12/11/21

INTERNATIONAL TAX: OECD support produces $850m extra tax.

As published on accountancydaily.co, Friday 12 November, 2021.

Developing countries have raised an additional $850m (£634m) in undeclared tax due from multinationals with support from the OECD’s tax inspectors without borders initiative for the year ending June 2021.

The joint programme is supported by the OECD and the United Nations Development Programme (UNDP) and is designed to enhance developing countries’ ability to fight tax avoidance by multinational enterprises, with operations running in 47 countries.

Tax inspectors without borders provides practical, hands-on assistance to developing countries in order to build capacity in the areas of international tax audit, criminal tax investigations and effective use of automatically exchanged information. For every $1 spent on activities, an average of $125 in supplementary tax revenues has been recovered by host administrations – a figure which has increased almost twofold in the past year.

African countries report that transfer pricing represents one of the highest risks to their tax base, with millions of dollars of tax at stake, particularly in the mining, telecoms and financial sectors. In the region, international and regional partners are joining forces to support tax administrations.

There is also support for criminal tax investigations, particularly across Africa, which typically target high net worth individuals with offshore accounts, corporations evading tax, and attacks on the VAT system through carousel frauds and other means. Investigations in these cases require experts to ‘follow the money’ across borders, often through a complex web of legal structures with opaque ownership patterns (legal and beneficial) across multiple jurisdictions.

Currently, there are seven criminal investigation pilot programmes underway in Armenia, Colombia, Honduras, Kenya, Pakistan, Tunisia and Uganda, and the relative action and work plans are being finalised. The OECD said that ‘there has been excellent progress under these pilot programmes, such as in Colombia and Honduras’. An additional pilot programme is being put in place in Costa Rica.

TIWB programmes grew in the past year as a result of geographic expansion, a widening of the scope of assistance available, and requests for additional programmes from host administrations. As of 30 June 2021, TIWB programmes spanned 47 jurisdictions with 47 completed and 43 current programmes, including 17 South-South programmes.

There have also been broader benefits of the programme, including skills development to conduct higher quality audits; improved internal tools, procedures and processes; and organisational improvements.