THE OECD yesterday released its
first recommendations for a co-ordinated international approach to combat
tax avoidance by multinational enterprises, under the OECD/G20 Base Erosion
and Profit Shifting Project designed to create a single set of international
tax rules to end the erosion of tax bases and the artificial shifting of
profits to jurisdictions to avoid paying tax.
Presenting the OECD’s recommendations, Secretary-General Angel Gurría said: “The G20 has identified base erosion and profit shifting as a serious risk
to tax revenues, sovereignty and fair tax systems worldwide. Our recommendations
constitute the building blocks for an internationally agreed and co-ordinated
response to corporate tax planning strategies that exploit the gaps and loopholes
of the current system to artificially shift profits to locations where they
are subject to more favourable tax treatment.”
At the request of the G20 Leaders, the OECD’s work is based on a BEPS Action
Plan setting out the 15 key elements to be addressed by 2015. The project aims
to help governments protect their tax bases and offer increased certainty and
predictability to taxpayers, while guarding against new domestic rules that
result in double taxation, unwarranted compliance burdens or restrictions to
legitimate cross-border activity.
The
first seven elements of the Action Plan released today focus on helping countries
to:
+ ensure
the coherence of corporate income taxation at the international level, through
new model tax and treaty provisions to neutralise hybrid mismatch arrangements
(Action 2);
+ realign taxation and relevant substance to restore the intended benefits
of international standards and to prevent the abuse of tax treaties (Action
6);
+ assure that transfer pricing outcomes are in line with value creation, through
actions to address transfer pricing issues in the key area of intangibles (Action
8);
+ improve transparency for tax administrations and increase certainty and
predictability for taxpayers through improved transfer pricing documentation
and a template for country-by-country reporting (Action 13);
+ address
the challenges of the digital economy (Action 1);
+ facilitate swift implementation of the BEPS actions through a report on
the feasibility of developing a multilateral instrument to amend bilateral
tax treaties (Action 15); and
+ counter harmful tax practices (Action 5).
The
OECD recommendations will be a key item on the agenda when G20 Finance Ministers
at a meeting hosted by Australia’s Finance Minister Joe Hockey
on 20-21 September in Cairns, Australia.
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