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OECD has proposals to cut corporate tax minimization

Staff writer |
Companies should pay tax in the countries where they conduct business under new proposals intended to cut corporate tax minimization.

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An OECD/G20 report found laws allowing companies to shift profits to low-tax jurisdictions means that between $100bn and $240bn is lost annually. That equates to between 4% and 10% of global corporate tax revenues.

While governments are being encouraged to adopt the proposals, they do not have to implement them. The final report from the Base Erosion and Profit Shifting Project, BEPS, found that no single rule was to blame for making profits “disappear” for tax purposes.

Rather, it was the “interplay among different rules... domestic laws and rules which are not coordinated across borders, international standards which have not always kept pace with the changing global business environment and an endemic and worrying lack of data and information”.

The report outlines measures intended to combat the practice of transfer pricing - whereby companies conduct transactions between different parts of the same organization.

Companies will now be required to outline their global business operations and transfer pricing policies in a “master file”, with more detail in a “local file”.

“Country-by-country reporting will provide a clear overview of where profits, sales, employees and assets are located and where taxes are paid and accrued,” the report stated.

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