OECD: “Tax Havens Need To Be Neutralised”

May 15, 2013

OECDInternational leaders are moving closer to taking action on corporate tax avoidance – prompted in part by Google’s use of use of Ireland and the Netherlands to shift billions of dollars of earnings to Bermuda — despite challenges, a top official at the Organisation for Economic Co-operation and Development [OECD] said on Wednesday [May 15].

National austerity measures taken by OECD member governments as a result of the global financial crisis have sparked voter anger at the way big international companies shift profits around the world to cut their tax bills.

As a result they have asked the OECD to draft proposals to tackle problems like double-tax agreements, transfer pricing and the exchange of information between tax jurisdictions.

“You cannot have a situation of crisis, unemployment, people unhappy, facing increases in taxes and no recovery and at the same time big profitable, juicy players not paying a penny,” Pascal Saint-Amans, head of the OECD’s tax centre told the Reuters news agency. “It’s just politically impossible.”

In the last year Britain has become more prominent in the controversy over how much tax multinationals pay and Prime Minister David Cameron called on the European Union to use the impetus of the G8 summit he is hosting in June to organise “radical” international action to crack down on tax evasion and avoidance.

The OECD is due to deliver its recommendations at the July Group of 20 [G20] meeting. These have not yet been agreed but Monsieur Saint-Amans said one of the proposals would be that double taxation agreements [DTAs] between countries be amended to avoid the problem whereby neither country taxes the income.

The European Commission recommended such a measure in December.

Earlier this year Reuters reported that Google takes advantage of DTAs between Ireland, where the Internet search firm has its European base, and other countries, to shelter billions of dollars each year from tax.

Most of Google’s European income flows to Ireland untaxed, thanks to DTAs, and most of this income is then sent to an untaxed Google entity in Bermuda.

Google says its follows the tax rules that apply in every country where it operates.

“You need to neutralise the use of tax havens,” Monsieur Saint-Amans said.

The OECD has no estimates of how much is lost by tax evasion and avoidance, but wants to set up a mechanism that could measure the money at stake, he added.

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  1. Harlot says:

    And just how will the OECD determine what constitutes a “tax haven”?