Global watchdogs crack down on multinationals’ tax practices

Patrick Marley

Sept 20, 2014

Jeff Gray, Globe and Mail

(Recap)

As the finance ministers and central bank governors from the world’s 20 largest economies gather in a convention centre in the Australian city of Cairns this weekend, anti-capitalist protesters will likely accuse them of doing the bidding of the globe’s all-powerful multinational corporations.

But the Group of 20’s financial chieftains will actually be discussing proposals that even those wearing balaclavas might appreciate: A sweeping plan to squeeze billions of dollars more in taxes from the world’s largest companies.

The proposals, called “revolutionary” and “historic,” aim to plug the gaping loopholes in the international tax system that allow multinationals to slide substantial profits into tax havens or low-tax countries, depriving governments of badly-needed revenue.

The reforms have been developed on a tight timetable and they have largely been agreed to by delegates from 44 countries consisting of member states of the Paris-based Organization for Economic Co-operation and Development and the G20. They have clearly put on notice the cadre of international tax lawyers and tax planners who craft the complex structures companies use to minimize their tax burdens.

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OECD officials, pointing to support from the G20 leaders who called for the proposals, insist their plans will finally end abusive tax planning and align taxation with where economic activity takes place, and value is created.

But Patrick Marley, a former Canadian Finance Department official and a tax lawyer with Osler Hoskin & Harcourt LLP, said there is a large gap between drawing up grand plans and actually implementing them. “The whole project could result in a major change for all companies engaged in cross-border transactions,” Mr. Marley said. “The reason I am hedging that and saying ‘could’ is because it’s still a bit too early to tell whether the ultimate result of this will go the way of the [failed] Kyoto accord on climate change.”

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