Tax "Little gain for developing countries", warns first analysis of OECD corporate tax proposals
"International Corporate Tax Reform: Towards a fair and comprehensive solution" and "Global inequalities in taxing rights: An early evaluation of the OECD tax reform proposals", released reports by ICRICT and TJN, have shed doubt on the benefits of the OECD led process and its current proposals to be published on 9 October.
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The Tax Justice Network (TJN) report is the first analysis of the country level effects of the reform proposals. Whilst supporting the first shift away from the arms length principle, the report notes that the OECD preferred option results in a mere 5% drop in the profits registered in tax havens. Even the IMF preferred model will drop the profits by 43% says the study.
Meanwhile the Independent Commission for the Reform of International Corporate Taxation (ICRICT) has launched its own declaration supporting its preferred model. The TJN study indicates that similar models will reduce the profits registered by 60%.
The main difference is that the ICRICT proposal shares the profits on the basis of where sales and workers are whereas the OECD preferred model only uses sales.
This clearly benefits rich countries which have more sales, but have outsourced the work to the developing world.
PSI's Assistant General Secretary Daniel Bertossa says "if the OECD is serious about respecting its own principles to tax where economic activity takes place, then it must include a workforce factor".
Daniel Bertossa
If it is good enough for multinational corporations to locate their production facilities in the developing countries, then they should at least pay the workers a decent wage and pay taxes in the countries they are benefitting from"