The OECD Secretary-General Angel Gurría presented the action Plan on base Erosion and Profit Sharing within the framework of the G20 Finance Ministers and Central Bank Governors' Meeting.
National tax laws have not kept pace with the globalization of corporations and the digital economy, leaving gaps that can be exploited by multi-national corporations to artificially reduce their taxes.
This Action Plan, which we will roll out over the coming two years, marks a turning point in the history of international tax cooperation. It will allow countries to draw up the coordinated, comprehensive and transparent standards they need to prevent BEPS," said Secretary-General Angel Gurría. "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."
Recognizes the importance of addressing the digital economy, which offers a borderless world of products and services that too often do not fall within the tax regime of any specific country, leaving loopholes that allow profits to go untaxed.
Will develop a new set of standards to prevent double non-taxation. Closer international cooperation will close gaps that, on paper, allow income to ‘disappear' for tax purposes by using multiple deductions for the same expense and "treaty-shopping". Stronger rules on controlled foreign companies would allow countries to tax profits stashed in offshore subsidiaries.
