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Is a 'Harmonised' International Tax System Viable?

Is a 'Harmonised' International Tax System Viable?
23 May 2013
"The public debate around corporate tax payments is currently moving at an accelerated pace, permeating across an increasing number of major global jurisdictions.

In the last week alone we have seen a more forthright defence from those corporates facing the most scrutiny, arguing the important point that it is governments themselves that set the tax rules and they are simply complying with the legislation. The issue has also risen up the agenda in the US, with questions focusing on Apple's vast offshore cash piles and the tax structures around them.

The response of certain multinationals has rightly concentrated on the responsibilities of lawmakers in these countries. Surely it is incumbent on legislators to reform the system if they want the see a true shift in the way in which the profits, not the revenue, of multinationals are taxed.

In this context, we are seeing the beginnings of a wider debate into the future of a truly international tax system. Whilst the overarching idea appears sound, the complexities associated with such cross-jurisdictional coordination could take many years to achieve or prove insurmountable. Tax authorities are already struggling with the problems presented by internet companies and the taxation of their intangible assets, so any cross-border consensus on how to create an equitable tax system would be an uphill struggle to say the least. Add in the difficulties faced by governments due to their struggling economies and there is a shaky platform for progress on this issue.

In many ways the Financial Transaction Tax, where developments are running parallel to the wider tax debate, is a mini case study in the difficulties associated with cross-border initiatives.

Taxand's global survey of CFOs showed that whilst 75% of multinational companies would welcome harmonisation, only 58% felt it would be achievable in the next five to ten years. It would seem the debate has some way left to go."

Frederic Donnedieu de Vabres, Chairman of Taxand


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Taxand's Take

"We are seeing the beginnings of a wider debate into the future of a truly international tax system. Whilst the overarching idea appears sound, the complexities associated with such cross-jurisdictional coordination could take many years to achieve or prove insurmountable... In many ways the Financial Transaction Tax, where developments are running parallel to the wider tax debate, is a mini case study in the difficulties associated with cross-border initiatives...Taxand's global survey of CFOs showed that whilst 75% of multinational companies would welcome harmonisation, only 58% felt it would be achievable in the next five to ten years. It would seem the debate has some way left to go."

Taxand's Take Author