OECD to unveil business tax avoidance action plan to G20

AN ACTION PLAN to tackle tax avoidance conducted by multinational companies is to be presented to G20 member nations by the OECD.

Produced at the request of the group, the plan will be presented today at a summit in Moscow, identifying 15 steps governments need to take to tackle tax base erosion and profit-shifting.

Companies including Google, Amazon and Starbucks have been in the firing line for their use of offshore jurisdictions to drive down their UK tax liabilities.

In a Public Accounts Committee hearing in November last year, committee chair Margaret Hodge branded their practices “immoral”, and in a more recent hearing described Google as “evil”, in reference to the company’s mantra “don’t be evil”.

In particular, the companies have been using transfer pricing, which some claim has the effect of mitigating their liabilities. The method sees multinational corporations value and purchase goods and services moving across international borders from one of the group’s corporate entities to another. An ‘arm’s length’ principle is usually applied to ensure the transaction is made at market value, but there have been questions raised over whether all companies do so in practice.

In particular, the action plan attempts to address the digital economy, which offers a borderless world of products and services that too often fall outside the tax regime of any specific country, leaving loopholes that allow profits to go untaxed.

ICAEW international tax manager Ian Young warned it could be “the last time the OECD has sufficient sway over the international tax system”.

He added: “The current momentum must be maintained by all involved to ensure that real progress is made. Each country will have their own domestic priorities which may not necessarily tally with the requirements of their international partners. “

OECD secretary-general Angel Gurría described the announcement as a “turning point”, however.

He said: “[The 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. The Action Plan aims to remedy this, so multinationals also pay their fair share of taxes.”

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