George Osborne, UK finance minister said: "People and companies have to pay the taxes that are due; it's the only way to operate in a fair and competitive society".
Business groups said they welcomed the plan but urged policy makers to show restraint in making changes. The National Foreign Trade Council, representing US multinationals said: "We are hopeful that caution will be used to be sure that any changes made as part of this plan will be easily administered by corporations and will not deviate significantly from current law."
The CBI, the UK's business lobby group, said "in the majority of cases existing international tax rules and principles work well" but it recognised that some needed updating. Katja Hall, the CBI chief policy adviser, said: "We support the reform of areas of international taxation which can cause confusion about where tax should be allocated and risk multiple or no taxation, but this must be co-ordinated internationally so UK firms are not disadvantaged."
Angel Gurría, secretary-general of the Paris-based Organization for Economic Co-operation and Development which drew up the action plan said it "marks a turning point in the history of international tax co-operation". Pascal Saint-Amans, its top tax official, said the initiative would force up tax rates for multinationals that organize their affairs so they paid little tax. He said: "They know the golden age of e don't pay taxes anywhere' is over."
The effort to reshape the international tax rules was a chance to avert "global tax chaos", according to the OECD, which said a failure to act could result in governments taking unilateral action. Countries outside the OECD such as India and China will be invited to take part in the revamp of the rules on an equal footing, in what experts said might be the last opportunity for the OECD to exert sufficient influence on the international tax system to reach a global accord.
The plan sets out 15 proposals to block gaps between national tax systems and tackle practices that artificially separate taxable income from the activity that it is generated from. It includes proposals to tackle abuses of tax treaties, to prevent tax avoidance by shifting intangibles between group companies and to neutralize the impact of "hybrid" structures used to minimize billions of dollars of tax.
The action plan aims to tackle the selling arrangements known as "commissionaire" structures that are widely used by multinationals, including digital companies such as Google and Amazon, to limit their tax bills in countries where they make sales. But broader issues around the taxation of the digital economy will be examined by a dedicated task force.
The impact of the project will depend on governments' willingness to make compromises over the next two years as details of the proposed changes are hammered out.
Bill Dodwell, head of tax policy at Deloitte, the professional services firm, said the action plan was "the most significant potential change to international taxation for decades". He said: "These changes will undoubtedly lead to increased costs for businesses, but international co-operation with the OECD will be needed to make progress."
Richard Collier, tax partner at PwC, professional services firm, said the initiative could be "the biggest reform of global taxation in a lifetime" but warned that change would not be swift and depended on continued commitment of governments and business. He said: "The biggest risk to the project will be if momentum and buy-in now wanes."
The Business and Industry Advisory Committee at the OECD said it welcomed a "considered and analytical" review of the rules but stressed the continued importance of relieving double taxation. Will Morris, chair of the BIAC's tax committee, said: "In some areas, the international tax system has not kept pace with globalization and changing business models, and it is appropriate to look again at those areas and consider, based on all the evidence, whether any changes are required."
The Tax Justice Network, a campaign group that has been pushing for a radical change in the international tax rules, said the plan contained some ambitious measures but it criticized the OECD for failing to deal with "fundamental flaws" in the system. It said that "its approach is like trying to plug holes in a sieve. The OECD has chosen a road that is strewn with obstacles, and leads in the wrong direction. The OECD has missed this big opportunity to crack open the door to the big reform that the world's citizens need."
The UK, France and Germany are to provide an additional
