Strategizing Multinational Tax Risks

UK’s Autumn Statement 2015 has been announced, with several measures aimed at changing corporate tax behavior and promoting transparency with the objective to achieve a modern and fairer tax system.  A link to the Statement is provided for reference:

https://www.gov.uk/government/publications/spending-review-and-autumn-statement-2015-documents/spending-review-and-autumn-statement-2015

Key points:

• A 60% penalty of tax due for successful general anti-abuse rule (GAAR) cases, to be implemented in 2016.  The revenue impact of this measure is highly uncertain, as it is also meant to be an incentive to change corporate tax behavior.
• A desire to be to the most digitally advanced tax administration in the world.
• New criminal offense for corporates failing to prevent tax evasion; failure to prevent their agents from criminally facilitating tax evasion by an individual or entity.
• Hybrid mismatch rules to be effective 1/1/2017, following the OECD’s BEPS Guidelines.
• Corporates to publish tax strategies as they relate to, or affect, UK taxation.
• Cooperative compliance framework.
• “Special measures” regime to tackle businesses that persistently engage in aggressive tax planning.

A carrot, stick and transparency approach is contained within the Statement, and thus important to follow as other countries will surely review UK’s leading initiatives to gauge impact on their respective economy.  The GAAR related penalty, which is inherently subjective, will be dictated in some fashion by HMRC’s aggressiveness to assess GAAR and a willingness to pursue it through the respective appeal avenues or court.  The tax strategy initiative will also be interesting to monitor as to its breadth and potential impact upon a company’s risk rating.