Taxes without borders.

• Author: Mitchell, Daniel
• Position: WORLD WATCHER - Corporate taxes

THE ORGANISATION FOR ECONOMIC Cooperation and Development (OECD) is an international organization that collects statistics and publishes economic reports. In recent years, however, the Paris-based bureaucracy also has ventured into policy activism, with a strong bias toward expanding the burden of government. A new OECD study, "Addressing Base Erosion and Profit Shifting" (BEPS), is very troubling in this regard, as it proposes to expand the international taxing powers of governments. Even though BEPS notes that corporate tax revenues have trended higher, it calls for dramatic changes in corporate tax policy based on the presumption that governments are not seizing enough revenue from multinational companies.

OECD essentially argues that it is illegitimate for businesses to shift economic activity to jurisdictions that have more favorable tax laws. The report was produced in "response to calls by the German, UK, and French finance ministers for coordinated action." However, such coordinated action to raise taxes would come at the expense of economic freedom and growth.

The core accusation in the report is that firms systematically----but legally----reduce their tax burdens by taking advantage of differences in national tax policies. Yet, the report acknowledges that "revenues from corporate income taxes as a share of gross domestic product have increased over time." That increase has occurred despite dramatic cuts to statutory corporate tax rates since the 1980s in most countries.

Other than offering anecdotes, OECD provides no evidence that a revenue problem exists. In this sense, BEPS is very similar to OECD's 1998 "Harmful Tax Competition" report, which asserts that so-called tax havens are causing damage but did not offer any hard evidence of any actual damage.

The report calls for more tax roles on companies, but does not acknowledge that governments already have immense powers to restrict corporate tax planning through "transfer pricing" roles and other regulations. Moreover, there barely is any mention of the huge number of tax treaties among nations that further regulate multinational taxation.

OECD does hot propose any specific policies, but says that it soon will make recommendations to achieve "tax fairness" using a "holistic approach." The paper talks about a "comprehensive action plan" based on "collaboration and coordination" to "provide countries with tools, domestic and international." That sounds like empty buzzwords, but...