Southeast Asian nations must cooperate to halt tax competition, avoidance, IMF official says

Governments must work together on a regional basis to fight the harmful effects of tax competition and address multinational tax avoidance through devices such indirect transfers of assets, IMF Deputy Managing Director Mitsuhiro Furusawa said July 12.

Speaking at a conference in Jakarta jointly sponsored by the IMF and Indonesia’s Ministry of Finance, Furusawa said that tax competition and indirect transfers are unwanted side effects of economic integration and cross-border investment.

Neither issue has been addressed in the 2015 G20/OECD base erosion and profit shifting (BEPS) initiative, Furusawa observed.

“BEPS is important. But it does not address all international tax issues—especially some that are most relevant for developing countries,” he said.

According to Furusawa, it is up to the Association of Southeast Asian Nations, or ASEAN, to respond to these problems through cooperative effort. ASEAN, established in 1967, is an association of the states of Indonesia, Malaysia, Philippines, Singapore and Thailand, Brunei, Vietnam, Laos, Myanmar, and Cambodia.

Furusawa said achieving effective coordination in tax matters is difficult, and gets harder as integration proceeds.

“Here, it is most important to keep in mind the delicate balance between establishing a tax system attractive to investment and protecting against damaging tax competition,” Furusawa added.

Furusawa also said the newly established Platform for Collaboration on Tax represents a milestone in capacity building to support developing countries and will take forward IMF work to stop tax avoidance through indirect transfers of assets.

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