Monday, September 02, 2013

Fixing the cracks in corporate tax: new policy brief

The Tax Justice Network and 33 other non-governmental organisations have just released a new policy brief responding to the OECD's large and widely reported Action Plan on "Base Erosion and Profit Shifting (BEPS) by multinational companies," (otherwise known as corporate tax dodging.)

Our new report is entitled Fixing the Cracks in Tax: A Joint Plan of Action.

As it states, and as we have stated before:
"The international system for the taxation of TNCs is no longer fit for purpose.  International tax rules, drawn up 80 years ago, have not kept pace with the changing business environment."
This new report, also available from here and here, issues a range of recommendations to the OECD and the G20, with three key pillars:
  • Take effective steps to ensure that developing countries can participate in the BEPS process on  an equal footing, and assist them in implementing measures to stem their losses from international tax avoidance that deprives governments of badly needed revenues.
     
  • Undertake – jointly with other organisations, policy makers from developing and developed countries, and independent experts – a rigorous study of the merits, risks and feasibility of more fundamental alternatives to the current international tax system, such as unitary taxation, with special emphasis on the likely impact of these alternatives on developing countries.
  • Implement additional measures to tackle financial and corporate secrecy, including the requirement for TNCs to provide public combined and country-bycountry reports, the establishment of comprehensive multilateral automatic exchange of tax information, and the public disclosure of the beneficial owners of companies, foundations and trusts.
We wholeheartedly endorse and support all of these. For reasons best known to its members, the OECD has a history of viscerally, intransigently attempting to close down all discussion of unitary taxation; the BEPS report was the first time it allowed a tiny chink of an opening, when it acknowledged that measures "beyond the arm’s length principle" may be required to
deal with some of the problems it identifies.

In more fine-grained detail, the report also makes a series of other recommendations, of which we will highlight these two here:
  • The OECD and the G20 should strengthen the UN tax committee. Quite so, as we've noted before.
  • Governments must promote a shift from tax competition to global and regional tax cooperation. Read more about the evils of tax 'competition' here
This blog will be posted permanently on our transfer pricing page.

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