PARIS: The phenomenon of Base Erosion and Profit Shifting (BEPS) has troubled policy makers across the world. BEPS refers to the complex structuring done by multinational businesses to artificially shift profits to low tax countries and pay little or no corporate tax. The OECD estimates the annual global revenue losses from BEPS to be between $100 – 240 billion at 2014 levels.
Last year, U.K. brought in a Diverted Profits Tax to counteract contrived arrangements used by large multinational enterprises that result in the erosion of U.K.’s tax base.
Now, France intends to do something similar. France’s National Assembly is set to consider a proposal aimed at companies that artificially divert profits by the excessive transfer pricing mechanism. It will also target companies avoiding the establishment of a tax presence in France, by using complex financial arrangements or simply taking advantage of loopholes in tax legislation, the proposal says.
This diversion of profits is to the detriment of the state, public services, competing local businesses and citizens. Giant fast food to those in the Internet, examples abound.
If the amendment goes through, the amount of taxable profits would be equal to the amount that France would have realized but for any artificial schemes, the amendment text notes. It further explains that such profits would be subject to the French corporate tax rate, but increased by five percentage points. Foreign taxes paid on such profits and comparable to the French corporate tax would be creditable, the amendment text explains.
The French parliament is expected discuss this proposal during the legislative process for the Finance Law for 2017.
