Business

OECD: Global firms need new tax rules

Starbucks Amazon Google
Image caption Multinational companies such as Starbucks, Amazon and Google have complicated tax systems - all say they operate within the law

Moves to tackle corporate tax avoidance on a global scale have been unveiled by the Organisation for Economic Co-operation and Development (OECD).

The action plan is aimed at multinational companies that shrink their tax bills by shifting their profits from one country to another.

Firms including Starbucks, Amazon and Google have been accused of pursuing such strategies.

They have all said they operate within the law.

Change the rules

The OECD says 44 nations making up 90% of the world economy favour its plan.

Announcing the proposals, the OECD's head of tax, Pascal Saint-Amans, told journalists in Paris that they would "change the rules of the game" by making sure companies paid taxes in the country where profits were generated.

At present, firms can exploit agreements intended to avoid double taxation of profits by using them to obtain double tax deductions instead.

They also use internal billing procedures to ensure that profits are registered in countries where corporate tax levels are lower.

Under the OECD plan, a country-by-country model would require firms to declare their revenue, profit, staffing and tax paid in each jurisdiction.

Big impact

The measures will go before finance ministers at the next meeting of G20 nations in Australia this weekend.

Richard Collier, tax partner at PwC said the changes would have a big impact on global firms.

"The scale and scope of change surpasses what many people had anticipated at the outset.

"The big worry for businesses is that different tax authorities will require different information, which could add to the administrative and cost burden for businesses."

Anton Hume, at accountants BDO, said the measures could result in companies moving away from tax havens: "It may mean that a lot of activities are onshored again."

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