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Last week, the OECD proposed a major new initiative aimed at cracking down on tax avoidance by multinational corporations. The 40-page report follows widespread international criticism of aggressive tax planning by high-profile U.S.-based firms such as Starbucks, Apple, and Google.
The OECD report, called the Action Plan on Base Erosion and Profit Shifting, makes 15 recommendations including:
- Cracking down on transfer pricing, especially for intellectual property and other intangible assets. This practice allows firms to shift assets and expenses among its subsidiaries in a way that maximizes revenue in low-tax jurisdictions and maximizes deductible expenses in high-tax countries.
- Requiring additional transparency by firms. Companies would have to disclose their profits, sales, and taxes on a country-by-country basis.