OECD issues latest global view on VAT and GST regimes to tackle VAT avoidance

The Organisation for Economic Co-operation and Development has issued last week the latest guidelines for international Value Added Tax / Goods & Services Tax. These are intended to provide all countries around the world with the broad and consistent principles for their consumption tax regimes. They are not legally binding.

This latest set of guidelines will aim to address mounting public and governmental concerns about aggressive tax planning and avoidance by multinationals.

Much of the work of the OECD in this respect is to help ensure that VAT does not interfere or distort global trade flows. This can arise through double taxation (either within or between countries), overly complex rules, rates or administrative burdens.

Issues covered in the latest VAT and GST guidelines include:

1. Scope of any VAT regime
2. Treatment of cross border goods, services and intangibles, especially where a company is establishments in multiple countries (this includes concerns around potential tax avoidance/evasion)
3. The neutrality for businesses of VAT regimes, and that it should only be a tax on the ultimate consumer.
4. Anti-abuse mechanisms