The OECD Initiative to Counter Tax Avoidance after the Global Financial Crisis

Abstract

Since the global financial crisis in 2007, the international tax landscape has been transformed significantly under the initiative of the OECD/G20 to counter international tax avoidance. This change in the international tax regime can be explained in two aspects: first, Transparency and Exchange of Information in Tax Matters(EOI); second, Base Erosion and Profit Shifting(BEPS) project. The EOI in taxation has become a global standard since the reorganization of global forum in 2009 with more than 100 jurisdictions participating and being subject to peer review process on their EOI system and practices. A more notable development is a continued expansion of the membership in the Multilateral Convention on Mutual Administrative Assistance in Tax Matters which makes a wide range of tax cooperation including automatic EOI possible. If the current trend is any guide, the final and common mode of information exchange will be a multilateral and automatic EOI. Given the perception that both advanced and developing countries lose substantial tax revenue by the MNEs' profit shifting practices for tax avoidance purposes, OECD's BEPS project has been launched under the support of the G20. The initial report of the OECD in early 2013 raises issues and indicates the problems to be addressed by the governments in a globally coordinated manner. Currently, the OECD is working on comprehensive and specific action plans to address key pressure areas such as cross-border mismatches, digital goods and services trade, transfer pricing and anti-avoidance measures, etc. When the action plans are reported to the G20 in the latter half of 2013, we will be able to estimate the potential relevance of the project to the current international tax regime. With these two developments in mind, one can cautiously conclude that a new multilateral international tax order in which developing countries are more actively engaged will emerge as a supplement to the current bilateralism in international taxation.