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Treasurers, Do You Have Any BEPS?

by François Masquelier, Head of Corporate Finance and Treasury, RTL Group, and Honorary Chairman of the European Association of Corporate Treasurers

This article describes the OECD’s new recommendations on Base Erosion & Profit Shifting (BEPS) and to what extent these new rules, if they are adopted by the various states, will impact the day-to-day work of corporate treasurers. Can taxes and the treasury function still go together well? BEPS will be certainly be THE next regulatory challenge that corporate treasurers will have to confront. The tax landscape seems to be coming under ever greater fire from governments. Looking for the lowest tax charge is becoming a minefield for multinational corporations. Things will never again be what they were; we can take that for granted, so we need to be ready to document intragroup transactions.

Transfer pricing (TP)

Transfer pricing has always been given special attention by the tax authorities. However, since the financial crisis, the G20 has added to its long regulatory wishlist measures for preventing tax avoidance through transfer pricing between entities of the same group. Clearly, excesses must have been committed. They used to be tolerated. But the bailout of the banks and the sovereign debt crisis which arose from it have forced states to look for new sources of funds to wipe out their deficits. The natural idea was to look for money wherever it happened to be and to curb the excesses made possible by incorporating exaggerated margins into transfer prices. What could be simpler than transferring income or margin within your group, from a country in which deductions are available to another country in which there are no, or fewer, deductions. Simple and effective, but indefensible. The idea, then, is to ensure that these abuses should not be committed and that the substance should not be transferred from one country to another, thus depriving certain states of badly needed revenue. The G20 has recently reaffirmed its support for the OECD project on that subject, and also for the Action Plan that it has put forward. The OECD itself has given the Global Forum on Transparency and Exchange of Information for Tax Purposes the task of working out the bases of this new regulation.