31 OECD members signed corporate tax avoidance deal

31 Organisation for Economic Co-operation and Development (OECD) members have signed corporate tax avoidance agreement in a bid to stem fiscal (tax) evasion by multinational companies (MNCs).
The new agreement is about sharing information between members rather than a new tax law. Under it, signatory members have to share information on tax issues of MNCs. It will primarily focus on country-by-country tax reporting of MNCs between members.
Comment

• The deal has new measures and rules in order to stop MNCs avoiding paying corporate tax using complicated loopholes in the existing complex tax arrangements.
• It will make it harder for MNCs to hide money in tax havens or play one country’s tax authority against another.
• It will enhance the transparency in operations of MNCs on tax issues and shall have an immediate impact in boosting international co-operation on tax issues.
• The exchange of information under this mutual deal will start in 2017 and henceforth, MNCs must have pay tax in the country where the profits are made.

Background

• The deal has proposals which are part of a 15-point OECD package agreed by leaders at a 2015 G20 summit held in Antalya, Turkey.
• OECD has estimated that every year governments across the world lose around 100 to 240 billion dollars (or 4 to 10 per cent) of global tax revenues because of the tax-minimising schemes of multinationals.

About Organisation for Economic Co-operation and Development (OECD)

• OCED is an international economic organisation of 34 countries to stimulate economic progress and world trade
• Founded: 1961.
• Headquarters: Paris, France.
• It defines itself as a forum of countries committed to democracy and the market economy.
• It provides common platform for members to compare policy experiences, seek answers to common problems, identify good practices etc.
• Most OECD members are regarded as developed countries i.e. high-income economies with very high Human Development Index (HDI).

Month: Current Affairs - January, 2016