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12 Oct 2015 12:07pm

Osborne backs OECD tax plan

George Osborne has endorsed the Organisation for Economic Co-Operation and Development's (OECD) plans to tackle corporate tax avoidance

Osborne suggested he would announce measures in next month's Autumn Statement to implement an international plan to crack down on tax dodging by closing international loopholes and ending tax havens.

He revealed in Lima, at the annual meetings of the International Monetary Fund, that the base erosion and profit-shifting (BEPS) plan would be implemented by Britain at the next fiscal event.

No one should be in any doubt that we will take new steps at future fiscal events to introduce these new international rules to our own domestic tax laws. These taxes must be paid," he said.

The OECD presented its package of measures for an extensive reform of international tax rules before G20 finance ministers last week.

The new reforms comprise 15 action points, which look at areas including the digital economy, countering harmful tax practices, ending inappropriate treaty benefits, and more.

The OECD wants multinationals to report their tax planning so it can be broken down in to a country-by-country basis, and for more emphasis to be put on the profits created in each country, making it more difficult to shift profits to low-tax jurisdictions.

Revenue losses from BEPS are estimated to be $100-240bn (£66-£158bn) a year, or roughly 4-10% of global corporate income tax revenues, according to the OECD.

"People are fed up when they see large international businesses avoiding paying tax in any jurisdiction. So this isn't about whether you have low taxes or high taxes, this is about paying your taxes," Osborne added.

G20 ministers gave the green light to the reforms saying that the proposals would help to create a level playing field by making the corporate tax system fairer and more efficient.

Turkish Deputy Prime Minister Cevdet Yilmaz, who announced the G20 decision, called it a "historic moment" for the fight against tax evasion.

Preventing companies from shifting profits to low-tax jurisdictions and debt to high-tax jurisdictions will require "a very large group of countries," particularly developing nations, to get on board with the plan, Yilmaz said.

“We want the U.K. to have a competitive tax system,” Osborne told reporters.

“But we do want companies to pay their fair share. We have been more than impressed by the progress made internationally to develop the plan.”

Britain has already taken steps to implement the reforms by introducing a levy on diverted profits, known as the “Google tax”, to counter the use of aggressive tax planning techniques by multinational companies.

Osborne, along with Jack Lew, the US treasury secretary urged the OECD to hold countries “feet to the fire” to ensure the reforms were implemented in full.

“Taxes should be paid where profits are made,” Osborne tweeted from the meetings last week. “Great to see OECD BEPS rules agreed here in Lima. UK will lead by example and implement early.”

Sinead Moore

 

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