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Sixty eight countries sign a multilateral convention to reduce tax avoidance by multinational enterprises

Sixty eight jurisdictions have signed a multilateral convention which aims to reduce tax avoidance by multilateral enterprises.

The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (Multilateral Instrument or MLI) transposes results from the OECD/G20 BEPS projects into bilateral tax treaties worldwide.

The aim of MLI is to eliminate double taxation and implement agreed minimum standards to counter treaty abuse and improve dispute resolution mechanisms.

The OECD/G20 BEPS project, according to OECD, fills the gaps in the current international rules which lead to corporate profits to «disappear» or be artificially moved to low or no tax jurisdictions.

Deloitte’s head of tax policy, Bill Dodwell said: “When ratified under each country's domestic procedures, over 1100 double tax treaties will be changed, approximately one third of the global total. The effective dates will depend on each country, but 2019 is the most likely year. The changes will cut out treaty abuse - using treaties to save tax when not intended by the countries involved. Much more effective dispute resolution between countries will also be introduced, reducing double tax and enhancing business certainty. 25 countries have elected to adopt mandatory binding arbitration as the ultimate resolution to tax disputes.This is very welcome and we hope to see more countries join in future years. This convention is an important milestone in global agreement on international corporate taxation. It sends a signal that countries are determined to work together on corporate taxation to minimise base erosion, whilst working to avoid economically damaging double taxation."

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