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In this policy brief, 34 organizations that collaborate to achieve tax justice provide recommendations to the G20 and the Organization for Economic Co-operation and Development (OECD) on the Action Plan presented by the OECD, in July 2013, to tackle base erosion and profit shifting (BEPS).
The OECD’s BEPS Action Plan is a welcome and long overdue step forward. The OECD – and also the G20 and the G8 – has clearly acknowledged that base erosion is a serious problem that threatens the integrity of the Corporate Income Tax, and damages governments, individual taxpayers and some businesses.
The BEPS Action Plan provides a unique opportunity to foster fundamental changes to prevent double non-taxation of income effectively, as well as to prevent cases of no or low taxation associated with transnational corporations’ practices that artificially segregate taxable income from the activities that generate it.
If successful, the project will help governments tackle tax avoidance and evasion by transational corporations. However, strong political courage will be required to define, implement and enforce reforms to counter base erosion effectively.
Recommendations to strengthen the BEPS project
1. The OECD and the G20 should invite developing countries to participate in the BEPS project on an equal footing.
2. The OECD and the G20 should make efforts to strengthen the UN tax committee.
3. The G20 should urge the OECD to follow its own recommendations regarding the duty to analyse the impact of potential tax policies on developing countries.
4. The G20 and the OECD, along with other bodies such as the UN tax committee and the IMF, should work with governments in developed and developing countries, as well as with independent tax experts, to explore alternatives to the arm’s length principle.
5. Governments in the G20 must take additional measures to tackle financial and corporate secrecy.
6. Governments in the G20 must promote a shift from tax competition to global and regional tax cooperation.