This article is more than 1 year old

OECD lashes out at tax avoiding globocorps' location-flipping antics

You hear that, Amazon, Google, Microsoft et al?

Proposals to stop tax avoidance by multinationals like Amazon and Google have been unveiled by the Organisation for Economic Co-operation and Development (OECD).

The international group proposed on Tuesday that firms be subjected to detailed reporting on a country-by-country basis of their assets and operations so officials can calculate their tax bill.

Also proposed are revised guidelines to align “value creation” with “intangibles.”

Translated, that means trying to end the practice of firms like Google and Amazon of making millions of dollars in one jurisdiction only to pay tiny tax bills by claiming to have little or no physical presence because their operations are legally based elsewhere.

Country-by-country reporting is to be in place by the end of 2020.

Pascal Saint-Amans, director of the OECD's center for tax policy and administration, said in a press conference Tuesday: “Many people have talked about developing country by country reporting so tax administrators would have an overall picture of the tax planning of companies. We will have country-by-country tax reporting.

“We will report to all the tax administrators where companies operate, to give a view where sales are made, profits are made, employees are employed, and assets are made. This will be a game changer in terms of risk assessment.”

The proposals are part of a package of seven outlined by the OECD to close loopholes and stamp out practices, to make companies pay up.

The seven measures come under the OECD’s Base Erosion and Profit Shifting Project (BEPS), with a further eight proposals still being drafted and yet to be published. The project is the result of the work of 44 countries, and would become part of the OECD’s tax reporting.

Also being stopped under the OECD's latest plans is the practice of making multiple deductions for a single expense and of claiming expenses in one country without paying taxes in a corresponding country.

Firms will be stopped from tax-treaty shopping – the practice of cherry-picking from different tax regimes the most favourable charges they will pay. Also in the OECD's sights is the practice of dodging tax-treaty agreements by funnelling money through third-party countries and the practice of lending tax credits internally to subsidiaries.

BEPS was endorsed by the G20 in July 2013 and the rules outlined on Tuesday are due to be formally approved at the next meeting of G20 leaders in 2015.

Tech firms have been on the frontline of criticism for not paying enough tax.

Search giant Google has been accused of avoiding UK tax by routing most of its earnings through Ireland – saving about £100m a year by paying Irish corporation tax at 12.5 per cent rather than the 28 per cent in the UK. Amazon paid just £1.8m in corporation tax in the UK in 2011 despite racking up a pre-tax profit of £74m on £3.35bn sales in 2011. Microsoft, Oracle and others have been accused of also not paying enough tax, by MPs in the House of Commons.

Saint-Amans said Tuesday: “We have new rules that will level the playing field and develop an environment for good performance based on performance of companies and not on performance of tax planners.” ®

More about

TIP US OFF

Send us news


Other stories you might like