Business

OECD urges effort to tackle profit shifting

Georgia Wilkins
428 words
17 September 2014
The Sydney Morning Herald
SMHH
First
23
English
© 2014 Copyright John Fairfax Holdings Limited.
Tax evasion - Treaty provisions sought

A new report by the Organisation for Economic Co-operation and Development recommends that companies
be forced to report their earnings and the tax they pay in every country they operate.

The OECD released on Tuesday a set of recommendations designed to tackle profit shifting and tax
avoidance by multinational corporations, before the G20 finance ministers meeting this week.

The recommendations include ways for governments to tax global corporations at an international level -
rather than individually - through a suite of new treaty provisions, and require earnings and tax to be declared
based on each country of operation.

Treasurer Joe Hockey is preparing to host the G20 finance ministers and central bank governors meeting in
Cairns on Saturday.

The OECD's plan is designed to create a single set of international tax rules to stop companies from shifting
profits to low-tax jurisdictions.

This issue is high on the agenda at the Cairns meeting as governments, desperate to shore up revenue, try to
plug the holes left by a wave of new tech-savvy companies.

The OECD report recommends that governments introduce a special tax instrument that will modify tax
treaties to ensure loopholes are progressively closed over time.

It calls on governments to introduce country-by-country reporting so that authorities know what amount
companies are paying in tax in each country they operate.

Labor shadow assistant treasurer Andrew Leigh urged the government to use its position as G20 chair to
push for a clear timetable on the recommendations.

"Taking real action means legislating to close loopholes that let profits drain offshore," he said.

"It means requiring companies to be more transparent about their finances and operations, and putting in
place flexible international structures so that tax laws can keep pace with changing business practices.

"[This] offers a fresh opportunity for the Coalition to show it is serious about making major companies pay
their fair share of tax."

A survey released this week showed increasingly concern about corporate tax avoidance and support for
greater measures to tackle profit shifting.

The research, commissioned by advocacy group Tax Justice Network, showed voters were also more likely
to view companies such as Apple negatively because of their use of offshore tax havens.

OECD secretary-general Angel Gurria said base erosion and profit shifting had become a "serious risk" to tax
revenues, sovereignty and fair tax systems.

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"Our recommendations constitute the building blocks for an internationally agreed and co-ordinated
response," he said.

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