Tax & Accounting Blog

Cracking Down on International Tax Loopholes- OECD Findings

Global Tax Compliance, Global Tax Planning, ONESOURCE, Tax Evasion, Tax Provision, Transfer Pricing, Uncertain Tax Positions, US Income Tax Compliance, WorkFlow Manager March 13, 2012

Hybrid methods use by multinationals for tax evasion are likely to increase scrutiny and additional UTP concerns. This is the basis for the recent OECD report, Hybrid Mismatch Arrangements: Tax Policy and Compliance Issues.  The 27-page report  highlights the use of hybrid methods arrangements to exploit differences in tax laws between countries. The report suggests the development of targeted rules to preserve government’s tax revenue stream.

The the United States has estimated $3.5 billion in tax evasion through 11 foreign tax credit generator transactions using such schemes. Meanwhile, the United States and other governments have reported success using targeted rules aimed at exploiting tax evasion.

OECD said rules need to be constantly monitored, and adapted if needed, to ensure they continue to be effective. This will ensure that revenue authorities and tax policy makers don’t encounter “double non-taxation” that may not be intended by either country.

Share your thoughts…Do you agree with the OECD conclusions and recommendations for tax administrators and tax policy makers?