LIMA: Finance ministers from the world’s leading economies gave the green light on Friday to a new plan to crack down on tax evasion by multi-national corporations which costs countries at least $100 billion a year.

The so-called Base Erosion and Profit Shifting (BEPS) plan, which seeks to close the loopholes multi-nationals use to avoid taxes, was adopted by finance ministers from the G20 group of leading industrialised and emerging economies at a meeting in Lima, Peru.

G20 leaders must now give final approval at a summit in November in Turkey, although the initiative was swiftly dismissed as lacking bite by one prominent critic.

The 15-point plan aims to tackle low tax bills for the likes of Google, Apple and McDonald’s, which have managed to sharply reduce their taxes while remaining within the law, provoking public outrage in recent years.

Turkish Deputy Prime Minister Cevdet Yilmaz, who announced the G20 decision, called it a “historic moment” for the fight against tax evasion.

He said the plan addressed a “very comprehensive set of issues” including profit-shifting across borders, corporations’ use of no-tax status in multiple countries and the digital economy.

“These are very complicated issues that required an extensive technical effort and a hard-to-build consensus in some cases,” he told a press conference in Lima, where finance ministers and central bank governors from around the world are gathered this week for the annual meetings of the International Monetary Fund and World Bank.

But the work on consensus-building has only just begun.

Preventing companies from shifting profits to low-tax jurisdictions and debt to high-tax jurisdictions will require “a very large group of countries,” particularly developing nations, to get on board with the plan, Yilmaz said.

International charity Oxfam has criticized the plan as a “toothless” package that will do nothing to stop poor nations being cheated out of billions of dollars.

“Rich governments are all bark and no bite when it comes to corporate tax dodging,” said Oxfam’s Manon Aubry when the plan was announced on Monday.

But the author of the long-awaited initiative, the Organisation for Economic Cooperation and Development (OECD), said it would give governments across the board a much-needed fiscal boost.

“Base erosion and profit shifting is sapping our economies of the resources needed to jump-start growth, tackle the effects of the global economic crisis and create better opportunities for all,” said OECD Secretary-Feneral Angel Gurria.

GLOBALISATION LOOPHOLES: The man who supervised the drafting of the plan, the OECD’s Pascal Saint-Amans, has said it means “playtime is over” for tax-dodging multi-nationals.

The OECD calculates that national governments lose $100bn to $240bn a year, or four to 10 per cent of global tax revenues, because of companies that game the system.

The plan, which applies to international companies with revenues of at least 750 million euros, seeks to make them pay tax in the country where their main business activity is based.

“It’s not about paying low or high taxes, it’s about paying your taxes,” said British finance minister George Osborne.

Published in Dawn, October 10th , 2015

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