The new international tax regime being adopted across the world presents a serious risk to the regeneration of the oil and gas sector, specialists have warned.
A tax expert with Scottish accountancy firm Campbell Dallas said delegates to the Offshore Technology Conference should be more aware of a “major shift” in global tax rules.
New OECD tax rules regarding Base Erosion and Profits Shifting (BEPS) assesses businesses on the location of their economic activity which means business now must disclose activities in each jurisdiction.
With the global oil and gas sector undergoing massive restructuring due to the effects of low oil prices, it is likely that changes to corporate structures will trigger international tax liabilities, the firm has warned. These changes will affect multinationals in particular, and those that fail to comply will suffer major penalties or worse, time-draining investigations by HMRC and other national tax authorities.
Ian Williams, chairman of Campbell Dallas, believes that in the rush to cut costs businesses could overlook this new regime: He said: “When a business is focused on cost cutting and survival, it often loses sight of its tax liabilities. It is important that delegates to OTC ensure international tax is considered during discussions on restructuring.”
He added: “Companies will need to be more transparent, publish their tax strategy, demonstrate compliance, and be open to public scrutiny on matters which were previously confidential.
“Tax planning opportunities on a major scale will virtually be absent with commonly used cross-border tax structures no longer offering any meaningful cost savings on the effective tax rates (ETRs) in each market. It has never been easier for a tax authority to analyse the performance of a business in each of its locations.”
He added: “If businesses do not want to be caught out by international tax they must ensure they are fully aware of the new rules, none more so than for companies undergoing restructuring.”