The Organisation for Economic Co-operation and Development (OECD) has called for an overhaul of international tax rules to better govern multinational firms.
A new plan to update and coordinate national tax laws has been forwarded at the request of the G20 group of leading nations as finance ministers prepare for a two-day meeting in Moscow. OECD Secretary General Angel Gurria said archaic international tax rules are allowing businesses to avoid double taxation (paying taxes in two countries), and called for greater international cooperation to close gaps that allow income to "disappear".
Corporate tax has become a focal political issue of late and several European finance ministers and leaders in the US have been pushing the agenda to crack down on evasion. But despite the political capital at stake from tough policies, the OECD’s proposals are optional, and many governments may decide against legislation until there is evidence of widespread collaboration.
Early signs are positive for the OECD, with the British Prime Minister David Cameron already pledging his support. He said: "Taxpayers, governments and businesses all suffer when some companies manipulate the tax system to avoid paying their fair share of taxes.”
The OECD hopes its recommendations will be put into action over the next two years and is working on an international legal structure that would help countries introduce the new rules quickly.
Florian Wettstein, Professor of Business Ethics at the University of St. Gallen in Switzerland, told BBC News: "Multinationals still have not grasped that tax honesty is an integral part of corporate responsibility. As a result, the public increasingly perceives them as hypocritical and untrustworthy."
TMF Group specialises in international tax and can help with any queries you may have over the OECD’s proposals. As more become truly international, we offer professionally tailored solutions, including multi-jurisdictional entities, to help best manage fiscal requirements.