OECD unveils measures against corporate tax avoidance
G20 finance ministers will discuss a set of measures to crack down on corporate tax avoidance globally at their meeting on Thursday.
Gaps in current international tax rules can make profits ‘disappear’ for tax purposes, or allow the shifting of profits to no or low-tax locations where businesses have little or no economic activity.
These activities are referred to as base erosion and profit shifting (BEPS).
The OECD’s package of measures titled OECD/G20 Base Erosion and Profit Shifting Project provides governments with solutions for closing these gaps in existing international rules.
Revenue losses from BEPS are estimated at US$100-240bn annually, or anywhere from 4-10% of global corporate income tax (CIT) revenues, the OECD says.
Given developing countries’ greater reliance on CIT revenues as a percentage of tax revenue, the impact of BEPS on these countries is particularly significant, the OECD says.
OECD secretary-general Angel Gurría said BEPS is “depriving countries of precious resources to jump-start growth, tackle the effects of the global economic crisis and create more and better opportunities for all.”
Beyond this, he said, “BEPS has been also eroding the trust of citizens in the fairness of tax systems worldwide.”
The measures, which were published yesterday, “represent the most fundamental changes to international tax rules in almost a century: they will put an end to double non-taxation, facilitate a better alignment of taxation with economic activity and value creation, and when fully implemented, these measures will render BEPS-inspired tax planning structures ineffective,” Gurría said.
They will “put an end to double non-taxation, facilitate a better alignment of taxation with economic activity and value creation, and when fully implemented, render BEPS-inspired tax planning structures ineffective,” he added.
The package of BEPS measures also includes new minimum standards on country-by-country reporting, which for the first time will give tax administrations a global picture of the operations of multinational enterprises; treaty shopping, to put an end to the use of conduit companies to channel investments; curbing harmful tax practices, in particular in the area of intellectual property and through automatic exchange of tax rulings; and effective mutual agreement procedures, to ensure that the fight against double non-taxation does not result in double taxation.
The BEPS package offers governments a series of new measures to be implemented through domestic law changes.
The BEPS measures were agreed after a two-year consultation process between OECD, G20 and developing countries and stakeholders from business, labour, academia and civil society organisations.
“Everyone has a stake in reversing base erosion and profit shifting,” Mr Gurria said. “The BEPS Project has shown that all stakeholders can come together to bring about change.
“Swift implementation by governments will ensure a more certain and more sustainable international tax environment for the benefit of all, not just a few.”
The OECD will present the BEPS measures to G20 finance ministers during the meeting hosted by Turkey’s deputy prime minister Cevdet Yilmaz on Thursday, 8 October, in Lima, Peru.
About Winnie Agbonlahor
Winnie is news editor of Global Government Forum. She previously reported for Civil Service World - the trade magazine for senior UK government officials. Originally from Germany, Winnie first came to the UK in 2006 to study a BA in Journalism & Russian at the University of Sheffield. She is bilingual in English and German, and, after spending an academic year abroad in Russia and reporting for the Moscow Times, Winnie also speaks Russian fluently.
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