OECD urges governments to clamp down on ‘aggressive’ tax avoiders – The Royal Gazette | Bermuda News, Business, Sports, Events, & Community

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OECD urges governments to clamp down on ‘aggressive’ tax avoiders

The Organisation for Economic Cooperation and Development (OECD) has encouraged Governments to change their tax regimes to capture more of the potential revenue lost to companies using “aggressive” policies to slash their tax bills.

An OECD report published yesterday identifies three main causes for concern enabling aggressive tax planning: financial instruments, corporate reorganisations, and intra-group transactions.

Bermuda, because it does not tax corporate profits, is one of the domiciles used by international companies to base subsidiaries to which profits can be attributed to reduce their tax bill, as has been highlighted in international news stories on companies including tech giant Google and pharmaceutical group Forest Laboratories.

The reports claims that some companies avoid taxes legally, but “in ways that are not within the spirit of the law”. Losses in some multinationals have been made artificially high in an unfair method to reduce tax payments, it adds.

Loss carry-forwards are as high as 25 percent of gross domestic product in some countries, the OECD said.

“They have also seen loss-making companies acquired solely to be merged with profit-making companies and loss-making financial assets artificially allocated to high-tax jurisdictions through non arm’s length transactions,” the 92-page report states.

According to the OECD, countries must consider introducing or revising restrictions on the use of losses in cases of mergers, acquisitions, or group taxation regimes, if they have concerns about the extent they are used for aggressive tax planning.

The report, entitled “Corporate loss utilisation through aggressive tax planning”, also says that countries should analyse their policy and compliance issues and consider the introduction of co-operative compliance programmes, where appropriate.

It says that countries should consider introducing or the revising disclosure initiatives aimed at aggressive tax planning schemes on company losses.

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Published August 31, 2011 at 10:45 am (Updated August 31, 2011 at 10:45 am)

OECD urges governments to clamp down on ‘aggressive’ tax avoiders

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