LONDON: Plans for a major rewriting of international tax rules unveiled on Tuesday could eliminate structures that have allowed companies like Google Inc and Amazon.com Inc to shave billions of dollars off their tax bills.

The Organisation for Economic Co-operation and Development (OECD) announced a series of measures that, if implemented by members, could stop companies from employing many commonly-used practices to shift profits into tax havens.

Corporate tax avoidance has become a hot political topic following media coverage and parliamentary investigations into the arrangements many big companies use to cut their tax bills.

Also read: Tax reforms commission on the cards

Amazon and Google say they pay all the taxes they should. Analysts say competitive pressures force companies to seek to minimise all costs, including tax.

Last year, the Group of 20 leading economies asked the OECD to develop an action plan to tackle the problem.

Big U.S. technology companies could be those most affected by the OECD’s plans but others could also be impacted including pharmaceuticals and branded consumer goods, as well as many European companies.

The draft proposals announced have been agreed by all G20 members and OECD members, which include most major industrialised countries, the OECD said in a statement.

But the measures form part of a larger ‘(tax) base erosion and profit shifting’ programme that will conclude next year. Only then will countries look at enshrining the results of the programme in law.

For more than 50 years, the OECD’s work on international taxation has been focused on ensuring companies are not taxed twice on the same profits. The fear was that this would hamper trade and limit global growth.

Over the years, the OECD has formulated a standardised model tax treaty which allows countries to split taxation rights and avoid double taxation, partly by providing reliefs from measures intended to stop tax avoidance, like withholding taxes.

But companies have been using such treaties to ensure profits are not taxed anywhere.

For example, search giant Google takes advantage of tax treaties to channel more than $8bn in untaxed profits out of Europe and Asia each year and into a subsidiary that is tax resident in Bermuda, which has no income tax.

Google Executive Chairman Eric Schmidt has said changes to tax rules that increased its tax bill would hit innovation.

The OECD’s proposals would make amendments to its model treaty so that cross-border transactions would not benefit from the reliefs in tax treaties if a principal reason for engaging in the transactions was to avoid tax.

“We are putting an end to double non-taxation,” OECD head of tax Pascal Saint-Amans said in a call with journalists.

The think tank, which also advises members on economic policy, also wants curbs on how much profit companies can report in centralised inter-company lending and purchasing arms, which are often based in tax havens.

Where such subsidiaries generate large profits on the back of intra-company trade, the OECD said the profits should be shared across the group.

This could hit UK telecoms provider Vodafone Group Plc , which has a Luxembourg subsidiary that buys telephone equipment for the group.

Published in Dawn, September 17th, 2014