Organisation for Economic Co-operation and Development (OECD) has unveiled new plans to tackle tax evasion by improving the way tax authorities share information about individuals and entities like trusts.
OECD’s Action Plan on Base Erosion and Profit Shifting (BEPS) will give governments the domestic and international instruments to prevent corporations from paying little or no taxes.
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OECD at the G20 in Moscow has drawn up a 15-point action plan to stop multi-nationals moving profits from one country to another to reduce their tax bill.
OECD secretary-general Angel Gurría said: "This Action Plan will allow countries to draw up the co-ordinated, comprehensive and transparent standards they need to prevent BEPS.
"International tax rules, many of them dating from the 1920s, ensure that businesses don’t pay taxes in two countries – double taxation. This is laudable, but unfortunately these rules are now being abused to permit double non-taxation," Gurría added.
OECD action plan will force multinationals to disclose to every tax authority a country-by-country breakdown of profits, sales, tax and other measures of economic activity such as headcount.
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By GlobalDataThe action plan will restore the planned effects of these standards by aligning tax with substance – ensuring that taxable profits cannot be artificially shifted, through the transfer of intangibles (eg patents or copyrights), risks or capital, away from countries where the value is created.
The OECD said its plan would stop companies "abusing" outdated international tax rules to prevent multinational companies from paying tax in more than one country.
The OECD pledged that the action plan recognises the importance of addressing the digital economy, which offers a borderless world of products and services that too often do not fall within the tax regime of any specific country, leaving loopholes that allow profits to go untaxed.
Trade Union Congress general secretary Frances O’Grady said: "It’s good news that the OECD has recognised the need for bold action to stop the likes of Amazon, Google and Starbucks shifting money around the world to reduce their tax bills.
The actions outlined in the plan will be delivered in the coming 18 to 24 months by the joint OECD/G20 BEPS Project, which involves all OECD members and G20 countries on an equal footing.
