No More Shifty Business: a response to the OECD's BEPS report on global tax
Last month we blogged a major new initiative by the OECD, a group of rich countries, to tackle tax avoidance by multinational corporations. We have been highly critical of the OECD in the past, but we broadly welcomed the new initiative, called BEPS (Base Erosion and Profit Shifting) initiative, because it appeared to show a real potential change of direction and a new willingness to start thinking of fundamental reform to international tax for the first time.
Now a large number of civil society organisations have jointly produced a document entitled No more shifty business: A response to the OECD’s Base Erosion and Profit Shifting Report on Tax.
It notes, among other things, that the international tax rules first drawn up 80 years ago have not kept pace with the changing business environment; the current rules are not fit for purpose. TJN has been saying this for a long time, and the OECD at last appears to be recognising this truth.
Perhaps the most important section of the report is this part:
"In order for MNCs to be taxed according to their real nature, two measures should be introduced:We should add that combined reporting, broken down on a country-by-country basis, is at heart a transparency issue. In and of itself it does not force countries into any particular tax policies, and It merely provides them with the information that they need to help tax multinationals. Combined reporting is a central component of the more far-reaching unitary taxation, which our new report also explores in depth, and which was the subject of a recent paper on the topic by Professor Sol Picciotto, who has done much work on this.
These two measures could be the basis of a tax system that would consider the total profits made by a MNC, rather than the profits made by any of its parts. It would then allocate these profits to the different countries in which the MNC conducts its real business, according to transparent criteria. Each country would be free to decide what tax rates to apply to their corresponding tax base.
- MNCs should be required to submit a worldwide combined report, including consolidated accounts, to the tax authorities of each country in which they operate.
- MNCs should be required to provide a country-by- country breakdown of their employees, physical assets, sales, profits and taxes actually due and paid.
These measures should be complemented by others in order to foster financial transparency, such as the public disclosure of the beneficial owner of companies, foundations and trusts, and the adoption of automatic information exchange as the new global standard."
John Christensen, director of the Tax Justice Network, said:
"This is a truly historic moment. Issues that have been off the agenda for nearly a century are now finally on the agenda. The OECD can either make history and push forward with thoroughgoing reforms, or it can pander to corporate lobbying and come up with a damp squib. The next 12 months will be crucial for establishing whether or not the OECD is up to the job of establishing a new and more just global economic order, where multinational corporations can no longer free-ride on the backs of the rest of us, channeling wealth upwards into the hands of a privileged few."Access the full report here or on Christian Aid's website here. This is an important document, which we will add to our home page. For further reading on combined reporting, see The Use of Combined Reporting by Nation States, by Prof. Michael McIntyre, and a presentation by McIntyre looking at how combined reporting functions in the hands of U.S. states. Read more on this blog entitled Render Unto Caesar, from the Center for Global Development. As it notes:
No less a radical firebrand than the Financial Times notes that corporate tax has become ‘a largely voluntary gesture’, which it thinks ‘scandalous’. The problem is particularly acute for developing countries.Our new No Shifty Business report contains further reading material.
The organisations that have supported the No Shifty Business document are:
Action for Economic Reforms (Philippines)
African Forum and Network on Debt and Development
Alliance Sud – the Swiss Alliance of Development
Australian Education Union (Australia)
Berne Declaration (Switzerland)
Canadian Council for International Co-operation (CCIC)
Canadians for Tax Fairness (Canada)
Catholic Bishops’ Organisation for Development
Cooperation – Misereor (Germany)
CCFD – Terre Solidaire (France)
Centre for Budget and Governance Accountability (India)
Centre for Social Concern (CFSC) (Malawi)
Centre National de Coopération au Développement,
CNCD –11.11.11 (Belgium)
Centro Internacional para Investigaciones en Derechos
Humanos (CIIDH) (Guatemala)
Christian Aid (UK)
Economic Justice Network (South Africa)
European Network on Debt and Development (Eurodad)
Forum Solidaridad – Peru
Global Policy Forum Europe (Germany)
Halifax Initiative (Canada)
Inter Pares (Canada)
International Alliance of Catholic Development
Organisations (CIDSE) (International)
Jubilee – Australia
Lantidadd (America Latina)
Malawi Economic Justice Network (MEJN) (Malawi)
Methodist Tax Justice Network
National Taxpayers Association (NTA) (Kenya)
Netzwerk Steuergerechtigkeit (Germany)
New Rules (USA)
Norwegian Church Aid (Norway)
Perkumpulan Prakarsa (Indonesia)
Plateforme Paradis Fiscaux et Judiciaire (France)
Red Jubileo – Peru
Red Nicaragüense de Comercio Comunitario (RENICC)
SJ Around the Bay (Australia)
Social Justice (Ivory Coast)
Southern and Eastern African Trade Information and
Negotiations Institute (SEATINI) (Africa)
Secours Catholique – Caritas (France)
Tax Justice Network
Tax Justice Network – Africa
Tax Justice Network – Australia
Tax Justice Network – Europe
Tax Justice Network – Germany
Tax Justice Network – Israel
Tax Justice Network – Netherlands
Tax Justice Network – Norway
Tax Justice Network – USA
Taxpayers Against Poverty (UK)
Union Aid Abroad – APHEDA (Australia)
Uniting Church in Australia, Synod of Victoria and
Weltwirtschaft, Ökologie & Entwicklung (WEED)