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September 24, 2017

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OECD delivers new global standard to target tax cheats

SYDNEY--The OECD on Sunday delivered a new global standard to crack down on tax evasion with more than 40 countries already committing to the measures.

Organization for Economic Cooperation and Development (OECD) chief Angel Gurria called it "a real game-changer" that would boost international cooperation to reel in cheats.

"Globalization of the world's financial system has made it increasingly simple for people to make, hold and manage investments outside their country of residence," he said.

"This new standard on automatic exchange of information will ramp up international tax cooperation, putting governments back on a more even footing as they seek to protect the integrity of their tax systems and fight tax evasion."

Offshore tax evasion remains a serious problem worldwide, with vast amounts of funds deposited abroad and sheltered from tax collectors in their home countries.

As an example, the OECD said profits from U.S. companies held offshore amounted to US$2.0 trillion, while the tiny British Virgin Islands — a tax haven — is now one of the top five investors in Russia and China.

OECD tax director Pascal Saint-Amans said G-20 finance ministers, meeting in Sydney, had also been working on standardizing the rules governing where the profits of multinationals should be taxed.

It comes as concern mounts that companies, particularly those involved in the digital and Internet sectors, are able to reduce their tax bills by shifting profits around the world to areas where rates are lowest.

Ahead of the Sydney meeting, IMF chief Christine Lagarde said accounting for revenues from global digitized businesses like Google and Apple was a "big ongoing problem and process."

Closing Down Loopholes

She urged governments to radically rethink international tax arrangements to deal with it.

"The political message is we are closing down all the loopholes," Saint-Amans said.

"If taxpayers don't have trust in the fairness of the tax system then the level of compliance drops."

The OECD will present its report looking at the increasingly digitalized global environment to another G-20 meeting in Cairns, in northern Australia, in September.

G-20 ministers asked the OECD to examine the issues as a way to inject more trust and fairness into the international tax system.

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