OECD finalises global tax reform package

5 Oct 15

The Organisation for Economic Co-operation and Development has overhauled the international rules governing the taxation of company profits. These revised rules are expected to be adopted by leaders of the G20 largest economies this week.

The economic think-tank today published its final suggestions on the reform of international tax rules, which will be discussed by finance ministers in Lima, Peru, on 8 October.

The package will help governments around the world recover between $100bn and $240bn in lost revenue each year, the OECD said.

“Base erosion and profit shifting (BEPS) affects all countries, not only economically, but also as a matter of trust,” said OECD secretary-general Angel Gurría.

“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. But beyond this, BEPS has been also eroding the trust of citizens in the fairness of tax systems worldwide.

“The measures we are presenting today 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.”

The OECD’s package includes new rules that apply minimum standards on country-by-country reporting, which for the first time will give tax administrations a global picture of the operations of multinational companies.

There are also tougher rules to curb 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.

And guidance on the application of transfer pricing rules to prevent taxpayers from using so-called “cash box” entities, which allows them to hide profits in low or no-tax jurisdictions, has been revised.

Gurria insisted that everyone had a stake in reversing base erosion and profit shifting.

He said the BEPS project had 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,” he added.

 CIPFA welcomed the introduction of the BEPS recommendations.

Chief executive Rob Whiteman said: “For those managing government finances and charged with ensuring the sustainable funding of public services, base erosion and profit shifting represents a critical issue in terms of the $.25tn annually lost revenues which underpin public services and government investment around the world.

“We should be under no illusion that this will be easy ... loopholes will need to be closed in over 7000 bilateral tax treaties.

“Given that the accountancy profession has a duty to serve the public interest, the fact that these lost revenues disproportionately affect developing countries should be a particular point of shame for the corporations and their advisers behind the engineering of such schemes.

“As these measures are introduced, accountants from both the commercial and public sectors around the world must work together to bring about reform and secure greater fairness across all communities.”


  • Judith Ugwumadu
    Judith Ugwumadu

    Judith writes about public finance, public services and economics across Public Finance International and Public Finance. She previously undertook reporting stints at Financial Adviser, Global Security Finance and The Sunday Express.

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