Six nations, including two "BRICs", have signed a global arrangement to make it harder for multi-nationals to shuffle profits so as to minimise taxes.

Six nations have signed a pact to automatically transfer reports to make multinationals more transparent about their affairs as part of a global drive against “base erosion”, a form of tax avoidance, the Organisation for Economic Co-Operation and Development has reported. 

Canada, Iceland, India, Israel, New Zealand and the People’s Republic of China yesterday signed the Multilateral Competent Authority agreement for the automatic exchange of Country-by-Country reports, taking total signatories to 39 countries. The signing ceremony took place in Beijing, China.

The agreement allows all signatories to bilaterally and automatically exchange country-by-country reports and help tax-gathers obtain a “complete understanding” of how multinationals structure their affairs, while keeping information confidential.

The move is part of a programme to stop firms shifting profits to low-tax jurisdictions to minimise overall tax bills, an issue that has seen groups such as Starbucks, Google and Amazon, for example, pilloried for this behaviour. In response, it is argued governments should levy more rational taxes in the first place and that avoidance is not a crime. (In the case of US-headquartered multinationals, for example, the US has one of the highest corporate tax rates in the world, at 35 per cent or more.)

Country-by-country reporting will require multinationals to provide aggregate information annually, in each jurisdiction where they do business, relating to the global allocation of income and taxes paid, together with other indicators of the location of economic activity within the multinational entity.