DAVOS, SWITZERLAND: Organisation for Economic Cooperation and Development (OECD) Secretary General Angel Gurria has stressed the need to bring the issue of beneficial ownership to the forefront to tackle tax evasion.
Beneficial ownership was not yet a discipline like the way the world was treating other tax evasion issues, said Gurria while speaking at a session on “Taxation without borders: A fair share from multinationals.”
Tax collection a failed system in Pakistan
The session took place on Thursday - the third day of the annual World Economic Forum (WEF) meeting.
It was organised with a focus on Panama Papers leaks that placed loopholes in the international tax regime squarely at the top of public agenda.
The leaks also mentioned the names of Prime Minister Nawaz Sharif’s children who owned offshore companies registered in Panama. The premier is now fighting a case in the Supreme Court of Pakistan for political survival.
His children are hiding behind beneficial ownership - an issue that is now expected to be part of the global agenda.
Gurria said there should also be a debate on what to do with beneficial ownership, adding the issue had to be tackled to know who was the ultimate owner of the money owned by the beneficial owner.
The OECD is currently leading a global campaign to curb tax evasion and tackle tax avoidance by bringing transparency. Pakistan has recently signed the OECD convention on the exchange of information.
Gurria said more than 100 countries had signed the exchange of information convention, which would make a difference. He stressed that signing of the multilateral treaty would not be sufficient and the countries would have to enforce these conventions.
According to some estimates, more than $240 billion in revenues are lost every year due to the shifting of profits by companies away from the places they earn.
The OECD secretary general also advocated a fair taxation system. “If people perceive that taxes are not collected from everybody, the people at street feel that only they are paying the taxes,” said Gurria.
Rich were saving their money in offshore tax havens, he said, suggesting that taxes should be paid from where the income was earned.
Pakistan is facing a similar situation where rich are getting tax breaks while poor are overburdened with indirect taxes.
He said the OECD would work to modify all those multilateral and bilateral agreements that facilitated tax avoidance.
“A dramatic transformation of the international tax regime is taking place and we have to cash in on the global momentum against tax evasion,” said the OECD secretary general.
Panama Vice President Isabel de Saint Malo insisted that her country was doing whatever needed for transparency and automatic exchange of information.
She said it was wrong to assume that Panama was not cooperating to curb tax evasion.
Malo raised the critical issue of tax breaks sought by multinational companies in the name of foreign investment. “MNCs when go to the developing countries negotiate tax breaks, which are not available to local firms,” she said.
WEF report: Pakistan leaves India behind in IDI
Under the China-Pakistan Economic Corridor (CPEC), Pakistan has so far granted more than $1.5 billion in tax concessions to various Chinese companies working on CPEC projects. Owing to this preferential treatment, Pakistani firms have started becoming uncompetitive.
Malo said fighting tax evasion was the global responsibility but cautioned that while making rules for promoting tax compliance the interests of the countries that were currently treated as tax havens needed to be taken care of.
“There is some progress towards the tax compliance culture, but the pace is very slow and the world needs to act very fast,” said Winnie Byanyima, Executive Director of Oxfam International, United Kingdom. She said weak tax administration should not be an excuse and the countries must improve their tax policies.
Published in The Express Tribune, January 20th, 2017.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.