THE Organisation for Economic Co-operation and Development (OECD) has
achieved new milestones in preparing comprehensive action plan (CAP) to fight
tax evasion and related malpractices highlighted by its report ‘ Addressing Base
Erosion and Profit Shifting' that was released in February this year.
In
its update on this report prepared for the meeting of the OECD Ministerial
Council held in Paris on 29-30 May 2013, OECD has listed its initiatives to
prepare CAP. The most important progress in this direction is the inputs
provided by three expert groups set up OECD to advance the work on CAP.
The
update says: “ three temporary focus groups were set up and all OECD
Members and Participant countries in the Committee on Fiscal Affairs were
invited to participate. Most delegations volunteered to provide input into these
three focus groups, including China, India, Russia and South Africa.”
The
three focus groups are: 1) Countering base erosion, which
mainly looks at anti-avoidance measures, measures to avoid the negative effects
of asymmetries in tax systems (“hybrids”), and how to revamp the work on harmful
tax practices.2) Jurisdiction to tax, which looks at issues
related to how existing rules allocate the right to tax cross-border business,
including controlled foreign corporation rules, residence rules, and issues
relating to digital goods and services. 3) Transfer pricing,
which looks at issues related to the arm's length principle.
OECD's move to prepare CAP got the requisite political adrenaline when
the OECD ministerial meeting adopted a declaration on base erosion and profit
shifting on 29 May.
The
Declaration urged the OECD Committee on Fiscal Affairs (CFA) to proceed speedily
on the elaboration and share CAP with all stakeholders. It also underlined the
need to take forward such CAP in a timely and inclusive manner and to ensure
that all relevant countries will participate in such further work on an equal
footing.
The
Declaration, among other things, also invites OECD Secretary-General to report
on progress in developing and taking forward the CAP at the 2014 Meeting of the
Council at Ministerial level and at other international fora as appropriate.
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