May 4, 2014 3:01 am

BlackRock leads protest against OECD tax plan

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BlackRock, Fidelity, Robeco and Pioneer have joined forces with asset management groups and fund associations around the world to persuade the OECD to alter tax proposals they believe could harm investors.

The industry has responded in force to a request for feedback from the OECD on its ambitious push to overhaul international tax rules. The aim of the plan is to prevent companies from avoiding taxation in their home country by moving business activities to low-tax domiciles.

But fund houses have cosigned a letter to the OECD protesting that the plan will have “unintended consequences for investors”. Collective investment schemes, including Ucits funds, will be denied certain tax benefits, while individuals who make direct investments in companies will be unaffected. The fear is this will encourage individuals to make direct investments for tax reasons, removing money from funds.

Under the proposals, any fund that wishes to claim tax treaty benefits must have a significant connection with the country in which it is resident for tax purposes. But the fund groups point out that many funds have investors in several countries, which would prevent funds from being eligible for benefits and expose them to double taxation.

“The millions of investors [in these funds] should not become collateral damage in [the] goal of targeting multinational stateless income,” said the fund companies, which also include M&G, Schroders, Capital Group, State Street Global Advisors and UBS Global Asset Management.

Fund trade associations, including the hedge fund lobby group Aima, the Association of British Insurers and the Luxembourg fund body Alfi, have also written letters raising similar concerns.

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