OECD reaches out to developing countries to curb tax abuse

As part of plans to reduce the levels of tax avoidance and profit shifting used by multinationals particularly in developing countries, the Organisation for Economic Cooperation and Development (OECD) has announced a new strategy to work more closely with developing countries to address abuse of the tax system

The OECD will  hold a two-day workshop in December 2014 which will allow developing countries interested in participating in the BEPS work of the Committee on Fiscal Affairs (CFA) and its technical working groups to discuss the practical aspects of deepened engagement in the project, as well as their priority issues.

At the same time, the donor community will meet to discuss plans to ensure that developing countries have the resources necessary to engage in the BEPS project effectively.

The new developing country strategy, the OECD Strategy for Deepening Developing Country Engagement in the Base Erosion and Profit Shifting (BEPS) Project, is designed to increase the involvement of developing countries in the decision-making processes and the technical work around profit shifting.

The strategy has three key elements:

Building on their engagement in the earlier phase of the BEPS Project. Ten developing countries, including Albania, Jamaica, Kenya, Peru, Philippines, Senegal, and Tunisia, will be invited to participate in meetings of the key BEPS decision making body - the Committee on Fiscal Affairs (CFA) - and its technical working groups.

Five regionally organised networks of tax policy and administration officials will be established, to coordinate an ongoing and more structured dialogue with a broader group of developing countries on BEPS issues.

Support for capacity building to address BEPS issues in developing countries is imperative. The regional networks will play an important role in the development of toolkits to support the practical implementation of the BEPS measures and as well as some of the priority issues for developing countries (tax incentives and transfer pricing comparable data).

The African Tax Administration Forum (ATAF) and the Inter-American Centre for Tax Administration (CIAT) will continue to lead regional discussions. They will also be invited to join the meetings of the CFA and the technical working groups, together with the international organisations (IMF, World Bank Group and the UN), which already participate.

A two-part report from the G20 Development Working Group shows that BEPS issues pose acute problems for developing countries, most of which have lower tax bases than advanced economies and raise a far higher share of tax revenues from corporate taxes than developed countries. More than 80 developing countries and other non-OECD/non-G20 economies were consulted.

The OECD’s recommendations on creating cross-border tax rules to end the erosion of national tax bases and the artificial shifting of profits to jurisdictions to avoid paying tax will be discussed at this month’s G20 meeting from 15-16 November in Brisbane.

For further information, go to www.oecd.org/tax/developing-countries-and-beps.htm

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