You are viewing your 1 free article this month. Login to read more articles.
The Organisation for Economic Co-operation and Development (OECD) has released new proposals to enable a crackdown on tax treaty abuse by multinational companies such as Amazon and Google.
The Paris-based organisation has said the world’s largest economies should impose a “country by country” reporting regime on multinational firms to increase the transparency of their corporate activities and prevent them from “treaty shopping” for good tax deals in other countries.
Despite owning thriving online business with individual domain names in several prominent countries in Europe such as the UK, France and Germany, Amazon claims to base its operations in Luxembourg and pays a small amount of corporation tax in the UK in comparison to its high sales. It is a practice the company has been heavily criticized for by MPs, the media, booksellers and campaign groups over the last two years. Google has also attracted criticism on the same grounds.
Angel Gurría, the OECD’s secretary-general, said today’s proposals marked “the beginning of the end” of such tax avoidance.
“Tax evasion and avoidance have been depriving our governments of precious resources for decades,” he said. “In the past years, our governments have been struggling to find the resources to jumpstart growth, to exit the crisis and to promote more and better jobs, while Base Erosion and Profit Shifting practices weakened these efforts. I am delighted to announce the beginning of the end of these corrosive practices.”
He said the measures, which will be presented to the G20 finance ministers at Cairns this weekend, will help countries to combat Base Erosion and Profit Shifting (BEPS), tax planning strategies that exploit gaps and mismatches in tax rules to make profits "disappear" for tax purposes, in their own countries.
“(They) will provide concrete measures to reduce tax treaty abuse,” Gurría said. “We all know it makes no sense that an investor based in one country, sets up a shell company in another country, to channel an investment in a third country. But this is what happens, because in our efforts to ensure that business doesn’t bear the burden of double taxation, the system has left gaps allowing double non-taxation. Now we are closing that loophole.”
The country-by-country reporting standard will provide a clear overview of where profits, sales, employees, and assets are located and where taxes are paid and accrued, the OECD said.