70 countries sign OECD tax evasion treaty
More than 70 countries have signed up to the first international treaty designed to crack down on tax evasion by multinational corporations.
The multilateral convention, drafted by the Organisation for Economic Cooperation and Development (OECD), aims to close the gaps in tax rules which allow corporations to shift their profits to very low tax countries for assessment purposes – even when they do no substantial business in that jurisdiction.
The OECD estimates that such movements, known as base erosion and profit shifting (BEPS), result in revenue losses of US$100-240 billion per year – or 4-10% of corporate income tax revenues worldwide.
Signatories to the treaty include more than 30 European nations, Canada, Australia, New Zealand, China and India, plus other countries in Asia, South America, the Middle East and Africa as well as some offshore financial centres. The United States has not signed.
The convention enables signatories to implement new tax treaty measures swiftly and easily and strengthens provisions for resolving treaty disputes, including the use of mandatory binding arbitration.
“The signing of this multilateral convention marks a turning point in tax treaty history,” said OECD Secretary-General Angel Gurría at the launch in Paris on 7 June.
“Beyond saving signatories from the burden of re-negotiating these treaties bilaterally, the new convention will result in more certainty and predictability for businesses, and a better functioning international tax system for the benefit of our citizens.
“Today’s signing also shows that, when the international community comes together, there is no issue or challenge we cannot effectively tackle.”
The convention arose out of a project to combat corporate tax evasion that was jointly mounted by the OECD and the G20 group of leading economies, under a mandate from G20 finance ministers and central bank governors. It involved negotiations with more than 100 countries and jurisdictions.
The OECD/G20 BEPS Project, which involved negotiations with more than 100 countries and jurisdictions, developed 15 action programmes intended to provide governments with the domestic and international tools needed to tackle tax evasion.
These include reinforcement of transfer pricing rules, strengthened tax treaty provisions, a joint approach to eliminating or modifying preferential tax regimes, model rules to tackle cross-border gaps in tax regulation, and measures to address the challenges of the digital economy.
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See also:
More than 100 governments now signed up to international tax convention
OECD chief calls for urgent measures to foster ‘inclusive’ globalisation
About Liz Heron
Liz Heron is a journalist based in London. She worked on daily newspapers for more than 16 years as an education correspondent, section editor and general news reporter. She was Education Editor of the South China Morning Post in Hong Kong and has contributed to a wide range of British media including The Independent, The Guardian and the BBC.
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