Multinational companies and the "digital economy" are pushing the world into tax chaos

The world is threatened with "global tax chaos" due to the inability of countries to deal with multinational companies and the "digital economy", according to the G20 report.

A report prepared for the G20 meeting by the Organization for Economic Co-operation and Development (OECD) said decisive and bold cuts were needed to prevent the situation from worsening and for governments to tackle the "floating business" of firms that shift profits to countries with low tax rates.

"This is now a pivotal moment in the history of international cooperation on tax issues," the report said.

The OECD action plan contains 15 initiatives that would equip tax authorities around the world with the tools to combat some of the moves that country leaders see as the "most widespread abusive practices" used by multinational companies.

These are serious changes to international tax agreements, which should be implemented in a period of one to two and a half years.

The changes should take into account new business methods, the "digital economy" and its consequences, i.e. the ease of capital "flyover".

Among the proposals is a requirement that large companies with large warehouse networks such as Amazon, which is often criticized for widespread tax avoidance, pay much higher local taxes.

It also called for tougher taxation of what large companies currently report as "intangibles" and exclusively in "tax havens" - such as strong brands and intellectual property.

The OECD states that governments should work together to harmonize outdated tax systems, which have been in place since the XNUMXs, to prevent large investors from "parking" huge sums in tax havens.

How to stand in the way of multinational companies: Venue of the G20 meeting (Photo: Reuters)

"New international standards are needed to ensure the harmonization of corporate income taxation at the international level," says the OECD.

Finance ministers and central bank governors of the G20 countries hope to reach an agreement on solving the problem of tax evasion during negotiations today and tomorrow in Moscow.

Actions proposed by the OECD include requirements for taxpayers to disclose their financial plans to fiscal authorities.

Among the companies that found themselves in the public spotlight last month for their legal but controversial methods of calculating profits are giants like Google, Amazon and Starbucks.

"Fundamental changes are needed to avoid double non-taxation. Governments should continue to work together to combat harmful tax practices," says the OECD.

Tax evasion and division over the state of the global economy, at a time when developing markets are slowing down, are the main topics of the meeting in Moscow, organized ahead of the G20 summit, which will be held in St. Petersburg at the beginning of September.

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