The OECD has published new proposals aimed at changing the way companies pay corporation tax for the first time in more than 100 years.
The OECD estimates that governments are losing up to US$240 billion a year (€213bn) from multinationals skirting around the rules on tax.
In the first major overhaul since the 1920s, some 60 OECD states have agreed to new transparency rules that will close loopholes and restrict the use of tax havens.
Entitled the Base Erosion and Profit Shifting (BEPS) Project, it aims to offset the use of complex tax treaties and technology used by multinationals to reduce the amount of tax they pay on profits.
In particular, the loss of tax revenues affects developing countries, often used by multinationals to produce goods.
Country-by-country reporting to change tax picture
The OECD found that the effective tax paid by multinationals in these countries is between 4 and 8pc lower than similar operations in developed countries.
BEPS is supported by 20 of the most developed economies, including the EU and US.
They aim to address aggressive tax planning by multinationals by updating tax rules and requiring them to update their activities country-by-country.
Finance Minister Michael Noonan TD yesterday confirmed that country-by-country reporting will be introduced in the upcoming budget.
The proposed Knowledge Development Box will also be the first patent box in the world that will comply with the new international rules.
“I welcome the publication of the OECD reports, which set out a comprehensive multilateral approach to tackling aggressive and harmful tax planning,” Minister Noonan said.
“The OECD is to be commended for its thought leadership in the area of international taxation and its commitment to the global priority of achieving a fair international tax system.
“Ireland is committed to the BEPS project and we will play a full part in its implementation. As a first step, we will legislate for country-by-country reporting and introduce a Knowledge Development Box, which will be the first and only such box in the world that complies with the OECD’s new standards.”
Global tax image via Shutterstock