Critics complain about regulation emerging from ‘Brussels’: excessive ‘red tape’, limiting competitiveness and imposing pointless constraints. In fact, much of it is simply the result of the European Commission transposing into Community law regulation handed down to it from global bodies. A current example is the developing action on Base Erosion and Profit Shifting (BEPS). This is an arcane subject, but instructive.
Governments in the developed world are increasingly concerned about companies shifting operations, revenues and profits between jurisdictions to minimize tax. Instead of reducing overall corporate tax burdens, they aim to limit companies’ ability to exploit favourable regimes and provisions. The G20 have taken the lead in this, asking the OECD to develop relevant proposals.
In early October 2015, the OECD presented its final proposals for “Reforms to the international tax system for curbing avoidance by multinational enterprises”. European Commisioner Pierre Moscovici welcomed these measures. He said, “We must now ensure that these measures are implemented consistently and coherently, to ensure a level playing field for all businesses and countries involved… I will continue to work with Member States to ensure that BEPS is implemented in a coordinated way within the EU, in order to enshrine fairness in our tax systems, protect governments’ revenues and safeguard EU competitiveness.”
When the UK government eventually implements these BEPS regulations, it may be presented as a UK initiative. Behind this, however, lies an EU initiative for consistent and coherent implementation. And behind this, it is the G20 which has told the EU what to do. This is increasingly the nature of regulation and legislation in a globalized world.