A proposed clampdown on global tax avoidance took a step forward on Tuesday with a leading global think tank releasing key recommendations ahead of a G-20 meeting later this month.
The practice of companies shifting their profits to other country's jurisdictions to avoid paying tax has drawn criticism from governments and pressure groups. The Organization for Economic Co-Operation and Development (OECD), a Paris-based think tank, released seven guidelines on Tuesday to combat this practice. It hopes they will be implemented into international law. The guidelines are is also intended to help put an end to the erosion of tax bases for countries and create a single set of rules for every government to follow.
"Our recommendations constitute the building blocks for an internationally agreed and co-ordinated response to corporate tax planning strategies that exploit the gaps and loopholes of the current system," OECD Secretary-General Angel Gurria said in a statement announcing the guidelines.
The OECD, which is made up of 34 members who are mostly from the developed world, has been campaigning vigorously for governments to get tougher on corporate tax reform. It believes aggressive tax strategies by many multinational companies represent a grave risk to tax revenues, sovereignty and fairness, and hopes these new plans will be addressed by 2015.
In July 2013, the OECD drew up a proposal for a fundamental rethink of global tax rules, which was backed by the G-20 group of leading economies. The plan called the Action Plan on Base Erosion and Profit Shifting—identified 15 actions that will allow governments to collect the tax revenue they need and give businesses the certainty they need to invest and grow.