G20 'determined' to halt cooperate tax avoidance
The G20 group of the world's top economies expressed determination on
Saturday to crack down on companies who duck their full taxation
responsibilities with elaborate schemes.
The call came after the finance ministers of Britain, France and
Germany said it was time for coordinated action to halt the practice of
shifting profits from a firm's home country to pay less tax under
another jurisdiction.
Cash-strapped governments are seeking to use every means to inject
new funds into their budgets and have run out of patience with big firms
shifting profits to be registered in tax havens like the British Virgin
Islands and Bermuda.
"We are determined to develop measures to address base erosion and
profit shifting" the G20 said in a communique after a two-day meeting of
finance ministers and central bankers in Moscow.
They vowed to "take the necessary collective action" and awaited an
action plan which is set to be put forward later this year by the
Organisation for Cooperation and Economic Development (OECD).
Online retailer Amazon, Internet giant Google as well as coffee shop
chain Starbucks have been under the spotlight for their tax strategies
in Britain and other EU countries in recent months.
Starbucks came under particular pressure in Britain following the
revelation last year that it has paid just 8.6 million ($13.8 million)
in British corporation tax since 1998, despite generating 3 billion in
revenues.
It has now pledged to voluntarily pay back millions in extra tax. "We
are talking about something that is fundamentally legal. We need to
modify the law," admitted the OECD secretary general Angel Gurria.
"Avoiding double taxation has become a way of having double
non-taxation." --- 'Fair on the citizens' In a rare joint news
conference, the finance ministers George Osborne of Britain, France's
Pierre Moscovici and Germany's Wolfgang Schaeuble said while such tax
avoidance was still technically legal, laws needed to be changed in a
broad global effort.
Schaeuble said it was "unfair that multinational companies should be
able to use globalisation as a tool" not to pay their fair share of
taxes while Moscovici described the issue as a "matter of fairness for
our citizens".
Osborne said that current global tax rules had been developed almost
100 years ago -- along principles set out by the League of Nations in
the 1920s -- and few changes had been made since.
"We want businesses to pay the taxes that we set in our countries.
And this cannot be achieved by one country alone. No one country can
create an international tax system by itself." The ministers emphasised
that their proposal was supported by the Russian presidency of the G20.
A person familiar with the OECD's report said it was essential to
move rapidly, especially with the United States apparently not sharing
Europe's wholehearted enthusiasm for the anti-tax avoidance drive. "The
timetable is going to be very tight -- otherwise the (OECD) report will
be buried," the person said. According to the OECD, some multinational
companies use avoidance strategies that allow them to pay just five
percent in corporate taxes while smaller businesses are paying 30
percent.
It says that practices have become more aggressive in the past
decade, with some multinationals creating offshore subsidiaries or shell
companies and taking advantage of the tax breaks offered in the
countries where these are registered.
This has led to absurdities like the tax havens of Barbados, Bermuda
and the British Virgin Islands in 2010 together receiving together more
foreign direct investment than either Germany or Japan, the OECD said.
In 2010, the creation of offshores meant the British Virgin Islands
was the second largest investor in China, it noted. |