Presently, in the corporate world, there are many companies which are indulged in practice of BEPS (Base erosion, Profit shifting). This is a practice of eroding base of home country by blocking tax revenue to be received by government. People shift their profits to tax haven and there is no system to measure the amount of exact profit earned by companies. This makes the system suspicious and it clearly lacks transparency. To overcome this issue, OCED has come up with few guidelines to have a visible transparency in taxation system of the world.
Tax transparency refers to putting off the practice of forbidding to provide the financial information of corporates or individuals by banks. This will significantly reduce tax evasion and would lead to clear, systematic approach for collecting taxes.
In April 2009, during London Summit, OECD stepped on to end bank secrecy and tax havens, and addressed various issues regarding tax avoidance. It has also contributed to G-20 countries to help them reform, reshape their tax architecture.
To ensure transparency, it has created a global forum so as to exchange information on taxation. Today over 160 members are part of it and are working on international standards of tax transparency. One of the ways to ensure transparency is to putting an end to offshore tax evasion.
Few international standards that are specified by OECD are:
- One of the standards is to exchange information whether it is held by banks or fiduciaries, irrespective of existence of domestic tax or interest.
- All the relevant documents shall be provided whenever those are demanded by tax authorities. This will enhance reliability of information that is being provided as well as it would be effective.
The main standard to ensure transparency in the taxation system is exchange of information in various ways and to various people.
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