OECD moots stringent steps to tackle tax avoidance activities

To curb tax avoidance activities as well as abuse of treaties, Paris-based OECD today proposed elaborate measures that would help countries, including India, to shore up its tax revenue base.
The Organisation for Economic Cooperation and Development (OECD), which sets the global tax standards, has come up with a seven-point action plan that has been prepared after extensive consultations with various stakeholders including G20 nations.
The first BEPS (Base Erosion and Profit Sharing) recommendations to G20 is aimed at having a global approach to combat tax avoidance by multinationals.
These proposals, once implemented, would help curb corporates from shifting their profits to less-taxed jurisdictions.

Meanwhile, foreign media reports said the proposals threaten strategies adopted by companies like Google and Amazon to avoid taxes.
OECD has called for re-aligning "taxation and relevant substance to restore the intended benefits of international standards and to prevent the abuse of tax treaties".

To improve transparency in tax administration as well as increase certainty and predictability for taxpayers, OECD has pitched for "improved transfer pricing documentation and a template for country-by-country reporting".
Among other suggestions, OECD has said that it should be ensured that transfer pricing outcomes are in line with value creation, through actions to address transfer pricing issues in the key area of intangibles.

OECD Secretary-General Angel Gurria said the G20 has identified base erosion and profit shifting as a serious risk to tax revenues, sovereignty and fair tax systems worldwide.
"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 to artificially shift profits to locations where they are subject to more favourable tax treatment," he noted.
The proposed measures have been arrived upon after consultations between OECD, G20 nations and various other stakeholders.
They have been made under the OECD/G20 Base Erosion and Profit Shifting Project designed to create a single set of international tax rules. The aim is to end the erosion of tax bases and the artificial shifting of profits to jurisdictions to avoid paying tax.

Further, the project is aimed at guarding against new domestic rules that result in double taxation, unwarranted compliance burdens to legitimate cross-border activity.
The OECD recommendations would be part of the agenda for G20 finance ministers meeting this month in Australia.
"These recommendations may be impacted by decisions taken with respect to the remaining elements of the BEPS Action Plan, which are scheduled to be presented to G20 governments for final approval in 2015," the statement said.