AS per the OECD, the continuing economic crisis has taken a serious toll on corporate profits. Numbers at stake are vast, with loss carry-forwards as high as 25% of GDP in some countries. Though most of these claims are justified, some corporations find loop-holes and use ‘aggressive tax planning’ to avoid taxes in ways that are not within the spirit of the law, adds the OECD Report.

The Report states that the aggressive tax planning is a source of increasing concern for many countries and they have developed various strategies to deal with it. Working cooperatively, countries can deter, detect and respond to aggressive tax planning while at the same time ensuring certainty and predictability for compliant taxpayers.

The report outlines strategies to detect and respond to aggressive tax planning schemes. Detection usually takes place through audits, special reporting obligations on losses, mandatory disclosure rules, rulings, and co-operative compliance programmes. Responses require a comprehensive approach focusing on aggressive tax planning schemes, as well as on their promoters and users. Early engagement between taxpayers and tax authorities in the framework of disclosure initiatives and co-operative compliance programmes also has positive effects, convincing some tax payers not to use or promote certain schemes.

Through the OECD, countries share intelligence on aggressive tax planning schemes and increase international co-operation on detection, responses, and evaluation. Governments should also introduce policies to restrict the multiple use of the same loss and to introduce or revise restrictions on the use of certain losses in the context of mergers, acquisitions, or group taxation regimes, it adds.