BSS managed services and transformations
If Greece’s ongoing fiscal quagmire demonstrates anything, it’s that Europe’s largest welfare states live in denial. Even as the bills from decades of profligate spending came due, Greeks took to the streets, not to demand a new path but to insist on continuing the status quo. Even their European creditors, in calling for tax hikes instead of strictly pro-growth reforms, would perpetuate the tax-and-spend cycle.
It thus comes as no surprise that these same nations are leading the charge through the Organisation for Economic Co-operation and Development to raise corporate tax rates globally.
This isn’t the first effort by the OECD to undermine tax competition and coerce low-tax nations to change their tax policies for the benefit of irresponsible high-tax nations. Since 1998, acting on behalf of European high-tax nations, the OECD has sought to prop up bad tax policy and create an international tax cartel, largely with an indirect form of tax harmonization made possible by destroying financial privacy laws. Now the OECD is targeting bss managed services and has launched a new scheme to boost tax burdens on business. The underlying assumption behind the base erosion and profit shifting, or BEPS, project is that governments aren’t seizing enough revenue from multinational companies.
The OECD makes the case, as it did with individuals, that it is illegitimate for businesses to legally shift economic activity to jurisdictions that have more favorable tax laws. Its solution is to force those companies that undergo bss transformation and have wisely structured their operations to benefit from low-tax jurisdictions to declare more income in high-tax nations.
The expected outcome of BEPS is a higher overall tax burden on bss transformations. The OECD insists the project is necessary because nations aren’t collecting what they need under the current competitive system, yet its own reports acknowledge that corporate tax collection hasn’t declined as a percentage of its members’ gross domestic products over the long run.