International Taxation. Assessing Tax Evasion Fight


Without any possible doubt, international tax scrutiny is on its highest level ever. BEPS program with its 15 actions plan may be considered the “top of the iceberg” and it has drawn a lot of attention, however, tax jurisdictions have taken additional steps on fighting against tax evasion.

In a fast review of the main actions that have been implemented in many countries around the world, we can easily identify:

  1. Exchange of information between tax jurisdictions intended for disclosure of harmful tax planning. In this sense, application of minimum standard reporting (MSR) has been useful.
  2. Adopting the new Multilateral Agreement (MLI) that nowadays is in force, or it will be soon, in most of the 102 countries that signed it. MLI puts emphasis on addressing treaty shopping and includes limitation on benefits rules (LOB).
  3. Reinforcement of transfer pricing informative returns that means more scrutiny on Local, Master and Country by Country reports.

From OECD perspective, the “jewel crown” would be to get a final version of the taxation on Digital Economy that contemplates a minimum tax segment. This topic has been discussed for several years but it seems to be in its final stage after going through a very complex process. OECD`s tax teamwork has been working hardly on the final version of Pilar One and Pilar Two that aim to reach two milestone goals within the Digital Economy taxation: a) reduce globally low-tax profits from 36% to 7% (Pillar Two)1, and b) allocate taxing rights on around USD 200 billion profits per year and rise up to 32 billion by relocating taxing rights from investments hubs to market jurisdictions (Pillar One)2.

Based on the OECD report we are led to believe that tax evasion is doomed, but unfortunately, after a close review of other reports this is something that is far to be true.

Indeed, according with a report released in 2024 for the EU Tax Observatory (ETO)3, even though some good steps have been taken on fighting the tax evasion, there are still many issues at stake. The report underlined, among others, the following worrying facts:

  • 15% Global Minimum Tax on Multinationals, backed for more than 140 countries in 2021, may have a lower impact as expected because many loopholes in its implementation.
  • ETO considers that no sufficient efforts have been made in order to tackle tax evasion on global billionaires that have effective tax rates around 0.5% of their wealth thanks to frequent use of shell companies.
  • The report concedes that automatic information exchange has significantly prevent offshore tax evasion, reducing it by approximately threefold in less than a decade. However, there are loopholes on financial assets that must be reported, and, in some countries, some financial institution fails in duly reporting compliance fearing loosing clients.
  • An issue that arises big concerns points out that large amounts of profits are still shifting to tax heavens. Moreover, ETO estimates that, in 2022, the amount accounts for $1 trillion. Obviously, this finding invites us to a deep assessment of the BEPS program and its real impact on high level taxpayers.

Inequality on the wealth distribution is a big problem worldwide, but it is even worse to know that after many years of hearing that strong measures would be implemented against tax avoidance the outcome seems to be very poor because the wealthiest multinationals and individuals still contribute the least of the tax burden.

1 OECD estimates that 53% of all low-tax profits globally is located in high tax jurisdictions.
2 Source: Secretary General Tax Report to G20, February 2024.
3 Research institute based on Paris School of Economics.

Miguel Rodríguez, tax partner Auren Mexico