Plans for a coordinated global crackdown on tax avoidance schemes employed by some of the world’s largest multinational corporations (MNCs) have been unveiled in Moscow by finance ministers from the Group of 20 (G20) of the world’s major economies.
The action plan, which aims to address “base erosion and profits shifting”, was drawn up by the Paris-based Organisation for Economic Co-operation and Development (OECD) after months of controversy over the low tax rates paid in some countries such as Google, Amazon and Starbucks.
It sets out 15 initiatives for equipping tax authorities around the world with the tools to crack down on some areas agreed by international leaders to be among the most widely exploited by MNC tax avoiders. These targeted initiatives are to produce a range of hard recommendations for changes to the tax treaty rulebook, with deadlines ranging from between 12 months and two-and-a-half years.
The plan includes measures to block gaps between national tax systems and tackle practices that artificially separate taxable income from the activity that generates it. The proposals address abuses of tax treaties and tax avoidance achieved by shifting intangibles between group companies. They also aim to neutralise the impact of ‘hybrid’ structures used to minimise billions of dollars of tax.
According to Pascal Saint-Amans, the top tax official at the OECD, the initiative would push up tax rates for MNCs that deliberately organise their affairs in order to pay the minimum amount of tax. “They know the golden age of ‘we don’t pay taxes anywhere’ is over,” he said.
The OECD said that the initiative to reshape the international tax rules was a chance to avert “global tax chaos”, as failure to act could result in governments taking unilateral action. Countries outside the OECD, including India and China, will be invited to participate in the revamp of the rules on an equal footing.
Welcoming the initiative, Frances O’Grady, general secretary of the UK’s Trade Union Congress (TUC) said: “The OECD should be given the chance to make these proposals work, but we are still concerned that MNCs will use tricks like ‘intra-group transfer pricing’ to avoid tax.
“While we welcome the steps taken by the OECD today, it should monitor the impact so that if these proposals don’t solve the problem, it can move immediately to tougher action that will.”
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