A couple of days ago the OECD published a document called The BEPS Project and Developing Countries: from Consultation to Participation which has three key elements: first, inviting ten developing countries to participate directly in its Committee on Fiscal Affairs and subsidiary bodies; second, to create of five regionally focused and organised networks of tax policy & administration officials; and third, to support capacity building for developing countries.
We generally welcome these changes, which is substantially the product of changing power relationships in the world and greater consciousness of how the international tax system disadvantages developing countries; as well as constant badgering by us and our colleagues to give developing countries greater say. The lingering worry, of course, is always that the OECD is a club of rich countries and is still merely offering a veneer of representation while getting on with the business of looking after its core member states’ interests.
Ahead of the looming G2o meeting in Brisbane, the Global Alliance for Tax Justice has issued a new report entitled The OECD BEPS Project – tax policies not fit for the 21st century. We summarise its main points:
- Country-by-country reports must be made public and transparent. A template has been agreed, but arrangements for access haven’t. These reports must be made public.
Harmful tax practices must be curbed. Wheezes like patent boxes, which we’ve just blogged, continue to proliferate, and the culprit countries continue to undermine BEPS in these areas, as predicted.
End the hypocrisy – end tax breaks for multinationals. Countries should stop loudly declaring their support for BEPS, while stealthily undermining it. Victims of their regimes should apply countermeasures.
Multinationals must be recognised as unitary firms. This is fundamental: the foundations of the current international tax system, designed a century ago, don’t work. Notably, it is built on the twin fictions of the Arm’s Length Method and the Separate Entity Principle.
Strengthen UN Tax Committee. As TJN has long argued. The OECD is a club of rich countries; the United Nations represents all the world’s citizens. Yet the OECD and its member states dominate, squashes the UN Tax Committee and interferes in its workings. Updgrade the UNTC, and resource it properly. As an Indian official publicly put it:
“It is inconceivable as to how a standard developed by Government of only 34 countries can be accepted by Government of other countries as ‘standard’ of sharing of revenue on international transactions.”
Christian Aid has also published a “half time” report on the OECD’s BEPS process to tackle tax avoidance by multinational corporations and wasteful tax expenditures by countries, a report entitled We Still Haven’t Found What We’re Looking For, whose press release notes:
“Rich countries and multinational companies seem to have had more influence over international efforts to stop them dodging tax than many poor countries.”
Christian Aid is well aware that this sentence is the equivalent of commenting on the extent to which the Pope is Catholic, but the point is that it fills in plenty of details and provides a range of materials to work with.
See also the BEPS Monitoring Group’s ongoing work.