OECD and G20 pursue efforts to curb multinational tax avoidance and offshore tax evasion in developing countries

The OECD and its Global Forum on Transparency and Exchange of Information have today been mandated by the G20 to develop toolkits to support developing countries addressing base erosion and profit shifting (BEPS) and to launch pilot projects to assist them to move towards automatic exchange of information. This mandate comes in response to two reports:

• Report on the Impact of Base Erosion and Profit Shifting in Low Income Countries (Part 2); and
• Roadmap for developing country participation in the new global standard for the automatic exchange of information between jurisdictions.

The G20 communiqué issued yesterday sets out an ambitious agenda for developing countries to take advantage of the tax reforms that have taken shape in 2014.

The OECD will report to the G20 Leaders in November on its plan to deepen the involvement of developing countries in the OECD/G20 BEPS project and ensure that their concerns are addressed.

BEPS in Low Income Countries

Following-up on the release of the first set of BEPS recommendations last week, this new report recognises that the risks faced by developing countries from BEPS, and the challenges faced in addressing them, may differ to those faced by advanced economies. It draws on extensive consultations with developing countries to discuss BEPS issues which are a key priority to them, for example transfer pricing and the abuse of tax treaties, as well as issues that are not part of the BEPS Action Plan, such as tax incentives which may erode the tax base in the developing world but do little to attract inward investment.  

Acknowledging that developing countries face specific policy issues and implementation challenges that are not always shared with developed countries, the report sets out areas where additional guidance and tools are required to ensure that the BEPS outcomes fully benefit lower capacity countries. It also highlights the actions developing countries have taken, many with international support, that indicate there are good opportunities to raise additional revenues from addressing BEPS issues and to create a more certain and stable investment climate for business.

Speaking from Cairns, Pascal Saint-Amans said: "This report demonstrates that we are serious about pursuing the dialogue with developing countries on BEPS and giving them a seat at the table. We will continue to work towards finding a coherent global solution ensuring that the revised international tax rules reflect the needs of both developed and developing countries."

Roadmap for developing country participation in AEOI

The Roadmap points the way to developing country participation in the new standard on automatic exchange of information. Drawing on the Global Forum’s extensive consultations with developing countries, the World Bank Group, other international organisations and civil society, the Roadmap provides a stepped approach to ensuring developing countries can overcome obstacles in implementing the new standard. It identifies the benefits, costs and the fundamental building blocks that developing countries need in order to meet the standard.

Pilot projects with developing countries are one of the key ways in which the Roadmap will be implemented. The pilot projects will take a progressive approach to implementation, with a focus on meeting the particular needs of each developing county pilot and ensuring that all confidentiality standards are reached. The pilot projects will be undertaken with the support of the World Bank Group and G20 countries, and include partnerships with more experienced countries. The results of these pilot projects will help to redress the knowledge imbalance between tax administrations in developing countries and tax evaders.

Over half of the Global Forum’s 121 member jurisdictions are developing countries and stand to benefit from the Roadmap and its implementation.