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News : Irish Economy Last Updated: Jun 4, 2013 - 9:19 AM

OECD to deliver action plan on corporate tax avoidance in July
By Finfacts Team
May 31, 2013 - 8:18 AM

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Ireland's representative at the OECD meetings this week, was possibly sent to Paris to engage in a charm offensive to soften planned proposals on curbing corporate tax avoidance.

The OECD will deliver an action plan on corporate tax avoidance in July to the G-20 group of the world's 19 leading advanced and emerging economies.

The G-20 requested the plan from the Organisation for Economic Cooperation and Development, the Paris-based think-tank for 34 mainly advanced countries, including Ireland.

"We need to take actions which should be coordinated, comprehensive and quick," said Pascal Saint-Amans, head of tax policy at the OECD, as finance ministers met in Paris this week to discuss the issue.

"I am very confident that we can work together and make progress. This is very challenging work, more challenging than fighting tax evasion as it involves reforming the entire international tax system," added Angel Gurría, the OECD secretary general.

Against a backdrop of austerity, international attention on massive tax avoidance by some of the world's leading brands, such as Apple,  Google, Amazon, Microsoft and Starbucks, has put pressure on politicians for action, in the big European markets and Australia.

Saint-Amans, said that 12 recommendations would be made with an aim to agree an overhaul in two years, possibly with a new multilateral tax convention or rewriting existing bilateral treaties en masse.

"My assessment is that there is strong consensus on what we will come up with," Saint-Amans said at a press briefing on Thursday. He added that so far there was not any one area of change that countries had flat out rejected, and said some countries might want to go even further than the OECD's proposals.

The proposals will include the issue of cross-border transactions between affiliates known as transfer pricing and the OECD would also address the problem of how to value intangible assets like royalties that affiliates pay to sister firms in tax havens.

"We have to ask: is the royalty too high and is it going to the wrong place?" Saint-Amans said. "A royalty should be charged from the place where it was developed."

On Wednesday, Switzerland withheld its signature on a new convention on mutual administrative assistance in tax matters because it wants to “keep all options open,”  Johann Schneider-Ammann, economics minister, told journalists in Paris. However, the Swiss government will think about joining, he said.

The agreement drawn up by the OECD provides for the automatic exchange of information between states in tax matters. It was signed by a further 12 countries on Wednesday.

Among the latest signatories are Austria, Luxembourg and Singapore, all of whom are traditionally as wary as Switzerland about fiscal cooperation.

In all, about 60 states have signed: not only the major European countries and the United States, but also territories with a reputation for opacity, such as Belize, Malta and several Caribbean islands.

Also on Wednesday, the Swiss government agreed that Swiss banks should be allowed to pass on more confidential information to the United States authorities to clear up the ongoing tax evasion row between the two countries.

The breach of banking secrecy is a hugely controversial issue in Switzerland and the Swiss parliament will be presented with two bills in June that aim to deal with existing US tax dodgers and measures to prevent future evasion.

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