OECD Takes Aim at Tax Havens

13/10/2015 09:28

On October 5, the Organisation for Economic Cooperation and Development (OECD) released their long awaited Base Erosion and Profit Shifting (BEPS) outcomes report, containing the OECD’s proposals for new rules to combat tax evasion by multinationals, and transfer pricing in particular. It represents the first major corporate reform in a century, targeting offshore tax havens and the multinational companies that use them to avoid corporate tax, and aims to raise $250bn. Pascal Saint-Amans, the director of the OECD Centre for Tax Policy and Administration, said that, “Within a week, this action plan will impact upon 90% of the world economy. This is only the beginning of the job, but the era of tax evasion is coming to an end.” 

The concrete objective of the BEPS project is to put an end to the international affliction of tax evasion. Multinationals often take advantage of differences between tax systems around the world to reduce their tax bills. One of BEPS flagship measures is to put an end to transfer pricing, whereby two related companies trade with each other in order to artificially distort the price at which the trade is recorded, thereby minimising the overall tax bill. This might, for example, help it record as much of its profit as possible in a tax haven with low or zero taxes. The action plan has been broadly criticised by NGOs. They say it lacks ambition, particularly on the questions of country by country transparency and "cash boxes".