G20 sending mixed messages on tax says Taxand chairman

by Calum Fuller

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04 Apr 2014

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G20 NATIONS are dragging their feet and sending mixed messages in their fight against tax avoidance and evasion, according to the chairman of an international network of tax practices.

The G20 and OECD have spent recent years working on a solution to what it calls base erosion and profit-shifting, through which multinational companies can locate activities in tax regimes that suit them best.

The bodies' action plan attempts to address the digital economy, which they say offers a borderless world of products and services that too often fall outside the tax regime of any specific country, leaving loopholes which allow profits to go untaxed.

Last year, at the request of the G20, the OECD identified 15 steps governments need to take to tackle tax base erosion and profit-shifting, which were criticised at the time for being too general.

Companies including Google, Amazon and Starbucks have been in the firing line for their use of offshore jurisdictions to drive down their UK tax liabilities.

But according to Taxand chairman Frederic Donnedieu, the G20 is in danger of "being all bark, with only individual nations having any bite".

He added "very few specifics" have been outlined on how the countries plan to tackle international tax in the coming year or further ahead.

"Outside of this year's G20 meeting, there are some tangible global tax changes underway, albeit they are making somewhat slow progress. We have heard this week that the OECD's BEPS initiative is "on track", primarily focused on establishing new country-by-country reporting requirements so as to more effectively target tax audits, however - whilst agreed by the G8 in principle - it's yet to be established how global implementation will work," Donnedieu said.

The cross-border automatic exchange of information initiative that will be adopted by 44 countries by 2017, is "another example of a cumbersome initiative that will take time to instigate", he added.

"While both will, eventually, help the fight against unlawful tax structures, they are also fuelling an escalating burden of compliance costs for the vast majority of multinationals who continue to fulfil their tax obligations", he said.

He went on to criticise G20 politicians over a mismatch between anti-tax-avoidance rhetoric and while using national tax breaks and incentives to "court multinationals".

"The inconsistency between global prose and national policy has proved problematic for business leaders. As the G20 countries come under increasing pressure to deliver real action and less talk, it seems that only individual countries can implement change in their hunt for more tax revenues," he said.

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