THE OECD amid sweeping overhaul of international corporate tax rules urged to
immediately stop savvy big companies escaping the payment of billions of euros
to cash-strapped governments. The Paris-based Organisation for Economic
Cooperation and Development said MNCs were increasingly reporting profits in
different countries from where their revenues were generated to avoid taxes.
Governments face a growing outcry from voters to force big firms with
extensive global business to pay more tax in wake of mounting evidence that many
use differences between different countries' rules to reduce their tax bill.
The trend comes against the backdrop of falling taxes on businesses as
OECD governments have trimmed their statutory corporate income tax rates to an
average of 25.4 per cent in 2011 from 32.6 per cent in 2000. However, the
effective tax rate paid by companies is often far lower due to deductions,
allowances and a range of measures that firms use to reduce what they pay to the
tax authorities.
In a report prepared for G20 economic powers ahead of
a meeting of its finance ministers in Moscow, the OECD warned that governments
were not alone in losing out. "If you are a multinational you will be able to
reduce your taxes substantially because the international tax architecture is
completely out of date," said OECD director of tax policy Pascal Saint Amans.
However, if you are a purely domestic business, then you will have a lot more
difficult time and will be at a competitive disadvantage.
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