25th September 2014
The OECD has launched its seven-point ‘action plan’ for delivering a coordinated international approach to combat tax avoidance by multinational enterprises under its Base Erosion and Profit Shifting Project (BEPS).
Under the joint OECD and G20 proposals, BEPS will create a single set of international tax rules to prevent companies that operate across borders from artificially shifting profits to pare down tax bills.
The first element of the plan is aimed at neutralising hybrid tax structures by ensuring the “coherence” of corporate income taxation at the international level, through new model tax and treaty provisions.
It also sets out ways to prevent the abuse of international tax treaties, ensure that transfer pricing outcomes are in line with value creation and improve transparency for tax administrations.
There is also a section on the challenges of the digital economy and addressing “harmful” tax practices. The European Commission has said that the digital economy does not require a separate new tax regime, but has stressed that current rules will need to be adapted to meet the demands of this complex sector.
The OECD said it wants to implement BEPS quickly through a report on the feasibility of developing a multilateral instrument to amend bilateral tax treaties.
OECD 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 coordinated 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.”
The final say on BEPS will be rest with national governments, who are expected to approve the plan some time in 2015.
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