OECD calls for global action on multinationals’ tax avoidance

12 Feb 13
Stronger international co-operation is needed to ensure multinational companies pay their fair share of taxes, the Organisation for Economic Co-operation and Development said today.
By Vivienne Russell | 12 February 2013

Stronger international co-operation is needed to ensure multinational companies pay their fair share of taxes, the Organisation for Economic Co-operation and Development said today.

An OECD study, commissioned by the Group of Twenty leading industrial countries, said many companies were using global tax regimes to pay relatively little or no corporation tax.

‘These strategies, though technically legal, erode the tax base of many countries and threaten the stability of the international tax system,’ said OECD secretary-general Ángel Gurría.

‘As governments and their citizens are struggling to make ends meet, it is critical that all taxpayers – private and corporate – pay their fair amount of taxes and trust the international tax system is transparent.’

The OECD report noted that many of the rules designed to protect multinationals from paying double taxation too often allowed them to radically slash their tax bills, giving them an unfair advantage over smaller enterprises.

Big companies had also become more ‘aggressive’ in pursuing strategies to lower their tax liabilities over the past decade, according to the report, Addressing base erosion and profit shifting. Tax-minimising activities included creating offshore or shell companies to take advantage of low-tax jurisdictions and claiming expenses and losses in high-tax countries, while declaring profits in low or no-tax areas.

The organisation added that global tax rules had become outmoded and no longer reflected cross-border economic integration, intellectual property values and new communication technologies.

It stopped short of recommending an optimal corporation tax rate, saying each government needed to decide its own. But over the coming months it will work with governments and businesses to quantify how much is lost through corporate tax avoidance as well as suggesting some actions that could be taken to reinforce the integrity of the global tax system.

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