The Philippines is taking part in a global move to weave bilateral tax treaties into a bigger web meant to catch tax evaders among multinational companies, Bureau of Internal Revenue (BIR) Commissioner Kim S. Jacinto Henares said.
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The Organization for Economic Cooperation and Development released Monday a plan that, among other things, aims to end tax shelters and require companies to pay taxes in the countries where they earn profits.
The good news is up for the central government to pull together much higher taxes from the multinational companies.
Countries aren’t required to follow the OECD’s recommendations, but many adopt the group’s guidelines as their own worldwide tax rules.
This BEPS package represents two years of work, and the co-operation of 60 countries, as well as regional tax associations and global organisations. Its success now depends on all countries being willing and able to see its implementation through. Artificial profit shifting activities are estimated to be causing up to $240 billion loss annually.
The ministers reached the agreement against a backdrop of concern about weak economic growth, tight government finances and media reports on the tax structuring used by companies including Starbucks and Google that have spurred public anger in Europe and the United States in recent years over tax avoidance. But it’s also important for stagnant economies in Europe and elsewhere that are struggling to tax major global companies that make their money online. It introduces updated guidance on the application of transfer pricing rules.
We will look closely at the final BEPS recommendations and consider what further steps need to be taken to strengthen Australia’s laws.
In relation to the new OECD proposals Toby Quantrill added: “Despite being clear what the problem was, any potential the OECD experts had to recommend effective solutions has been thwarted [by]governments’ unwillingness to stand up to multinationals and the tax avoidance industry”.
The opposition’s proposed changes to our thin capitalisation rules, including the removal of access to the arm’s length debt test, would increase the cost of capital in Australia, which would negatively affect economic activity and, as a outcome, cost jobs. Here it will be up to countries such as Luxembourg whether or not to apply the OECD’s recommendations.
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Brett Weaver, partner, worldwide Tax, and national leader of Tax Transparency Services, KPMG LLP.
