Present tax rules need to be updated as they could be “abused” to some extent by the multinational companies, as according to the Organisation for Economic Co-operation and Development (OECD).
A plan is launched for updating and coordinating the national laws of tax.
There happened to be criticism in UK earlier in this year at the time it became known that Google, Amazon and Starbucks paid less tax in spite of having big operations in UK.
Following the criticism, Starbucks did agree on paying more tax.
OECD came with this plan at request of G20 group that is of the leading nations. Ministers of finance from G20 are having meeting at Moscow.
Closing The Gaps:
Secretary-general of OECD, Angel Gurria, told, “International tax rules, many of them dating from the 1920s, ensure that businesses don’t pay taxes in two countries – double taxation. This is laudable, but unfortunately these rules are now being abused to permit double non-taxation.”
It’s calling for the greater co-operation internationally for closing the gaps which allows the income to vanish for the purposes of tax.
OECD also told that the tax income needs to reflect the economic activity that it generates.
This would address the criticism which is aimed at the big companies.
In the beginning of this year, UK MPs fiercely criticised Google for routing the £3.2bn sales of UK through Dublin as well as paying less tax due to that.
Starbucks is questioned for transfer of money to some sister company, which is Dutch, in the royalty payments.
Tim Cook, the chief executive of Apple was questioned from the lawmakers of US regarding billions of the dollars that his company does keep in the Irish divisions.
Companies say that such schemes are quite legal and also, they have this duty toward their shareholders of minimising the tax bills.
The Corporate Responsibility:
David Cameron, the British PM said that he was very delighted that OECD produced this report.
He said that the governments, taxpayers and the businesses suffer when the companies manipulate tax system in order to avoid payment of their fair taxes’ share.
OECD hopes that its recommendations would be put in action over next 2 years and it is working over a legal structure at international level which would help the countries in introducing new rules at great speed.
Business ethics’ professor at University of St. Gallen, Florian Wettstein, said that the multinationals still haven’t grasped that honesty regarding is corporate responsibility’s integral part. Florian also said that due to this, public increasingly does perceive them to be untrustworthy and hypocritical.
The campaigners think that the aggressive policies of tax are especially hard for poorer nations, the ones who need all tax revenue which is generated.
Manager of tax campaigns of ActionAid, Chris Jordan, told that for developing countries which lose many billion dollars every year to the aggressive avoidance of tax, stakes could not be higher. He also said that it is vital for them to have one seat at table, so the tax rules globally are not stitched up due to major powers.