Photo: Sara Jespersen

By:

Gitte Gram, Policy Assistant, Oxfam IBIS

The OECD Guidelines for Multinational Enterprises (“the Guidelines”) is the most comprehensive set of government-backed recommendations on responsible business conduct that exist today. However, the Guidelines fall short when it comes to responsible corporate tax behaviour.

A lot has happened in terms of the international debate and work on responsible corporate taxation in recent years; multiple international guidelines have been established, the OECD’s Base Erosion and Profit Sharing (BEPS) project has been finalised, and the EU is discussing a number of tax transparency measures where public Country-by-Country Reporting (pCBCR) is at the centre of the discussion.

Nevertheless, these advances in the international debate on corporate taxation are poorly reflected in the current OECD Guidelines for Multinational Enterprises, which was last reviewed five years ago. As a consequence OECD Watch and Oxfam IBIS are preparing to call on the OECD to clarify the Guidelines chapter on “Taxation”.  

The role of the Guidelines

“It is important that the OECD clarifies the chapter on taxation, as the Guidelines currently constitute the most comprehensive set of government-backed recommendations on responsible  business conduct “ explains Dr. Joseph Wilde-Ramsing, Coordinator of OECD Watch, a network of more than 100 organisations from around the world working on corporate accountability.

The Guidelines in themselves are not legally binding on companies, but the signatory governments are obliged to ensure that the Guidelines are implemented and observed. The Guidelines also require the establishment of National Contact Points (NCP), which act as a dispute resolution mechanism in case of violations of the Guidelines.

As a consequence, the Guidelines could play an important role for advancing responsible corporate tax behaviour. However, the NCPs involvement in cases related to the chapter on taxation is thought to be significantly underutilised. “To date, only a handful of tax-related cases have been filed with NCPs, and none of them have been resolved successfully,” says Dr. Wilde-Ramsing.

Corporate responsible tax practice rapidly developing

“It is time for the OECD to provide additional clarification and specification on the tax provision of the Guidelines” states Dr. Wilde-Ramsing, who together with Oxfam IBIS are preparing on a formal request to the OECD, which will ask the organisation’s Investment Committee to clarify the chapter on taxation.

The current text only provides two broadly formulated recommendations for responsible business conduct.The first adheres to the principle that enterprises should comply with both the letter and the spirit of the tax laws in countries where they operate. However, “No clear definition of ’the spirit of the law’ is given in the text,” states Dr. Wilde-Ramsing.

The second recommendation on corporate taxation states that taxation is part of the broader risk  management of the company, “But it does not mention anything about public disclosure of tax policies and principles, which are vital for proper scrutiny of corporate tax behaviour” criticises Sara Jespersen , Private Sector Policy Advisor in Oxfam IBIS, who continues; “ We’d like to see more clarity on what corporations are expected to do in practice and a better reflection of the multiplication of stakeholders in the tax debate that we have experienced and that companies need to take into account.”

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