PARIS, France (Reuters) – About 70 countries on Wednesday (June 7) launched a new international tax convention to prevent multinational companies from “treaty shopping” for jurisdictions most favorable to their tax bills.
Ministers from major economies signed the new tax pact at the Organization for Economic Cooperation and Development (OECD) in Paris, which said more countries were likely to join in the coming weeks.
The new agreement will replace more than 1,100 bilateral tax treaties, or about a third of the treaties signed by countries over the last century to avoid double taxation.
In the age of globalization, multinational countries have increasingly sent cross-border transactions through third countries only to take advantage of their low taxes in what has come to be called treaty shopping.
The new treaty sets in particular minimum standards to avoid abuses and defines a company’s taxable presence in a country while also setting out plans for settling double taxation disputes between governments.
One notable absence at the signing was the United States, which has shown little interest in the treaty.