OECD Prepares to Close Tax Loophole

 Luxembourg—widely publicized leaks late last year exposed the extent of tax avoidance in the European country. Photo: Shutterstock/bofotolux

Luxembourg—widely publicized leaks late last year exposed the extent of tax avoidance in the European country. Photo: Shutterstock/bofotolux

By Paul Hannon

Preparations for an overhaul of the international tax system to make it more difficult for companies to shift profits to low-tax countries advanced on Friday, with an agreement to launch talks on modifying more than 3,000 bilateral tax treaties, and on ways to ensure companies accurately measure the cost of goods and services transferred between the countries in which they operate.

Launched by the Group of 20 largest economies and members of the Organization for Economic Cooperation and Development in 2013, the planned overhaul is intended to close loopholes that allow companies to adopt legal structures and practices designed to shift their profits to the lowest tax jurisdictions, regardless of where those profits are generated.

The planned overhaul of tax rules comes as governments around the world are seeking to raise more tax to cut their budget deficits and bring down high levels of debt accumulated in the years since the onset of the financial crisis. It followed controversies in a number of countries—including the U.S., the U.K., France and Germany—over the behavior of a number of companies that operate in the digital economy.

Read more at The Wall Street Journal

Categories: Business, Economic policy, Economics, Foreign affairs, Politics, Top stories, World news

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2 replies

  1. This is kind of an interesting article. It piqued my interest because it is a major world news story, and because the topic dovetails rather nicely with a couple of recent posts by genvana and Ecantados.

    Liked by 1 person

    • Excellent that you found this one to add to ours! Oh, yes, governments finally figured out they were getting cheated. The financial meltdown (especially in Greece and Cyprus) and hi-tech made it possible to put the companies in the spotlight, front stage and center. haha

      I think governments had an inkling, they just didn’t realize how far the multinational companies had gone to conceal their avoidance of taxation, though several had been pointing it out for years. Coupled with the IMF and World Bank data, even the Chinese and Russian governments found out that they too had people avoiding …taxes.

      Hopefully, they can get the treaties hammered out and put somewhat of a stop to it, though I’ve no doubt that multinational companies are working on Plan B etc. They have no reason to do anything but keep their eye on the profit line. It’s their function. Overlooking the benefits of the societies that they do business in and with doesn’t seem to hit their radar though it should being as how without the benefits their business would be left without the protections of government. Where the sweet spot is, is to let them have profit but yet pay for benefits.

      Liked by 1 person

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