Crackdown on corporate tax avoidance

An initiative by the Organization for Economic Co-operation and Development (OECD) on Wednesday resulted in the signing of a landmark treaty aimed at cracking down on international tax avoidance.

OECD chief Angel Gurria called the agreement among almost 70 nations "a turning point in the history of tax treaties."

German Finance Minister Wolfgang Schäuble said the fight against dubious tax arrangements by international companies could only be won by concerted action involving the international community.

Signatories include the EU's 28 member countries, but also India, China and Australia. By contrast, the United States did not ink the treaty, confirming its longstanding misgivings about multilateral accords and perhaps due to difficulties of ratification in the Senate, the "Financial Times" argued.

Better deal for taxpayers

The newspaper pointed out Wednesday's treaty was part of an initiative launched by the G20 group of leading nations to tackle base erosion and profit shifting, that is tax avoidance strategies involving the shifting of profits to low or no-tax jurisdictions.

The accord is designed to curb the so-called practice of "treaty shopping," that is channeling income to countries with attractive national tax treaties, although the companies in question may show little presence on the ground beyond a mere mailing address.

International estimates show that governments around the world lose up to $240 billion (213 billion euros) yearly as a result of such individual arrangements.

Increased efforts to crack down on corporate tax avoidance have come in the wake of a public backlash over dubious practices by the likes of Amazon, Apple and Google.

hg/jd (dpa, Financial Times)