the study points out some intermediaries also act as designers and promoters of aggressive tax planning. Although the FTA remains concerned over the role of tax intermediaries in ‘aggressive’ tax planning, it recognises that companies determine their own appetite for risk. Its preferred approach is to reduce the demand among corporate taxpayers for complex tax minimisation arrangements. It proposes that tax authorities do this by developing risk management techniques to differentiate between high and low risk taxpayers, so that they can focus time and resources on dealing with the higher risks. This will require more voluntary disclosure of information by taxpayers which, the FTA suggests, can be encouraged by developing “enhanced relationships” with taxpayers and their tax advisers. |