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Corporate tax strategies under pressure from G20 and OECD

Leaders of the world’s largest economies have backed what they call “an ambitious and comprehensive” plan to crack down on multinationals that shift profits into low tax countries.

The G20 countries also increased the pressure on tax evasion with plans to exchange tax information automatically between themselves by the end of 2015.  They went on to call on all other jurisdictions to join them by the earliest possible date. 

Social Justice Ireland strongly urges the Irish Government to play a positive and constructive role in this process as a means of ensuring that the corporate sector pays a fair share of its profits in tax and is not provided with mechanisms facilitating or enabling tax avoidance or evasion.

At their meeting in St Petersburg the G20 countries' leaders endorsed an action plan to close corporate tax loopholes that was drawn up by the Paris-based Organisation for Economic Co-operation and Development (OECD) in the wake of public anger over tax planning used by multinationals such as Google and Apple to minimise their payments. They also urged countries to examine how their own tax rules contributed to profit shifting.

The declaration said that “in a context of severe fiscal consolidation and social hardship, in many countries ensuring that all taxpayers pay their fair share of taxes is more than ever a priority”.

In an increasingly interconnected world, national tax laws have not always kept pace with global business models, fluid capital, and the overall digitalisation of economy, leaving gaps that can be exploited by multinationals to artificially reduce their taxes. This undermines the fairness and integrity of tax systems.

On 19 July, the Action Plan on Base Erosion and Profit Shifting (BEPS) was released on the occasion of the G20 Finance Ministers meeting in Moscow. This Action Plan has now been fully endorsed by G20 leaders, and its development benefited from input from civil society.

It sets forth 15 actions to address BEPS in a comprehensive and coordinated way. This will result in fundamental changes to the international tax standards, based on three core concepts: coherence, substance, and transparency. Working on the actions with tight deadlines in the next 24 months, non-OECD G20 Economies will join the project on an equal footing with OECD members, and developing countries will also be involved in the process.

Civil society representatives will be invited to comment on the proposals developed in the course of the BEPS work.