OECD to publish its BEPS proposals today

The OECD estimates that governments are losing up to $250 billion (CHF244 billion) a year in tax revenues. There were concerns from many commentators that group-wide interest limitation rules could result in effective double taxation for a few wholly commercial group structures. India had earlier said mandatory binding arbitration to resolve tax treaties disputes will impinge on its sovereign rights.

The Organization for Economic Cooperation and Development (OECD) approved a new set of measures Monday whichseek to stop tax evasion by multinationalcorporations.

– Oblige multinationals to detail their business country by country to the tax authorities.

The OECD’s plan will be submitted for approval by the finance ministers of the 20 biggest economies (G20) at their meeting next week, before moving on for endorsement by the G20 leaders during their summit in November.

Mr. Gurria is hopeful that the rules will be implemented, given the strength of the political backing the process has received. There is debate over whether the new rules will benefit Britain. “We are covering the ground with radars”, he said. “There is a known timetable and you have to look at lots of different options about how to do it”.

“But the corporates would need to mature to align to likely changes in tax regime as a result of implementing BEPS recommendations”. That could largely offset the new revenue, given Amazon’s razor-thin margins.

The body that advises industrial nations on economic policy has published proposals to overhaul the way global companies are taxed in an effort to tackle avoidance.

Time will tell, but they should make a difference.

“[The reforms will help] move away from an era when tax planning had become part of core business models”, said Pascal Saint-Amans, who has led the two-year OECD reform programme, backed by 60 countries representing more than 90% of the world’s economy. Tax planning has turned into core business for many companies and practices such as transfer pricing are catered to by an entire industry.

Tech companies had initially been a particular focus of the new round of rule-making.

Besides, the key concept of Permanent Establishment has been redefined to prevent arrangements which avoid the creation of a taxable presence in a country by reliance on an outdated definition. A product that ends up on a shelf in Germany or the USA can contain components manufactured in a dozen other countries, and include intellectual property in the form of patents, licenses and brands from still others. MNC affiliates report higher taxes in lower tax jurisdictions – nearly double of the taxes they report in higher tax jurisdictions.

Similarly, it could affect United Kingdom telecom group Vodafone, which according to Reuters made more than 540 euros tax-free a year ago at a Luxembourg unit which buys handsets and sells them to group companies all over Europe.

“The central issue has always been that worldwide tax standards have not kept pace with developments in the global economy. Without the necessary resources and support, the intended objectives of the BEPS initiative could be overwhelmed by increased controversy and cost of compliance”.

Others fear the short period allocated to the overhaul has made it impossible to thoroughly investigate the impact of the new rules on the tax revenue of individual governments and the locational decisions of multinational companies.