ICRICT advocates international corporate, tax system review
8 hours ago
January 22, 2019
The Independent Commission for the Reform of International Corporate Taxation (ICRICT) has advocated the review of international corporate tax system, including the energy tax administration.
The agency, which said this in a report sent to New Telegraph, added that by not collecting the revenue that is being lost through tax avoidance schemes by multinationals, governments are failing in their obligation to mobilise all available resources towards the realisation of economic, social and cultural rights.
“The most shocking aspect of multinational tax avoidance is the fact that it is legal,” the ICRICT said.
Multinationals, it continued, “fix the prices of transactions between their subsidiaries to guarantee that their revenues are taxed in countries where tax rates are lower – and not where their economic activity and the creation of value really take place. It is called the “transfer pricing system”
“This way, they are able to concentrate enormous profits in just a handful of tax havens thanks to a powerful industry of intermediaries – banks, consultants and law firms.”
These taxes that are dodged, according to the agency, are compensated for with higher contributions from the middle and working classes. It is toxic for democracy and contributes to the kind of populist backlash that allows authoritarianism to flourish, as we see today.
“In 2012, the G20 called on the Organization for Economic Cooperation and Development (“OECD”) to reform the international corporate tax system through the Base Erosion and Profit Shifting (“BEPS”) initiative and associated processes. In 2015, a package of reforms was unveiled by the OECD. The reform process was only afterwards open to non-G20 countries, including developing economies, within what is called the “Inclusive Framework”
“BEPS has resulted in helpful solutions for some of the most shocking tax avoidance mechanisms. For example, it introduced country-by-country reporting of profits and taxes paid by the largest multinationals, and an exchange of information among countries.
“But the project failed to address the core problem, which is the transfer pricing system itself. This still allows companies to move their profits wherever they want and to take advantage of very low tax jurisdictions,” the repot read.
“As a commission, we believe that the OECD BEPS Process has achieved what it could, within the constraints of politics driven by big corporations. We therefore urge governments represented in the Inclusive Framework, the UN Tax Committee and all multilateral institutions involved in efforts to reform the international tax system, to evaluate alternatives to the transfer pricing system,” ICRICT said.