Azerbaijan to Fight with Withdrawal of Profits from Taxation

The Ministry of Taxes of Azerbaijan has been granted observer status in the Organisation for Economic Cooperation and Development (OECD) in the fight against the erosion of the tax base and the withdrawal of profits from taxation.

As the Head of Tax Policy and Strategic Studies Department of the ministry, Natig Shirinov told the media, on the one hand, it will allow expressing views on various issues at the government level, and on the other, the country has no obligations yet.

"The Ministry of Taxes and the International Finance Corporation (IFC) are working on a draft agreement on transfer pricing. If in the future we sign the agreement, Azerbaijan will be able to go to the international standards of taxation of transfer prices," he said.

The problem worldwide is that large corporations to reduce taxes use offshore companies and transfer prices to move the taxable income into so-called low-tax jurisdictions. In this context, the OECD has received a mandate from G-20 to achieve a consensus by all countries on the set of rules that would ensure the taxation of international companies in the jurisdictions in which they are actually engaged in economic activities.

Within the framework of the OECD specific measures unified tax reporting forms will be worked out, which will let observe revenues, profits, assets, number of employees and the amount of taxes paid by each company. It is also planned to abolish unjustified tax breaks for large taxpayers in several countries and to block other existing tax loopholes.

According to experts, the widespread introduction of new rules will take time, but the prospect of their implementation will have an immediate impact on corporate behavior. This is especially true in countries such as Azerbaijan, where large taxpayers and beneficiaries are the state monopoly. --17D-