Nations have agreed on principles for concrete action to prevent corporations from manipulating the international tax system, the Organization for Economic Cooperation and Development said in a report on Tuesday.
In a set of technical recommendations made in Paris, where the organization is based, the organization said nations had agreed on a series of actions to ensure "the coherence of corporate income taxation at the international level" and to improve transparency for governments.
"Our recommendations constitute the building blocks for an internationally agreed and coordinated response to corporate tax planning strategies that exploit the gaps and loopholes of the current system to artificially shift profits to locations where they are subject to more favorable tax treatment," Angel Gurría, the O.E.C.D. secretary general, said in a statement.
To lower their tax bills, multinational corporations move profits from high-tax to low-tax jurisdictions through subsidiaries and offshore companies using complex transactions including internal payments for interest, royalties, patents and fees.
Such strategies are usually legal, but since the beginning of the current financial crisis there has been a clear recognition in Washington and in other capitals that corporate tax planning is distorting the world economy. Furthermore, the rules governing global tax affairs, created in the 1920s, can seem out of touch when a Google, Apple or Microsoft can move millions or billions of dollars of profit from one country to another at the click of a button.
The issue has come under scrutiny by the Obama administration and lawmakers in the United States, where companies hold about $2 trillion offshore in so-called stateless funds and where corporate giants have taken to inversions, or transactions in which corporations move their tax residency abroad by being bought by smaller foreign firms, in order to reduce their corporate tax bills at home.
In developing countries — which are typically more dependent on corporations for tax revenues than wealthy economies, and which lack the cadre of skilled experts to untangle corporate profit-shifting structures — there is even greater concern.
The O.E.C.D. acknowledged that the rise of Internet commerce had greatly changed the global playing field, but stopped short of calling for rules specific to e-commerce.
"Because the digital economy is increasingly becoming the economy itself, it would be difficult, if not impossible, to ring-fence the digital economy from the rest of the economy for tax purposes," it said.
The organization, which serves as a forum for discussion and research, was given a mandate in September 2013 by Group of 20 leaders to ensure that "profits are taxed where economic activities occur and value is created."
The O.E.C.D. initiative, formally known as the Base Erosion and Profit Shifting Project, or BEPS, is being negotiated by the 34 members of the organization plus associated nations, including China, Russia and Brazil. It said all of the organization's members, which include the United States, Japan and most of the European Union nations, had agreed to adopt the new measures.
The organization said nations should, for example, harmonize aspects of their national laws or amend bilateral treaties to neutralize so-called hybrid mismatch arrangements, where corporations set up entities or transfers in two or more countries not for productive purposes, but rather to create deductions or to generate foreign tax credits.
It also said nations should ensure that their laws or treaties fully address the transparency of such transfer pricing on a country-by-country basis, and should adopt rules on how intangible assets like trademarks, brands, trade secrets and copyrights — all of which offer rich opportunities for exploiting tax loopholes — are accounted for in transfer pricing.
For the recommendations to actually become binding, however, countries would have to encode them in their domestic laws or amend their bilateral tax treaties. The organization said on Tuesday that it planned to hold an international conference on amending the network of existing tax treaties.
Sol Picciotto, an emeritus professor at Lancaster University in Britain, said the recommendations were at least five to 10 years from becoming law, and that the jury was out on whether they would accomplish their stated goals.
"These are just tweaks," said Mr. Picciotto, who is also a senior adviser to Tax Justice Network, a nonprofit organization that advocates an overhaul of international tax policy. "They're trying to repair an old motorcar, but what they need is a new engine."
The problem, he said, is that "companies are very wary of any shift to a new system." But, he added: "Tax professionals are aware that the system is broken. It has to change."
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