An international collaboration on tax reform, led by the G20 nations takes aim at the measures that world's largest global corporations adopt to avoid trillions of dollars in taxes (See: Big US firms hold $2.1 trillion in tax havens: study).
The two-year reform programme, under the auspices of the Organisation for Economic Co-operation and Development, comes following a series of revelations in recent years about the tax affairs of multinationals including Starbucks, Google and Amazon.
In addition to the final batch of reforms, published yesterday, the OECD released what it said were ''extremely conservative'' estimates suggesting large global businesses were shifting profits and eroding the tax receipts of economies around the world at a cost of $100 billion-$240 billion a year – equivalent to between 4 per cent and 10 per cent of global corporation tax revenues.
With corporates adopting increasingly aggressive tax avoidance measures, countries had been forced to rely more heavily on other taxing options where there was less scope for shifting income abroad – including taxes on workers' pay and sales taxes such as VAT.
''[The reforms will help] move away from an era when tax planning had become part of core business models,'' said Pascal Saint-Amans, the OECD's tax director who had led the two-year reform programme, with support from 60 countries representing over 90 per cent of the world's economy, The Guardian reported.
''Value creation [should be] the core business of industry. Tax planning should just be some supportive, marginal activity … The tax world will not be the same.''
Google's funnelling of profits via a labyrinth of holding companies to Bermuda, which had zero tax rate had been branded as 'immoral' by UK MPs.
"This is coming to an end," Saint-Amans said yesterday as he outlined changes he said would help 'local companies that cannot benefit from loopholes in the international system', Mailonline reported.
''Most multinationals are likely to be affected in some way,'' said Stella Amiss of accountancy giant PwC.
''The OECD achievement should not be underestimated. Today's package of reforms achieve far more consensus and progress than many expected.''
According to Saint Amans, the current rules, many of which dated back to the 1930s, were'not fit for purpose' and had led to 'more and more aggressive planning from companies'.
The new rules will have 'a major behavioural impact' on large firms, he said.