The Treasury has pledged its “full support” for a planned overhaul of global tax rules aimed at cracking down on multinationals but warned they would “not always increase UK revenues or taxing rights”.

Its first public response to far-reaching reforms being drafted by the Paris-based OECD came as a leading tax expert described draft measures aimed at dismantling ‘hybrid’ tax structures, which exploit differences between countries’ tax rules, as “almost the tax world’s equivalent of Big Bang”.

Peter Cussons, international corporate tax partner of PwC, the professional services group, said the proposals would allow foreign governments to block the “check-the-box” tax planning used by some US multinationals to route profits to tax havens, even without the co-operation of the US Congress.

New proposals to limit the abuse of tax treaties were also greeted as a potentially far-reaching change to the tax landscape. Richard Collier, of PwC, said they went too far: “The treaty abuse paper is an unbalanced proposal that will lead to a negative effect on international trade.”

George Osborne, the chancellor, strongly endorsed the OECD project to crack down on base erosion and profit shifting, saying unilateral action would backfire. In a Budget paper, he said: “Whilst the project will not be completed until the end of 2015, if we can achieve our goals, we will succeed in fundamentally changing the international tax landscape, and shift the balance of the rules in favour of tax authorities, enabling us to clamp down on those who refuse to play by the rules.”

The UK may lose tax revenues from multinationals headquartered in Britain that will end up paying more tax in overseas markets. But the Treasury said the planned changes would ensure the tax rules were “fair and consistent” and lead to profits generated in the UK being taxed more effectively.

Mr Osborne said it was “unfair and wrong” that some digital businesses paid little tax in the UK, noting that Britain has the highest global average online spend per capita by online consumers. The Treasury said it believed that proposals to change transfer pricing guidelines and update the threshold at which a company becomes taxable in a foreign country would address many of the problems, but it would propose supplementary rules if progress failed to materialise.

It insisted that the UK’s tax break on patent income – which has been criticised by Germany and is being examined by a group of OECD countries looking at harmful tax practices – was legitimate. It said most of the activities currently qualifying for the UK Patent Box would meet any “substance” test but warned that “insisting too much on substance alone could risk jobs simply moving to tax havens”.

Norton Rose Fulbright, an international law firm, said the Treasury paper was “long on aspiration but short on concrete proposals”, requiring companies to start addressing measures on information exchange but not yet to restructure their operations.

Heather Self, of international law firm Pinsent Masons, said the paper contained a “worrying hint” that the Treasury could weaken its stance on interest deductibility, even though it said it already had a number of defences against excessive interest deductions.

Copyright The Financial Times Limited 2018. All rights reserved.