I have already written about the fact that the OECD has, in the first chapter of its Base Erosion and Profits Shifting (BEPS) report accepted that this is a big issue, much along the lines that the tax justice and NGO community has argued. I have welcomed that.

There are other welcome admissions in the report. For example, this statement in chapter 2:

BEPS   relates   chiefly   to   instances   where   the  interaction  of  different  tax  rules  leads  to  double  non-­taxation  or  less  than   single  taxation.  It  also  relates  to  arrangements  that  achieve  no  or  low  taxation   by   shifting   profits   away   from   the   jurisdictions   where   the   activities   creating   those  profits  take  place.  No  or  low  taxation  is  not  per  se  a  cause  of  concern,   but  it  becomes  so  when  it  is  associated  with  practices  that  artificially  segregate   taxable  income  from  the  activities  that  generate  it.  In  other  words,  what  creates   tax   policy   concerns   is   that,   due   to   gaps   in   the   interaction   of   different   tax   systems,  and  in  some  cases  because  of  the  application  of  bilateral  tax  treaties,   income   from   cross-­border   activities   may   go   untaxed   anywhere,   or   be   only   unduly  lowly  taxed.

Again, this reflects much that I have argued. It is not low tax rates per se that makes a tax haven harmful, it is the secrecy that permits profit shifting into the tax haven without being detected that is harmful. This is another welcome admission by the OECD.

So is this:

There  are  gaps  and  frictions   among   different   countries'   tax   systems   that   were   not   taken   in   account   in   designing  the  existing  standards  and  which  are  not  dealt  with  by  bilateral  tax   treaties.

Absolutely right. That's why we're in the mess we are.

It is then frustrating that the OECD then fail to rise to the challenge of tackling these issues, as my next blog discusses.