Over 70 nations join landmark anti-tax avoidance pact

8 Jun 17

More than 70 countries have backed the swift implementation of international measures to limit tax avoidance by multinational companies.


Ministers and high-level officials from 76 jurisdictions either signed or formally registered their intention to sign an OECD agreement – the first international treaty of its kind – that allows signatories to transpose OECD corporate tax avoidance guidelines into existing tax treaties.

It means that a set of measures intended to overhaul the global corporate tax system, agreed after a two-year long process led by the OECD and known as the BEPS project, can quickly proliferate through the current architecture, fixing the gaps and mismatches that have allowed corporate tax avoidance to thrive.

OECD secretary general Angel Gurría said the convention marks a “turning point in tax treaty history”.

“We are moving towards rapid implementation of far-reaching reforms agreed under the BEPS project in more than 1,100 tax treaties worldwide, and radically transforming the way that tax treaties are modified,” he explained.

“Beyond saving signatories from the burden of re-negotiating these tax treaties bilaterally, the new convention will result in more certainty and predictability for business, and a better functioning international tax system for the benefit of our citizens.”

The BEPS project, which was launched in 2012 at the G20, was targeted at updating an international tax system for a globalised world, and preventing company profits disappearing or being artificially moved to low tax jurisdictions.

Earlier this year, the Tax Justice Network estimated that around $500bn is lost to such ‘profit shifting’ by multinational companies annually, with developing countries the most affected.

While many have argued the BEPS project does not go far enough, it is also widely acknowledged as a milestone in international tax cooperation and in refreshing highly complex and sensitive regulatory frameworks.

Eric LeCompte, executive director of Jubilee USA, which campaigns for a fairer financial system for the world’s poorest countries, said the agreement signed yesterday is also a “critical step forward” for transparency and tackling corporate tax avoidance.

“The tax pact acknowledges that we are dealing with a problem that transcends borders and we need solutions that can cross borders,” he noted.

Also yesterday, the OECD published its latest economic outlook for the world economy. It predicted global growth would pick up from 2016 levels, rising from 3% to 3.6% in 2018.

The think-tank welcomed signs of improvement, after five years of weak growth. However Gurría noted that the modest increase will not be sufficient to deliver gains in living standards or the inclusive growth that recent events have suggested is required.

The election of president Donald Trump in the US, the UK’s Brexit vote and other gains made by populist parties, especially those on the far-right, around the world have been interpreted as a backlash against globalisation and the negative consequences it has had for many people around the world.

“Policymakers cannot be complacent,” said OECD chief economist Catherine Mann, calling for “better choices” on fiscal, structural and international policies.

“[This] will improve the wellbeing of a country’s own citizens, but also spill over to improve the outcome for others, raising the probability that the current upturn will endure and become the foundation for sustained and broad-based improvements in living standards around the world,” she stated.


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