As concerns about prevalence of artificial corporate practices designed to shift profits to a low-tax or no-tax jurisdiction, the Secretary-General of the OECD announced a global plan aimed at cracking down on such aggressive tax avoidance practices by corporate organizations.
Forty countries will work together to ensure the framework to discourage companies from resorting to such practices is in place by 2017. Such practices lead to erosion of the tax base and raises revenue implications for nations.
The OECD is working with nations that form a part of G-20 to setup a framework for exchange of information at a global level to nip tax-avoidance strategies in the bud. Many high profile and reputed organizations like Google, Apple, and Yahoo have resorted to such tactics and methods in the past. The implementation of the new standards will facilitate automatic sharing of information between financial institutions. This setup is expected to ensure the global corporate income tax regime is a smooth and coherent process.
Representatives of the G-20 nations expressed support for the move and emphasized on the need of global action to prevent tax cheating. Australia is expected to pass laws for the implementation of these global standards by 2017.
The OECD released its preliminary recommendations under the joint Base Erosion and Profit Sharing project that is working on along with the G-20. The move is expected to have a significant impact considering that money held by multinational companies in low-tax nations is estimated at around $2 trillion.
The plan aims to create a unified set of tax rules applicable at the international level. Once approved by the G-20 in 2015, the framework will help nations secure their tax bases without affecting legal and genuine cross-border international transactions.