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International organisations collaborate to help developing countries with international tax

The IMF has joined forces with the World Bank, the Organisation for Economic Co-operation and Development and the United Nations (UN) to improve collaboration in international tax and support developing countries in designing tax rules.21 Apr 2016

As the Platform for Collaboration on Tax, the four organisations will formalise the regular discussions they already hold in the design and implementation of standards for international tax matters. This will help them to support developing countries, provide guidance and share information, the groups said in a joint statement.

There is growing recognition of the importance of tax in achieving the UN's sustainable development goals, and the Platform will be able to provide better technical advice to developing countries, the statement said.

The Platform will begin by creating eight 'toolkits' on tax issues to help developing countries. The first of these, focusing on tax incentives, was delivered in November. Further toolkits will tackle issues including how to implement measures under the G20/OECD Base Erosion and Profit Shifting Project. BEPS refers to the shifting of profits of multinational groups to low tax jurisdictions and the exploitation of mismatches between different tax systems so that little or no tax is paid.

The OECD was asked by the G20 to make recommendations on reform of the international tax system to prevent BEPS. In October 2015 it published its recommendations, and OECD and G20 member countries are now considering how to implement the BEPS recommendations. In February the OECD announced that any country could join its BEPS project if it agreed to adopt minimum standards and pay an annual fee.

Catherine Robins, a tax expert at Pinsent Masons, the law firm behind Out-law.com said: "It is important to remember that only the 34 countries that are members of the OECD and those countries that are members of the G20 are obliged to implement the BEPS minimum standards and to work towards the recommendations in other areas."

"Many developing countries see benefits in BEPS recommendations such as restrictions on interest deductibility, changes to transfer pricing and measures to prevent the avoidance of permanent establishment status, all of which can reduce their tax take. However, they often lack resource and technical expertise to participate fully in the process, so it is good news that the Platform for Collaboration on Tax will focus its efforts on supporting developing countries" Robins said.

"Getting developing countries on board should also help international businesses as we are likely to see an increase in cross border tax disputes involving developing countries. If those countries are signed up to the dispute resolution recommendations coming out of the BEPS projects, that should make the inevitable disputes easier to resolve," she said.   

Platform members will hold regular meetings with representatives of developing countries, regional tax organisations, banks and donors, while consultations with business and civil society "will be organised as needed", the group said.

The Platform will also aim to hold a major conference every two years, with the first one planned for 2017, it said.