BRISBANE, Australia: The Organization for Economic Cooperation and Development (OECD) on Friday forecast competition heating up among countries wanting to attract revenue from big digital companies like Apple and Google, even as a row rages over Luxembourg’s arrangements with multinationals.
Closing corporate tax loopholes and endorsing a common reporting standard to increase transparency are set to be a primary focus of the G20 summit in Brisbane this weekend.
Leaders of the world’s most powerful economies want to ensure companies pay taxes where they make their profits, instead of using complex financial structures that allow them to slash their liabilities, depriving governments of billions in revenue.
Many of these strategies are legal, but are sometimes at the limit of the law. The opacity of Luxembourg’s beneficial tax deals with a slew of companies, when its government was led by the new head of the EU’s executive Jean-Claude Juncker, has erupted as a major dispute heading into the G20.
OECD tax chief Pascal Saint-Amans said the organization’s plan against base erosion and profit shifting (BEPS) would end tax havens, but would not eliminate tax competition, which he expects to intensify as nations compete for business investment on a more even playing field.
“If there’s no zero-tax havens left, then countries will be keen on competing with more attractive rates,” he told Fairfax Media.
“BEPS puts an end to harmful tax competition, but not (all) tax competition. Some countries might move to be more attractive by reducing their (tax) rates. We think that’s fine.”
The Paris-based OECD provides economic analysis and advice to its industrialized country members, many of which figure in the G20.
G20 host Australia has made tax avoidance a key plank of its G20 presidency with Treasurer Joe Hockey on Thursday saying the practice of corporations shifting profits amounted to “theft.”
The issue has taken on added significance with Juncker heading to Brisbane for the G20 forum.