An Action Plan on Base Erosion and Profit Shifting will be devised today at the G20 Finance Ministers’ meeting held at Moscow. The elephant in the room is the issue about the asymmetry between tightly
integrated global corporations and the fragmented, piecemeal responses from individual states. One of the best known and most derided examples of this is the practice of setting up shell companies in low-tax
jurisdictions like Ireland, which are then used to account for profits from higher-tax nations — something that Google, Facebook, and Starbucks have all been accused of.
While the Action Plan is not legally binding in itself, it does represent the most coordinated international response to aggressive tax avoidance so far. Reaching a consensus on its prescriptions allows the
finance ministers who’ve backed the agreement to go back to their countries and petition their governments to enact the changes. Putting the strong words into real action will be no easy task, but the goal is to enact the Action Plan globally over the next two years.