Global corporations face shifts in tax laws

Posted on February 7, 2016 by ATB Chartered Accountants
INTERNATIONAL TAX LAWS ARE CHANGING THE STRUCTURE AND OPERATIONS OF GLOBAL CORPORATIONS.

In recent months, global corporations have been facing increasing levels of public scrutiny in regards to how little tax they are paying, and the tactics they are using in order to avoid paying the amount they should be.

The Organisation of Economic Co-Operation and Development (OECD) is orchestrating the movement to stop the tax avoidance methods used by international businesses, following a push from the governments involved in the G20.

Living in a digital age has made it easier for global trade to operate, however it has also allowed leeway for large corporations to seek out tax loopholes in different countries. In 2013-14 for example, the ABC reported that in Australia companies such as Apple paid approximately $74 million in tax, accounting for 1% of their total income, and Google paying approximately $9 million. These companies as well as countless others are able to avoid proper tax payments through their business structuring and the use of tax havens.

The pending tax legislation changes by the OECD will enable specific countries to strengthen their tax laws in order to lessen the tax loopholes available. The Base Erosion and Profit Shifting (BEPS) project run by the OECD has coordinated the reform of tax laws, leading to a channel where information is able to be exchanged between various authorities to monitor the movements of global corporations’ profits. BEPS will provide taxation authorities with guidance on how countries can modernise their tax to effectively stop profit shifting.

The OECD have estimated that between 4-10% of global corporate revenues, equivalent to US$100-240 billion is being lost by authorities annually.