Corporate Tax Loopholes Closed By Landmark Agreement

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Ministers from 76 countries have queued up to sign a landmark treaty that will stop multinational organisations from evading tax by shifting their earnings to low-tax nations.

Under the shelter of the umbrella group the Organisation for Economic Co-Operation and Development, member nations agreed to update more than 1,100 tax treaties between them at the same time.

The effect, says the OECD, will be that companies will have to pay between a suspected $100 billion and $240 billion in corporate taxes that they save by exploiting loopholes in international tax treaties which are now plugged.

“The signing of this multilateral convention marks a turning point in tax treaty history,” said OECD Secretary-General Angel Gurría.

“We are moving towards rapid implementation of the far-reaching reforms agreed under the BEPS Project in more than 1,100 tax treaties worldwide, and radically transforming the way that tax treaties are modified.

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Companies stopped from shifting profits

“Beyond saving signatories from the burden of re-negotiating these treaties bilaterally, the new convention will result in more certainty and predictability for businesses, and a better functioning international tax system for the benefit of our citizens.

“Today’s signing also shows that when the international community comes together there is no issue or challenge we cannot effectively tackle.”

The OECD tax agreement will modify existing treaties to remove ambiguities that allow companies to shift profits to places where they have no economic activity.

The agreement will start operating from April 2018.

100 countries update thousands of tax treaties

“The signing ceremony marks an important milestone in the international tax agenda, which is moving closer to the goal of preventing base erosion and profit shifting (BEPS) by multinational enterprises,” says the OECD.

“The new convention, which is the first multilateral treaty of its kind, allows jurisdictions to transpose results from the OECD/G20 BEPS Project into their existing networks of bilateral tax treaties. It was developed through inclusive negotiations involving more than 100 countries and jurisdictions, under a mandate delivered by G20 finance ministers and central bank governors at their February 2015 meeting.”

The move follows outrage against companies such as Starbucks, Google and Apple for paying little or no corporation tax in the countries where they earned their profits.

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