Translation of the base erosion and profit shifting project in Oman

Abstract

With digitalisation and neoliberalism orientation, giant multinational enterprises (MNEs) can shift their profits to other countries where preferential tax regimes and incentives are offered. This practice adversely impacted the taxable bases of MNEs’ residence countries, which necessitated those countries to shift the tax burden to ‘working’ individuals. Such a shift triggered social movements, which created pressure on governments to take action, to ensure that multinational conglomerates pay their fair share of taxes. The G8 and G20 then directed the Organisation for Economic Cooperation and Development (OECD) to initiate a solution. The OECD proposed the Base Erosion and Profit Shifting Project (BEPS). The BEPS project aims to mitigate aggressive tax planning by closing loopholes in the international tax system, and then countries can raise tax revenue that can be used for social development. Nonetheless, the BEPS standards were mostly finalised by the G20 and OECD countries in 2015 without considering the capacities and local settings of non-G20/OECD countries. By November 15, 2023, 145 countries had joined the BEPS project and became members of the Inclusive Framework despite dissimilar contextual settings. Oman was implicitly compelled to adopt the BEPS standards despite its limited capacity and contradictory setting, through the placement of Oman on the EU List of Uncooperative Jurisdictions (the “naming and shaming blacklist”). This raises the question of Oman’s rationale for adopting the BEPS standards and how they were implemented in Oman, which is rich in natural resources and so, tax is not a significant source of government revenue.

To answer these questions, semi-structured interviews with local actors involved in the BEPS translation process were conducted, in addition, documents and reports published by the concerned institutions were studied.

Adopting a Bourdieusian theoretical perspective, this thesis reveals that global legitimacy was not the only reason for Oman, joining the BEPS project. The state interests and state doxa of foreign affairs policy compelled Oman to adopt the BEPS standards. State doxa was codified in its foreign affairs policy. This policy is based upon the rhetoric of “peace, good relations and cooperation in the global community”, which came about after the experience of historical-political events, and, it gradually became (state) doxa. In short, being on the EU List of Uncooperative Jurisdictions contradicted this doxa. At the same time, it adversely impacted upon other state interests, e.g., the policy of attracting inward investment. These combined to force Oman to immediately adopt the BEPS standards in spite of the associated compliance costs and contextual setting challenges. Hence, global standards should impact the locally embedded mental structures (doxa), and there should be consequences for deviating from those standards to force countries to adopt them.

Translating the BEPS standards locally was met with initial resistance, in part, due to conflicting norms. However, with the rigorous hierarchical power structure and the interests of dominant local actors in Oman, the BEPS standards were ultimately rationalised/accepted and translated in a way which enabled the pursuit of other interests rather than tackling tax abuse, since the size of the Omani market is small, and taxation still represents a tiny proportion of government revenue. The Omani government therefore resorted to “decoupling” from BEPS in order to be removed from the naming and shaming list and to simultaneously pursue other interests. Notwithstanding local challenges and global efforts to diffuse the BEPS standards globally, these standards neither make noticeable changes to the Omani tax system nor to reduce tax evasion cases in Oman.