Aid agencies say OECD plan on tax dodging fails developing countries

The new Organisation for Economic Co-operation and Development (OECD) Action Plan against multinationals’ tax dodging is a step forward but fails developing countries, the Global Alliance for Tax Justice, Christian Aid and Oxfam warned on Friday. The Base Erosion and Profit Shifting (BEPS) Action Plan was presented to G20 finance ministers’ meeting in Moscow this weekend.

Alex Prats, Principal Economic Justice Advisor at Christian Aid, said: "The Plan is a welcome and long overdue step towards tackling tax dodging by unscrupulous multinationals.

"The OECD clearly acknowledges that existing international tax rules make it easy for multinational corporations to avoid paying their fair share of tax – as shown by the recent Google and Amazon scandals. We all now agree – with the possible exception of some multinationals and tax havens - that the current situation is unfair and requires urgent reform."

But developing countries’ inability to participate in the reform process as equal partners is not acceptable. Oxfam’s senior policy advisor Claire Godfrey said: "International tax rules affect everyone and it is often the poorest countries that suffer the greatest losses due to tax abuse. Negotiations on new international tax rules must include all countries - including those that are not OECD or G20 members – from the very start."

The OECD expects the United Nations Tax Committee to help facilitate the contribution of developing countries but Alex Prats warned: ‘This will only happen if there is a firm commitment to strengthen the UN Tax Committee. With the current level of resources, the UN Tax Committee will most likely not be able to meet the expectations.’

The Action Plan set by the OECD, which the G20 now needs to endorse, seeks to fix some of the problems of the current tax system. Jim Henry, Chair of the Global Alliance for Tax Justice, said the OECD should also be exploring alternatives to the current rules on transfer pricing, which govern the prices at which related companies trade with each other and are intended to prevent tax abuse.

"The OECD is having a hard time moving beyond the ‘arm’s length’ standard for transfer pricing, which is impossible for many low-income countries to implement. We believe the OECD should work more closely with non-G20 countries on exploring alternatives, including unitary taxation," he said.

"As a first step, the OECD should also strengthen its support for public country-by-country reporting by multinationals – so we can see exactly how much profit they are parking in tax havens."

Source: Christian Aid