Another tax avoidance story?
Larger companies are not paying enough tax according to the Organisation for Economic Cooperation and Development (OECD). The OECD said that rules designed to protect companies from paying tax twice were “too often” being used to “allow them to pay no taxes at all”.
The strategies used are legal, but are perceived as eroding the tax base of many countries.
The OECD’s report states that many double taxation agreements do not properly reflect the way that larger companies now do business. The agreements fail properly to recognise cross-border integration, values of intellectual property or new communications technologies. The report indicated that the rules give large businesses an unfair advantage over smaller businesses that cannot use the same international planning options.
The report follows calls from government and tax authorities in Germany, France and the UK for action on international tax standards and links in nicely to the media reports on the tax affairs of multinational companies including Amazon, Starbucks and Google.
However, the report seems not to recognise that most well-developed jurisdictions such as the UK and America already have anti-avoidance rules to stop diversion of taxable profits such as the provisions on transfer pricing and controlled foreign companies. I would question whether we need more rules, or just for the authorities to use the tools already available.
Date: 15th March, 2013
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