OECD under pressure to devise new corporate tax regime

Paris-based thinktank co-ordinating international tax agreements expected to publish strategy document this week

The pressure is on OECD secretary-general Angel Gurría to formulate a taxpayers' charter that resolves the current disputes over corporation tax payments.

The Paris-based thinktank has accepted various duties over the years, and co-ordinating international tax agreements is one of them.

On Wednesday all eyes will be on its HQ near the Eiffel Tower, where it is expected to publish its latest paper on the subject, and, within its wordy shell, present a coherent strategy.

Google boss Eric Schmidt claims all he wants is a level playing field. He says his firm must play the system to minimise tax and use every available lever to please its shareholders. Only when the rules clearly stop him will he resist the temptation to end his tax dodging ways.

Google boss Eric Schmidt, who says his company complies with all British tax law.

 The problem centres on the role royalties play in international company structures. At the moment Google can charge its various subsidiaries a royalty for using its brand and a host of other goodies developed in California. Stopping this legitimate practice is going to be difficult.

In the past the OECD has proposed moving away from corporation tax in favour of sales taxes and wealth taxes, which would apply to a good deal of the assets and transactions carried out by corporations such as Google.

But whatever scheme is devised will need to win international support. Just a couple of weak links would undermine the entire project. Ireland, for instance, is unapologetic, despite the many recent examples that show US companies fail to even pay the 12.5% corporation tax Dublin charges. Turkey has long given up any pretence of charging foreign companies corporation tax. Even manufacturers can escape as long as they export their goods.

For every country that can say it is tough on international businesses, such as Norway, there are 10 that turn a blind eye.

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Article source : http://www.guardian.co.uk