Julia Irvine 9 Dec 2016 05:20pm

OECD's BEPs measures seriously flawed

The OECD’s proposals for creating a level playing field for emerging economies on tax are seriously flawed and their piecemeal implementation has led to a deepening of the tax gap, according to research from Tax Justice Network (TJN)

And it has called for immediate changes to limit the amount of damage being done.

The major problem, it says, has been the decision by the Organisation in 2013 when it came up with its standard on country-by-country reporting (CBCR) to give into intense lobbying, largely from US multinationals, and place limits on access to the data.

Effectively this means that the only organisations that get to see the report are the tax authority in the country where the relevant multinational has its headquarters, and other tax authorities that it chooses to share the information with, subject to various conditions including limitations on the use the data can be put toi.

At the time, the TJN warned that the end result was likely to be that lower-income countries would be systematically denied full access to this important information.

Speaking at today’s Global Tax Transparency Summit, TJN chief executive Alex Cobham said it was “completely unacceptable” that something which had been designed to level the playing field in transparency had ended up exacerbating the inequality in global taxing rights.

“As long as the OECD or its rich country members continue to block access to CBCR data, lower income countries should take whatever steps necessary to ensure they can obtain it,” he said.

“Policy-makers around the world should aim to short circuit these damaging inequalities by simply passing laws that require full publication of CBCR data, as we originally proposed.”

The TJN argues that openness of CBCR enables tax authorities to calculate measures of misalignment easily, in order to identify the major tax risks.

Widen access to the general public and it allows the media, researchers and civil society activists to hold tax authorities to account.

Some countries, including Australia, China, Germany and Spain, have already  moved beyond the OECD rules and limitations and legislated for local filing requirements. The UK government, under pressure from the Public Accounts Committee, agreed to introduce a provision into the 2016 Finance Bill giving it the power to introduce public CBCR.

The TJN is keen for other countries to follow suit because, it says, as long as the OECD remains in thrall to big business, inequality will continue. As the report concludes, “If the OECD and others continue an apparent drift towards the exacerbated inequality of taxing rights, the dam may break as non-OECD countries simply decide to require direct reporting.

“A critical mass of G77 countries could then emerge, tipping the global balance and quite possibly overcoming resistance to publication among OECD country governments.

“And arguably this path would be more empowering than that of waiting for OECD governments to make CBCR data public, so that the current inequalities are overcome as a gift.”

Cobham added that the OECD was not the right body to take the tax transparency agenda forward as long as major member states could “exert power to prevent the disclosure that smaller countries need”.