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International Community Agrees on a Road Map for Deal on Taxing Multinational Firms

Companies like Google, Facebook and Amazon are able to cut tax bills by booking profits in low-tax countries

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International Community, Roadmap
"Important progress has been made through the adoption of this new Programme of Work. Pixabay

A total of 129 countries and territories have adopted a “Programme of Work” laying out a process for reaching a new global agreement for taxing multinational enterprises, the Organisation for Economic Co-operation and Development (OECD) said on Friday.

The roadmap aims to resolve the tax challenges arising from digitalisation of the economy.

The Programme of Work will explore the technical issues to be resolved through two main pillars.

The first pillar will explore potential solutions for determining where tax should be paid and on what basis (“nexus”), as well as what portion of profits could or should be taxed in the jurisdictions where clients or users are located (“profit allocation”).

International Community, Roadmap
The roadmap aims to resolve the tax challenges arising from digitalisation of the economy. Pixabay

The second pillar will explore the design of a system to ensure that multinational enterprises – in the digital economy and beyond – pay a minimum level of tax.

This pillar would provide countries with a new tool to protect their tax base from profit shifting to low/no-tax jurisdictions, and is intended to address the remaining issues identified by the OECD/G20 Framework on Base Erosion and Profit Shifting (BEPS) initiative.

According to a report in RTE.ie, companies like Google, Facebook and Amazon are able to cut tax bills by booking profits in low-tax countries no matter where the end customer is.

In 2015 the OECD estimated revenue losses from BEPS of up to $240 billion, equivalent to 10 per cent of global corporate tax revenues.

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OECD created the “Inclusive Forum” to co-ordinate international measures to fight BEPS and improve the international tax rules.

“Important progress has been made through the adoption of this new Programme of Work, but there is still a tremendous amount of work to do as we seek to reach, by the end of 2020, a unified long-term solution to the tax challenges posed by digitalisation of the economy,” OECD Secretary-General Angel Gurria said in a statement.

“Today’s broad agreement on the technical roadmap must be followed by a strong political support toward a solution that maintains, reinforces and improves the international tax system. The health of all our economies depends on it,” Gurria added.

The document, which calls for intensifying international discussions around two main pillars, was released on Friday, but it will be presented by the OECD Secretary-General to G20 Finance Ministers for endorsement during their June 8-9 ministerial meeting in Fukuoka, Japan. (IANS)

Next Story

No Halfway Deal in Security

In a large country like India, there are multiple agencies producing intelligence -- internal, external and technical and the system must ensure

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Deal, Security, Management
There should be no gap between 'information' and 'response'. Pixabay

There is no halfway deal in Security. Management of security works on the principle of completeness. You cannot feel satisfied if your house is half secure or if only a part of it is fully secure. The house as an integral unit is either fully secure or is insecure. The framework of security must provide for an ongoing protection of the three assets of the safeguarded entity — physical, human and information-related. Since security by definition is protection against a ‘covert’ threat — from an ‘invisible’ enemy — information on that must come in time to allow for preventive action.

As the threat scenario is never static, security is not a ‘one time event’ — the flow of information called intelligence, must keep up. There should be no gap between ‘information’ and ‘response’. In a large country like India, there are multiple agencies producing intelligence — internal, external and technical and the system must ensure that there is flow of the total information to a point at the national apex where it will be examined for determining the course of a comprehensive action.

Several wings of the government would be involved in sharing the response. A coordinated timely action to follow up on the complete assessment of threat becomes pivotal for the success of security. This coordination must flow from the top. There has been a welcome evolution of the organisational and procedural aspects of the national security set up since the creation of the position of National Security Advisor who presided over the National Security Council Secretariat and worked directly under the Prime Minister. However, there are complexities involved particularly when security, on account of the mounting threat of terrorism, compels our defence forces and the para-military to work in consonance with the civil administration to conduct counter-terror operations on our own soil. In such a situation every bit of learning from experience to improve the system becomes important.

It is in this background that the reported address of NSA at the recent conference of Anti-Terror Task Forces organised by NIA, in which he dwelt on the areas of needed improvement, deserves notice. Ajit Doval emphasised the need for neutralising the chief weapon of terrorists — their ideological appeal — and reiterated the importance of the world community isolating Pakistan as a country that used terrorism as an instrument of state policy. He praised the success of NIA in Kashmir and rightly held the sanctions of Financial Action Task Force (FATF) as the most effective deterrent for Pak-instigated terrorism at the global level. The NIA conference clearly brought out the strategy of Pak ISI to further activate cross-border terrorism against India by exploring its turf in Bangladesh, Nepal and Sri Lanka and bringing to the front militant groups like Jamaat-ul- Mujahideen Bangladesh(JMB) and National Tawheed Jamaat of Sri Lanka besides, making a fresh attempt to revive militancy in Punjab through Khalistan Liberation Force.

Deal, Security, Management
As the threat scenario is never static, security is not a ‘one time event’ — the flow of information called intelligence, must keep up. Pixabay

Notwithstanding the rebuff it is getting at world forums on the issue of terrorism, Pakistan will continue to find good use for the low cost ‘proxy war’ it can keep up against India. It has a core of support from within the Muslim world as the faith-based cause it is able to put forth had its takers there and the firmness of Sino-Pak military alliance gives it an underlying confidence against India. Invoking Jehad in Kashmir and churning out Mujahideen for attacking India are the concerns basically for this country and we have to find a way of countering this menace at the micro-levels in various parts of the country. Pak agencies know of the domestic situation in India and the opportunities it can create for it for sending in potential militants for a drawn out strategy of causing internal disruptions.

The NIA conference hopefully will work for greater spread of our capabilities for producing ‘Intelligence from below’ and pushing the action taking job of ATTFs closer to the ground. The Indian scene demands a centralised policy drive on terrorism on the one hand and, on the other, a spread out machinery in the states to identify and neutralise ‘sleeper’ elements being created by the hostile agencies on our soil. The national grid against terrorism has to exist totally above politics, which is not going to be easy to achieve judging from the domestic reactions to the abrogation of Art 370 and 35A relating to Kashmir.

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Pakistan is likely to continue fiddling with the affairs of the Muslim minority in India in the hope of creating disaffection that could turn a few minds towards radicalisation. Carrying intelligence to where people lived would facilitate a friendly outreach to families that had become vulnerable — this would be done best by the local administration without publicity or even bringing in the police. The Ulema and the communal elite trying to play vote bank politics are stepping up propaganda on such nebulous points as ‘majoritarianism’, ‘inclusive politics’ and ‘denial of freedom to criticise the government’ — mostly to stir up Muslim antagonism. It is time to enforce laws against communal speeches and anti-national exhortations firmly as otherwise an environ will be created in which Pak agencies will find it easier to instigate militancy out of communal schism — the rise of the Indian Mujahideen is a serving illustration of this danger. Terrorism rooted in notions of faith is particularly sinister in an India- specific way and requires to be handled in both military and socio-political spheres. (IANS)