Global Policy Forum

The BEPS Process: Failing to Deliver For Developing Countries

actionaid_logo2ActionAid UK has released a report that outlines why the OECD’s base erosion and profit sharing (BEPS) project, which aims to put a halt to tax dodging, will not work to the benefit of poor countries. Three reasons for this are identified: BEPS sidesteps many important issues for poor countries, developing countries are not part of the negotiations around new international tax rules, and the proposed BEPS solutions are weak and in many cases impractical. This report comes in the wake of the OECD’s launch of the 2014 BEPS deliverables as part of its Action Plan on BEPS, which has largely been met with criticism from civil society.

September 16, 2014 | Action Aid

The BEPS process: failing to deliver for developing countries

In 2013, spurred by revelations of tax dodging by some of the world’s biggest corporations such as Starbucks, Google and Amazon, public anger grew at the injustice of the current global tax system. G8 governments responded by promising at the G8 Meeting in Lough Erne in 2013 to make the international tax system fairer and to close the tax loopholes that help big companies avoid paying tax. As part of this, the G8 and subsequently the G20 made a strong commitment that these changes would benefit developing countries, which are currently systematically deprived of tax revenue by corporate tax dodging.  This revenue could pay for the schools, hospitals and roads those countries need.

Following the Lough Erne commitments to tackle these injustices, in July 2013 the G8 and G20 mandated the Organisation for Economic Co-operation and Development (OECD), a grouping of 34 of the world’s richest countries, with leading on ‘base erosion and profit shifting’ (BEPS) process which aims to update the international tax system. The main output of this process so far has been the OECD’s Action Plan on BEPS, which identified 15 specific actions the organization saw as necessary to equip governments with the domestic and international instruments to address various forms of tax dodging. Yet now a year into the two-year process we see that it is not delivering on the promises made to developing countries. This is for three main reasons: BEPS sidesteps some important issues for developing countries, poor countries are not at the decision-making table, and the BEPS actions so far are weak.

In light of this, ActionAid UK is asking the UK government to:

• Ensure the BEPS process becomes more transparent from now, including removing the secrecy around the negotiations of Action 5 on the process on harmful tax regimes.

• Carry out a thorough and well-resourced ‘spillover’ analysis, looking at the negative effects of the UK’s own tax rules on other countries, especially developing countries, as called for by the G20’s 2013 St Petersburg Declaration (and as already undertaken by the Netherlands and Ireland).

• Recognise that there are other bodies with wider international reach – such as the UN Committee of Experts on International Co-operation in Tax Matters – where important discussions on the future of international tax rules are taking place and consider actively boosting the UN Committee’s funding and status.

• Acknowledge that the BEPS process is unlikely to produce the results that developing countries need to adequately protect their tax bases, and articulate a timeline for the further reforms that will be needed after the BEPS process is concluded to ensure this is addressed. Negotiating such reforms should include developing countries as equal negotiating partners.

For the full report, see here.


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