Beijing: India and five other nations, including China and Israel, on Thursday signed pact for automatic exchange of information on tax issues and develop new tools and standards for tackling tax base erosion and evasion.
“As part of continuing efforts to boost transparency by multinational enterprises (MNEs), Canada, Iceland, India, Israel, New Zealand and the People’s Republic of China signed today the Multilateral Competent Authority agreement for the automatic exchange of Country-by-Country reports, bringing the total number of signatories to 39 countries,” an OECD release said.
The signing ceremony took place here.
Other countries which have already signed the pact include Australia, France, Germany, Japan, Liechtenstein, Malaysia, Italy and the UK.
The pact allows all signatories to bilaterally and automatically exchange Country-by-Country Reports with each other.
“It will help ensure that tax administrations obtain a complete understanding of how MNEs structure their operations, while also ensuring that the confidentiality of such information is safeguarded,” it said.
In October last year, the Organization for Economic Cooperation and Development (OECD) issued final tax policy recommendations stemming from its Base Erosion and Profit Shifting (BEPS) project.
The original concept of the BEPS project was to target limited, overly aggressive tax planning that resulted in inappropriate tax avoidance, particularly the elimination of ‘cash boxes’ shell companies with few employees or economic activities and subject to little or no taxation.
The OECD/G20 BEPS Project set out 15 key actions to reform the international tax framework and ensure that profits are reported where economic activities are carried out and value created.
“Country-by-country reporting will require MNEs to provide aggregate information annually, in each jurisdiction where they do business, relating to the global allocation of income and taxes paid, together with other indicators of the location of economic activity within the MNE group.