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G20 and OECD plan action to tackle multinational tax avoiders

March 2013

International action to halt tax avoidance by multinationals has been promised by the finance ministers of the G20, the grouping of the world’s 20 leading economies.

The G20 nations, led by Britain, France and Germany, are to seek ways to prevent companies from shifting profits from the countries where they operate to others where they pay lower taxes.

The ministers, meeting in Moscow, decided to reconvene in July to consider and possibly act on comprehensive proposals being drawn up by the Organisation of Economic Co-operation & Development (OECD).

An OECD survey has already been produced detailing how multinationals exploit the gaps in the tax rules.

The survey reports that international royalties and licence fee sums, mostly paid between subsidiaries within the same business group, grew 170-fold between 1970 and 2009, and it highlights the confusion over where tax should be paid on the growing revenue from e-commerce.

Three committees will now help the OECD compile its new report. One, to be chaired by the UK, will investigate how corporates calculate the payments passed between their subsidiaries in different countries.

Germany is set to chair the committee which will examine the strategies used by companies to reduce their tax base.

The third committee, to be made up of French and US experts, will consider how the correct tax jurisdiction for business activities, particularly e-commerce, can be decided.

At the G20 summit, French finance minister Pierre Moscovi said France was “strongly determined to fight against tax fraud, tax avoidance and tax evasion”.

Wolfgang Schaeuble, the German finance minister, told a press conference it was “unfair that multinational companies should be able to use globalisation as a tool” not to pay their fair share of tax.

The ministers were supported by OECD secretary-general Angel Gurria, who insisted the rules had to change. “Avoiding double taxation has become a way of having double non-taxation,” he said.

Meanwhile, NGO Christian Aid is putting pressure on the UK government to help tackle the issue. Alex Prats, the charity’s principal adviser on economic justice, said: “Tax avoidance is a major problem across the world and it’s especially devastating for developing countries, which lose billions every year as a result of tax avoidance by multinationals.

“Their tax authorities also have to contend with multinational companies’ armies of highly-paid accountants and tax lawyers. It’s not a fair fight.”

The issue has been highlighted in recent months by a number of high-profile companies, including Amazon, Google and Starbucks, that have found legal ways of avoiding tax payments in Britain.

Starbucks, for example, was reported to have generated revenue of £4bn (£2.58bn, €3bn) in Britain since 1998. However, it has paid corporation tax of only $13.8m in that time. Starbucks has now offered to make a £20m ($31m, €23m) voluntary payment to the British tax authorities.

In the US, Facebook has been accused of legal tax-dodging. The lobby group Citizens for Tax Justice said Facebook achieved profits of more than $1bn in the US last year but paid no tax, instead reclaiming $451m from the Internal Revenue Service.




G20 | Global | Tax Evasion

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