Arun Jaitley | Photo: Suryakant Niwate
Finance ministers from India and other G-20 countries have endorsed the final detailed plan for putting in place a coherent and transparent global tax regime to curb artificial profit-shifting ways. Once implemented, the steps would bolster India’s efforts to prevent tax avoidance and illegal fund.
At the G-20 finance ministers meeting here, also being attended by Finance Minister Arun Jaitley, the final package of measures for a comprehensive, coherent and co-ordinated reform of the international tax rules was approved.
In a statement on Friday, the Paris-based think-tank Organisation for Economic Cooperation and Development (OECD) said at the meeting, chaired by Turkish Deputy Prime Minister Cevdet Yilmaz, the G-20 finance ministers expressed strong support for the Base Erosion and Profit Shifting Project.
Earlier this week, the OECD came out with the final detailed action plan for coherent and transparent international taxation norms for multinationals. Artificial profit shifting activities are estimated to be causing up to $240 billion loss annually.
The OECD/G-20 project provides governments with solutions for closing the gaps in existing international rules that allow corporate profits to be artificially shifted to low or no tax environments where little or no economic activity takes place.
The ministers also “renewed a commitment for rapid, widespread and consistent implementation of the BEPS measures and reiterated the need for the OECD to prepare an inclusive monitoring framework by early-2016 in which all countries will participate on an equal footing,” the statement noted.
Measures under the BEPS project will be discussed at the G20 heads' meeting to be held in November in Turkey.
Undertaken at the request of the G20 leaders, the work to address BEPS is based on the 2013 G20/OECD BEPS Action Plan, which identified 15 steps to put an end to international tax avoidance.
OECD Secretary General Angel Gurria said base erosion and profit shifting is sapping economies of the resources needed to jump-start growth, tackle the effect of global economic crisis and create better opportunities for all.
According to OECD, revenue losses from BEPS are conservatively estimated at USD 100-240 billion annually, or anywhere from 4-10 per cent of global corporate income tax (CIT) revenues.
"Given developing countries' greater reliance on CIT revenues as a percentage of tax revenue, the impact of BEPS on these countries is particularly significant," it added.
The final package measures include new minimum standards on country-by-country reporting, treaty shopping and curbing harmful tax practices.
The standards on treaty shopping are aimed to end the use of conduit companies to channelise investments.