(Angel Gurría, Secretray-General of th OECD, Image: Industry Leaders Magazine)
Although the OECD has refused comment on their leaked draft report on new measures to curb the use of tax havens to this month’s meeting of the G20 Ministers of Finance and Central Bank Governors, it has been widely circulated.
Last month, Pascal Saint Amans, Director of the OECD Centre for Tax Policy and Administration referred to this forthcoming report in his testimony to the US Ways and Means Committee Meeting on Tax Havens; which was convened shortly after Apple was accused of sheltering billions of dollars in income from tax by creating companies which were taxable nowhere because they were registered in Ireland but managed from the United states.
(U.S Senator Dave Camp, Chairman of the Ways and Means Committee. Image: Washington Post)
According to the OECD, the report is a response to growing intolerance by G20 members of structures routinely used by their multi-nationals to circumvent the apathy of their home governments to meaningfully address domestic tax reform.
The draft OECD Action Plan follows a number of National Action Plans announced in the days following the 2013 G8 Summit; and proposes the amendment of certain domestic and international tax rules to enable the closer alignment of income allocation with the economic activity which generates that income.
With it now customary ambitious agenda for change, the OECD suggests that their proposals be implemented within two years.
Specifically the OECD recommends that:
- the avoidance of tax residence, or permanent establishment (PE) “through the use of commissionaire arrangements” – a mechanism reported used by companies such as Dell to avoid reporting revenues in markets where they have major sales – should be examined;
- the long-standing “specific activity exemptions” which have been used by Amazon to enable it operate major retail businesses in countries like Britain and Germany without creating tax residences for these businesses should also be re-examined;
- arrangements where companies allocate profits to tax haven units on the basis these units funded research or bore business risks related to transactions elsewhere in the group should be addressed; and
- arrangements where treaties designed to avoid double taxation of corporate profits are abused through the use of “dual resident entities” to ensure no taxation whatsoever is paid should be targeted.
(Russia’s Minister of Finance, Anton Siluanov)
With the G20 meeting of Finance Ministers and Central Bank Governors scheduled to be convened in 10 days’ time there is little expectation that the OECD’s final report to the G20 will evidence any substantive changes.