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Global firms’ profit shifting shows need for new tax rules: OECD

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New data shows the extent to which multinational companies shift profits around the globe to avoid tax, increasing pressure on international efforts to rewrite rules for a digital era, the OECD said.

For the first time, the Paris-based organization published aggregate data on the activities and taxes of 4,000 multinationals. Overall, profits reported in low tax countries are much higher relative to economic activities than in larger nations.

“There is a misalignment between the location where profits are reported and the location where economic activities occur,” the OECD said Wednesday.

High-income countries have around 32% of employees and 35% of tangible assets, but only 28% of profits. In investment hubs — defined as jurisdictions with a total inward Foreign Direct Investment above 150% of economic output — multinational companies report 25% of profits and only 4% of employees and 11% of tangible assets.

The OECD said the report shows a need to make progress on efforts to create a minimum corporate tax as part of the broader negotiations on digital taxation.

Bloomberg News