G20 Agree on International Tax Rules

Bold updates to international tax rules designed to force some of the world’s biggest multinationals – including Google, Apple, Amazon, Vodafone and GlaxoSmithKline – to contribute their fair share towards government budgets are to be agreed by G20 countries this weekend.

A package of draft rules and progress reports, published on Tuesday by tax experts from the Organisation for Economic Cooperation and Development (OECD), marks the halfway milestone in a two-year reform project which was set in train by world leaders in Moscow last summer.

Many of the world’s largest and best known corporations now face being forced to rapidly dismantle their elaborate cross-border corporate structures as governments move in unison in an attempt to corral them back within a joined-up and modernised network of international tax treaties.

If nerves hold among the 44 countries involved – G20 and OECD members, and others, together representing 90% of the world’s economy – the impact on both corporate profits and treasury receipts could be significant in many economies, large and small.

Meanwhile, nations that have courted multinationals with tax-friendly regimes – Bermuda, Ireland and Luxembourg among them – could suffer an investment exodus.

Existing international tax rules, laid down in a network of about 3,000 bilateral tax treaties between nations, have for decades been straining to keep up with innovations in technology and tax avoidance. The OECD has described the G20 reform programme as being urgently required “to prevent existing consensus-based international tax framework from unravelling”.

Among the initiatives OECD experts claim will have the most impact are new rules to combat arbitrage structures that exploit differences between tax regimes to conjure up unwarranted tax deductions.

These so-called hybrid mismatch structures are thought to cause billions to leak from treasury coffers around the world each year and are routinely deployed by the world’s largest international businesses.

via The Guardian

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza