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Finance

Globe-spanning framework eyed for taxing multinationals

TOKYO -- Countries around the world are planning an international framework to prevent multinational corporations from avoiding taxes by skirting bilateral tax treaties.

     The 34 members of the Organization for Economic Cooperation and Development, which includes such developed nations as Japan and the U.S., are expected to work with Group of 20 emerging-country members like China and India to start discussing details of the proposed framework around early next year.

     A multilateral agreement among tens of nations could be signed as early as 2016 to spell out uniform taxation rules.

     Multinationals are increasingly moving funds among three or more countries to dodge taxes. Large American information technology companies, for example, shelter profits from taxes by transferring them to tax havens via Ireland and the Netherlands.

     Countries now try to prevent tax avoidance through bilateral tax treaties and agreements. Japan has such arrangements in place with 85 countries and regions.

     Participants in a multilateral tax accord would agree on taxation rules in advance. An estimated 3,000 bilateral tax agreements are currently in effect. So if each must be revised, putting new rules in place would likely take decades. A multilateral accord could be changed more easily to crack down on excessive tax avoidance.

     The OECD and the G-20 have been working together to consider steps for stopping tax avoidance by companies. Under measures drawn up last month, businesses would report cross-border transactions within their corporate groups to tax authorities. A multilateral framework was decided on because dozens of countries would be involved.

     But reaching an agreement could prove difficult, given the need to coordinate the interests of many nations. And the entire effort could devolve into a cat-and-mouse game as corporations dream up new ways to avoid taxes.

(Nikkei)

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