'A turning point': Tax crackdown as world profit-shifting ban looms

International authorities have unveiled the first step in a major crackdown on billions of dollars worth of international corporate tax avoidance, warning that existing rules are not fit for purpose. The Organisation for Economic Co-operation and Development (OECD) said its plan would help prevent the kind of legal corporate tax avoidance which it is alleged has been used extensively by companies such as Apple, Google, Amazon and Starbucks. Its detailed new proposals, seven of which are published today, are largely aimed at stemming the extent to which companies can shift profits from one country to another in order to take advantage of lower tax rates.

Gaps and mismatches in the current, outdated tax rules can make profits ‘disappear’ for tax purposes, or allow the shifting of profits to no-or low-tax locations where the business has little or no economic activity.

OECD report

Although there are few reliable estimates of these practices – also known as base erosion and profit shifting – they are thought to have contributed to billions of dollars of tax avoidance by leading multinationals. The reports suggests this money could be used support the fragile economic recovery after years of austerity and “social hardship”. Although such tax avoidance is legal, the report says taxpayer trust has been damaged by these practices. The proposals, which are long and complex, aim to close numerous loopholes in domestic and international laws which allow companies to shift such profits around the world, using a variety of financial instruments.

The BEPS Project marks a turning point in the history of international co-operation on taxation.

OECD report

Business tax avoidance