G-20 summit: Misuse of corporate vehicles playing part in tax frauds: OECD

LONDON: Misuse of corporate vehicles such as setting up of shell companies to hide the identity of beneficial owners continues to play a part in tax evasion and other illicit financial activities, says OECD.

The Paris-based think tank OECD, in its reports presented to the G-20 leaders' ongoing summit in Mexico, has also said that steady progress is being made in effectively tackling tax evasion issues.

"Corporate vehicles continue to play a part in a wide range of illicit activities, including tax fraud and evasion, money laundering, bribery, corruption and terrorist financing," OECD said.

The Organisation for Economic Cooperation and Development (OECD) co-ordinates initiatives related to taxation issues worldwide.

According to the think tank, the misuse of corporate vehicles primarily lies in the way they are exploited, particularly in secrecy jurisdictions, to hide the identity of the beneficial owners and controllers of assets and the parties to illicit transactions.

Secrecy jurisdictions refers to places where there is less transparency on issues related to taxation.

"Work on the whole of government approach and international cooperation in combating financial crime is also directly relevant to combating the misuse of corporate vehicles for illicit purposes," it noted.

Most of the countries lose revenue because of base erosion and profit shifting.

Noting that misuse of corporate vehicles is one aspect of this challenge, OECD said it would provide instruments for nations to better assess their own taxes.

To support developing countries to address international taxation issues, OECD has launched the 'Tax Inspectors without Borders' initiative that would be operational by the end of 2013.

On Multilateral Convention on Mutual Administrative Assistance in Tax Matters, OECD said the number of signatory countries are increasing rapidly. Currently, 35 nations, including India, have inked the pact.

"India has moved particularly quickly to both sign and ratify, with the result that the convention entered into force with respect to India on June 1, 2012," it noted.

The convention -- considered a valuable tool in fighting tax evasion -- allows exchange of information on all taxes, among others.