COLOMBO: Sri Lanka should consider joining the tax transparency initiative promoted by the Organisation for Economic Cooperation and Development (OECD) to fight tax dodging, a tax expert said.
The island’s tax system was being changed, with the base being widened and the number of taxes and rates being reduced, said Premila Perera, a former partner of KPMG, an audit firm.
“The change should be within a consistent policy framework; within precepts of certainty, simplicity and equity; and in keeping with global trends,” she told a business forum in Colombo.
The OECD’s project on Base Erosion and Profit Shifting, known as BEPS, was meant to prevent tax evasion and avoidance.
“All tax treaties are being given a fresh look to ensure that there’s no treaty shopping and companies do not misuse treaty provisions,” Perera told the forum organized by the European Chamber of Commerce of Sri Lanka for a high level delegation from Austria.
“Sri Lanka should move in that direction.”
BEPS is of major significance for developing countries due to their heavy reliance on corporate income tax, particularly from multinationals.
The OECD’s BEPS project is giving a new boost to transparency in international tax matters with more and more countries joining the agreement, enabling the automatic sharing of country-by-country reporting of tax data.
It is part of continuing efforts to boost transparency by multinational companies that are known to avoid paying taxes by shifting reporting of profits to low tax jurisdictions or tax havens.
The BEPS action plan will help ensure that tax administrations obtain a complete understanding of how multinationals structure their operations, while ensuring that the confidentiality of such information is safeguarded.
The OECD’s BEPS project will reform the international tax framework and ensure that profits are reported where economic activities are carried out and value created.
