G20 backs crackdown on tax avoidance

Support for ‘ambitious and comprehensive’ plan to target tax-avoiding multinationals

 Spanish prime minister Mariano Rajoy (left) meets Russian president  Vladimir Putin during the G20 summit in St Petersburg yesterday. Leaders of the G20 nations made progress on tightening up on multinational company tax avoidance. Photograph: Iliya Pitalev/Host Photo Agency via Getty Images

Spanish prime minister Mariano Rajoy (left) meets Russian president Vladimir Putin during the G20 summit in St Petersburg yesterday. Leaders of the G20 nations made progress on tightening up on multinational company tax avoidance. Photograph: Iliya Pitalev/Host Photo Agency via Getty Images

Sat, Sep 7, 2013, 01:00


Leaders of the world’s largest economies ratcheted up the pressure on tax avoidance by backing “an ambitious and comprehensive” plan to crack down on multinationals that shift profits into low-tax countries.

The G20 countries also stepped up the assault on evasion, with plans to exchange tax information automatically between themselves by the end of 2015 and calling “on all other jurisdictions to join us by the earliest possible date”.

The countries endorsed an action plan to close corporate tax loopholes that was drawn up by the Paris-based Organisation for Economic Co-operation and Development (OECD) in the wake of public anger over tax planning used by multinationals such as Google and Apple to minimise their payments. They also urged countries to examine how their tax rules contributed to profit-shifting.


‘Fair share’
The declaration said that “in a context of severe fiscal consolidation and social hardship, in many countries ensuring that all taxpayers pay their fair share of taxes is more than ever a priority”.

The leaders, who have faced criticism from aid charities about doing too little for developing countries, said they wanted to help them build up their capacity to participate in automatic exchange of tax information.

A road map will be drawn up to show how developing countries can “overcome obstacles” to participation in the emerging new standard, which will require countries to ensure confidentiality and the proper use of information.

The charity Christian Aid called on the G20 to include developing countries in automatic exchange from the outside. “It does not make sense to say that developing countries are not ready to implement it, some are as ready as any developed country,” it said.

In a statement issued during the summit, businesses said they were working closely with the OECD to update international tax rules in order to help restore public confidence. BIAC, the OECD business lobby group, set out voluntary guidance to companies, which said they should not engage in “abusive” tax planning although they could “legitimately respond to tax incentives”. It also said they should enhance “co-operation, trust and confidence” between business and developing countries’ tax authorities.


Letterbox companies
The Netherlands has proposed to renegotiate its tax treaties with 23 least-developed countries in the wake of criticism that damaged its investment climate, a Dutch minister said. Frans Weekers, deputy finance minister, said he wanted to turn around a trend for a growing number of letterbox companies in the Netherlands.

“I see the Netherlands being portrayed in a bad light. I don’t want to be portrayed in a bad light,” he said.
(Copyright The Financial Times Limited 2013)