The time for international tax reform is now, Commission says

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The Independent Commission for the Reform of International Corporate Taxation (ICRICT) was initiated by a coalition of civil society and labour organisations including Action Aid, Alliance-Sud, CCFD-Terre Solidaire, Christian Aid, the Council for Global Unions, the Global Alliance for Tax Justice, Oxfam, Public Services International, Tax Justice Network and the World Council of Churches supported by Friedrich-Ebert-Stiftung.

The Commissioners, who include José Antonio Ocampo (chair) and Eva Joly, Rev. Suzanne Matale, Manuel Montes, Léonce Ndikumana, Ifueko Omoigui Okauru, Govinda Rao, Magdalena Sepúlveda, and Joseph Stiglitz, have just produced their declaration and it is stunning piece of work.

The report starts from a statement of principles:

1. Tax abuse by multinational corporations increases the tax burden on other taxpayers, violates the corporations’ civic obligations, robs developed and developing countries of critical resources to fight poverty and fund public services, exacerbates income inequality, and increases developing country reliance on foreign assistance.

2. Abusive multinational corporate tax practices are a form of corruption that weakens society and demands urgent action. This is even true when the practices of corporations are within the law, and especially so when corporations have used their political influence to get tax laws that provide them scope for such abuses.

3. Multinational corporations act – and therefore should likewise be taxed – as single firms doing business across international borders. This is essential because multinational corporations often structure transfer pricing and other financial arrangements to allocate profits to shell operations in low tax jurisdictions.

4. Tax havens facilitate abusive tax practices with enormous negative effects on the global community.

5. Greater transparency and access to information are critical first steps to stop tax abuses.

6. Every individual and country is affected by corporate tax abuse, and therefore the debate over multinational corporate tax avoidance should be widened and made more accessible to the public.

7. Inclusive international tax cooperation is essential to combat the challenges posed by multinational corporate tax abuse.

It then goes on to make recommendations. These are grouped under six headings. I have added bold text to indicate ones I think most important:


1. States must reject the artifice that a corporation’s subsidiaries and branches are separate entities entitled to separate treatment under tax law, and instead recognize that multinational corporations act as single firms conducting business activities across international borders.

2. States should develop model bilateral and multilateral agreements to enable participating jurisdictions to apportion revenues and costs attributable to a multinational corporation operating in those jurisdictions.

3. Instead of attributing income from the control or ownership of intellectual property to a low tax jurisdiction, the income should be apportioned to the jurisdictions where the intellectual property was developed or, if sold, apportioned according to objective economic factors such as sales and employment.

4. States should treat a company affiliate of a resident multinational corporation that carries out business activity in a jurisdiction as a presumptive permanent establishment with tax nexus in that jurisdiction.

5. States should revise the permanent establishment rules to provide that when a corporation sells or provides downloads of products from the internet to customers in a jurisdiction, exceeding a specified threshold, that business activity creates a permanent establishment.

6. In the long term, the system for taxing a multinational corporation’s subsidiaries as separate entities should be replaced by a system of taxing multinational corporations as single and unified firms, using formulary apportionment based upon objective factors, such as sales and employment, and with adequate consideration of the source principle.

7. International cooperation for reform must go beyond the current OECD’s BEPS initiative and begin to research and negotiate the specific elements of an international consolidation and apportionment system, including what rules would apply to determine the tax base and apportion profits among countries where multinational firms operate, and how to avoid the vertical disintegration to which it may give rise.


8. Developed nations, possibly through the OECD, should take the first step to stop the current race to the bottom in corporate taxation, by agreeing on a minimum corporate tax rate.

9. States should also examine spillover effects of their tax preferences for multinational corporations and eliminate those that facilitate tax avoidance in another country.

10. All states should proactively disclose to the public tax incentives, tax preferences, and income exclusions provided to multinational corporations.

11. States should refrain from advocacy, through diplomatic or other means, for their multinational corporations involved in a tax dispute with other countries.

12. European states should bring additional legal actions before the European Commission to clarify the factors that qualify certain corporate tax preferences as illegal state aid and to stop the use of those tax preferences.

13. States should promote cooperation to curb tax competition, along the lines of such efforts in the East African Community, through its efforts to harmonize tax incentives, and in the European Union, through the development of the Common Consolidated Corporate Tax Base.


14. States should impose criminal penalties on abusive tax practices.

15. Multilateral organizations should develop a model tax withholding system that requires the withholding of taxes from interest, dividend, royalty, and other payments made between affiliate companies of multinational corporate groups before those outbound payments cross international borders.

16. Multilateral organizations should develop model provisions to protect whistleblowers who disclose abusive corporate tax practices.

17. States should ensure that their tax administrators have adequate resources, independent authority, and legal protection to collect taxes owed from multinational corporations.

18. Multinational corporations should publish and adhere to a set of ethical principles related to paying taxes, and enunciate an explicit acknowledgement of their civic obligation to pay taxes to support the countries in which they operate.


19. States must require multinational corporations, both public and private, to file country-by-country reports and, upon filing, make those reports freely available to all tax administrators, without requiring separate treaty or other agreements, so as not to disadvantage developing countries compared to developed countries and to facilitate efficient and cost-effective tax administration.

20. States should make country-by-country reports available to the public within 30 days of filing.

21. States should obtain the names of natural persons who are the ultimate beneficial owners of the shares in corporations and update those names in public corporate registries.

22. Multinational corporations in the extractive industries should also publicly disclose, on a country-by-country and project-by-project basis, the payments they make to governments, based on their reports under Section 1504 of the Dodd-Frank Act in the United States and the Accounting and Transparency Directives in the European Union.

23. Multinational corporations should identify in their annual, publicly available corporate reports all of their subsidiaries, and not just the subset of “significant” subsidiaries.

24. States should publicly disclose advance pricing agreements and the outcomes of mutual agreement procedures and develop a model form to make key elements publicly available.


25. States should avoid restrictions on tax withholding in tax treaties.

26. Multilateral organizations should expand the objectives of model tax treaties to include preventing double non-taxation, curbing abusive tax practices, and enabling information exchange to facilitate effective tax administration.

27. Multilateral organizations should amend the model tax treaties to include a general antiavoidance rule.

28. States should avoid the inclusion of provisions in investor protection treaties, resource extraction agreements, or other agreements that weaken or circumvent tax law.


29. Member States should upgrade the UN Committee of Experts on International Cooperation in Tax Matters to an intergovernmental Commission and provide it with adequate resources.

30. The G20/OECD BEPS project is a step in the right direction, but should be made more inclusive to reflect the priorities of developing countries, including through equal voting rights and equal rights to amend the action plan.

31. Multilateral and other governmental organizations should provide increased resources for capacity building in developing countries for tax administration, including through South-South cooperation.

32. The UN Global Compact and the OECD Guidelines for Multinational Enterprises should be strengthened by explicitly recognizing the obligation to pay tax as a preeminent corporate social responsibility.

33. Member States should initiate negotiations to draft a UN convention to combat abusive tax practices, which should evolve into a convention that would adopt a consolidation and apportionment system for taxing global corporate profits.

34. The international community should continue to search for the most effective and inclusive mechanisms to regulate corporate taxation at the global level.

I would have probably added a few others and changed a few, but I think this is a really important statement of priorities from civil society that benchmarks where debate in this area should be going.

What is also welcome is the commitment that it shows to the issue remaining on the agenda.

There is much still to do.