G20 to tackle tax avoidance

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G20 finance ministers, led by the UK, France and Germany, pledged to crack down on tax avoidance by multinational companies at their meeting in Moscow on 15 February, report Accountants Northampton Harris & Co.

The final communique from the two-day conference said the G20 welcomed a new report commissioned from the Office of Economic Co-operation and Development’s (OECD) Addressing Base Erosion and Profit Shifting (BEPS), and stated that ‘an important part of fiscal sustainability is securing our revenue bases’.

The G20 said:

‘We are determined to develop measures to address base erosion and profit shifting, take necessary collective actions and look forward to the comprehensive action plan the OECD will present to us in July.’

The UK, France and Germany were the key players in the move to tackle these issues. Chancellor George Osborne said: ‘We want businesses to pay the taxes that we set in our countries. And that cannot be achieved by one country alone.’

Pierre Moscovici, the French finance minister, said France was "strongly determined to fight against tax fraud, tax avoidance, and tax evasion. We must avoid situations in which some companies use international and domestic law to be taxed nowhere.’

Osborne said that global tax rules ‘have stood still for almost a century’, since being developed by the League of Nations in the 1920s, and stated that ‘Britain will lead the international effort to bring them into the 21st Century’.

The OECD’s BEPS study found some multinationals are paying as little as 5% in corporate taxes when smaller businesses pay up to 30% and said the practices used to reduce tax liabilities had become ‘more aggressive’ over the past ten years.

OECD research also highlighted the role that some small jurisdictions perform as conduits, receiving disproportionately large amounts of Foreign Direct Investment compared to large industrialised countries and investing disproportionately large amounts in major developed and emerging economies.

The OECD’s action plan to tackle BEPS will be formulated with the help of three committees. The UK will chair a committee looking at transfer pricing; Germany will head a panel looking at the ways in which companies have reduced their tax base; and France and the US will jointly consider the problem of identifying the correct tax jurisdiction for business activities, particularly e-commerce.

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