Hungary signs OECD tax convention

Hungary signed the agreement, which aims to reduce opportunities for tax avoidance by multinational companies, together with more than 65 other countries, the ministry said.

The innovative multilateral convention “will swiftly implement a series of tax treaty measures to update the existing network of bilateral tax treaties and reduce opportunities for tax avoidance by multinational enterprises,” the OECD said. “The new convention will also strengthen provisions to resolve treaty disputes, including through mandatory binding arbitration, thereby reducing double taxation and increasing tax certainty,” it added.

The agreement was described as an important milestone in the international tax agenda, moving closer to the goal of preventing base erosion and profit shifting (BEPS), the tax avoidance strategies used by multinational enterprises.

“The signing of this multilateral convention marks a turning point in tax treaty history,” said OECD Secretary-General Angel Gurría. “We are moving towards rapid implementation of the far-reaching reforms agreed under the BEPS Project in more than 1,100 tax treaties worldwide, and radically transforming the way that tax treaties are modified. Beyond saving signatories from the burden of re-negotiating these treaties bilaterally, the new convention will result in more certainty and predictability for businesses, and a better functioning international tax system for the benefit of our citizens.”

The OECD estimates that multinational companies avoid paying USD 100-240 billion in tax each year by taking advantage of gaps and mismatches in tax rules to artificially shift profits to low or no-tax environments where they have little or no economic activity.

The text of the convention, an explanatory statement and background information are available here.