That is, according to Pascal Saint-Amans, director of the Organisation for Economic Cooperation and Development's ("OECD") Centre for Tax Policy and Administration.
On 19 July 2013, the OECD released its Action Plan on Base Erosion and Profit Shifting (the "Action Plan").
The Action Plan, produced at the request of the G20, aims to stop multinational companies from paying little or no tax. Formal proposals will be rolled out over the next two years.
The OECD has said that rules governing double taxation are being abused in order to permit "double non-taxation". The Action Plan, through a series of 15 specific action points, aims to address this issue.
Pascal Saint-Amans confirmed that all OECD members, including Switzerland, have backed the plan. China, India and other countries outside the OECD will be invited to take part in the new rules on an equal footing.
The Action Plan attempts to ensure that profits are not artificially shifted away from countries where the value is created; the OECD has specifically referred to the "growing disconnect" between 1) the location where financial assets are created and investments take place, and 2) where multinational enterprises report profits for tax purposes. More emphasis will be placed on where sales are made and where staff are based as the OECD looks to align the allocation of income with the economic activity that generates it.
One of the 15 specific action points proposed by the OECD is to address the tax challenges of the digital economy. This will be assessed by a dedicated task force. Other areas on which the OECD will focus include abuse of tax treaties, the neutralisation of the impact of "hybrid" structures and tackling "commissionaire" structures.
Companies will have to transparently declare their tax arrangements and disclose any "aggressive tax planning arrangements". This information will need to be broken down on a country-by-country basis.
Even though all OECD members have signalled their backing of the Action Plan, given the level of cross-border cooperation that will be required, it will clearly take a significant amount of time for any new legislation to be implemented.