MTN: New tax rules aim to curb evasion

MTN. (Reuters)

MTN. (Reuters)

Taxpaying practices of multinational companies are coming under increasing pressure, with leading politicians accusing them of using artificial schemes to move money out of the hands of revenue authorities.

Scandals highlighting huge profits shifted to tax havens by large multinationals – including Apple and Google – have spurred world leaders to action.

In 2013, the G20 commissioned the Paris-based Organisation for Economic Co-operation and Development (OECD), a global policy forum, to develop new international tax rules. The mandate was to ensure profits were declared “where economic activities take place and value is created”. 

The two-year process to develop the new regime finished this week when the OECD published its proposals and G20 finance ministers’ meeting in Lima, Peru, rubber-stamped the rules on Thursday this week. 

The OECD has proposed mandatory arbitration; in future the kind of disputes uncovered between MTN and the countries where it operates could be decided at a secret international tribunal. 

Campaign groups acknowledged that the new global tax guidelines are a step forward, but objected that, at best, they only patch up a flawed system.

In particular, they argue that although tax authorities will have more tools to deal with “cash box” entities – such as MTN’s Mauritian entity – the lack of clear, universal rules on how to deal with them could lead to more disputes between tax authorities and companies.

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