The Methodist Tax Justice Network, the Global Alliance for Tax Justice and one of our senior advisors Professor Sol Picciotto have just published a very useful up-to-date account of where the OECD and G20 have got to on tax reform, along with a useful explanation of the Unitary Taxation alternatives which you can download here.The Methodist Tax Justice Network booklet also explains
“how current international tax laws are not fit for purpose, and how this system might be replaced with something which is fairer for developed and developing countries alike.
Unfortunately, it is currently all too easy for multinational corporations and wealthy individuals to avoid taxation and shift profits to low-tax havens, through a number of convoluted schemes involving huge networks of subsidiaries and trust funds. These are currently allowed to trade with each other as if they were separate entities, resulting in the shifting of profits through manipulating market prices, the payment of royalties or interest on inter-company loans.”
Professor Picciotto looks at the rhetoric and the reality of international tax and efforts to reform it. He writes:
“Combating this system requires both political will and international cooperation. Too often, however, governments have preferred to hide behind the need for such cooperation, and its technical complexity, to conceal their own lack of commitment.”
He goes on to assess the steps forward and some of the steps back by the G20 and the OECD, proposing a system of unitary taxation
“in which all subsidiaries of a multinational corporation would be considered as a single entity and its profits consolidated. The total profits would then be divided between the countries in which the corporate group operates by an apportionment formula which accurately reflects their real economic presence, based on their employment figures and their sales.”
As the booklet says:
“What is clear is that effective reforms will be impossible without continued and sustained public pressures. We hope that this report will help improve the understanding of the issues necessary to support such pressures.”
Download your copy here and read on.
[Professor Picciotto is a Senior Advisor to the Tax Justice Network and a member of the BEPS Monitoring Group, established to monitor the Tax Declaration of the G20 world leaders and the OECD’s BEPS Action Plan for the reform of the taxation of transnational corporations.]