With artificial profit shifting causing an estimated USD 240 billion annual loss, Paris-based OECD today came out with the final detailed action plan for coherent and transparent international taxation norms for multinationals.
The final set of measures, which has been announced after extensive discussions over the years, also comes at a time when countries, including India, are looking for ways to curb tax evasion and illegal fund flows.
The steps, which are aimed at ensuring a "comprehensive, coherent and co-ordinated reform of the international tax rules", have been prepared by the Organisation for Economic Cooperation and Development (OECD), which sets the global taxation standards.
Unveiling the plan, OECD said revenue losses from Base Erosion and Profit Shifting (BEPS) are "conservatively estimated at USD 100-240 billion annually, or anywhere from 4-10 per cent of global corporate income tax (CIT) revenues".
Given developing countries' greater reliance on CIT revenues as a percentage of tax revenue, the impact of BEPS on these countries is particularly significant, it said in a statement.
This package of new standards will be discussed at this week's meeting of G20 Finance Ministers and Central Bank Governors in Peru, which will also be attended by Finance Minister Arun Jaitley. The meet is scheduled for October 8.
The OECD/G20 project on BEPS provides governments with solutions for closing the gaps in existing international rules that allow corporate profits to artificially shift to low or no-tax environments, where little or no economic activity takes place.
OECD Secretary-General Angel Gurria said BEPS is depriving countries of precious resources to jump-start growth and tackle the effect of the global economic crisis.
"BEPS has been also eroding the trust of citizens in the fairness of tax systems worldwide.
"The measures we are presenting today represent the most fundamental changes to international tax rules in almost a century: they will put an end to double non-taxation, facilitate a better alignment of taxation with economic activity and value creation, and when fully implemented, these measures will render BEPS-inspired tax planning structures ineffective," Gurria said in a statement.
The proposed new standards will help countries such as India, which has been making efforts to bring back black money stashed abroad by its citizens.
Undertaken at the request of the G20 leaders, the work to address BEPS is based on the 2013 G20/OECD BEPS Action Plan, which identified 15 steps to put an end to international tax avoidance.
