After releasing a ten-point action plan on tax evasion, the G8's proposals have been branded an "anti-climax" by advisers
ADVISERS HAVE BEEN LEFT UNDERWHELMED by proposals for an action plan to tackle the “scourge” of international tax evasion put forward by G8 leaders after their summit in County Fermanagh, Northern Ireland.
The ten-point agreement released by the group, among other things: detailed plans for tax authorities around the world to automatically exchange information; the prevention of cross-border profit-shifting; and the identification of the beneficial owners of companies.
Other suggestions included helping developing nations to collect their taxes, having extractive companies report payments to all governments and a call for governments to “roll back” protectionism in favour of boosting jobs.
Tax practitioners, though, are unimpressed, with many noting that while such broad agreements were anticipated, no tangible action has been agreed.
It’s a source of particular irritation to multinationals and their tax advisers after months of public criticism and controversy around their tax affairs. Indeed, many have pointed out the principle that tax is levied on a company’s profits, not its revenues or where its customers are located is seldom acknowledged.
Companies such as Google, Amazon and Starbucks have been lambasted both in public and before the Public Accounts Committee over their UK tax affairs after shifting their profits offshore in order to pay in lower-tax jurisdictions. There is nothing to suggest any legal wrongdoing.
The most concrete move to come out of the summit is the pledge to create a central register of company ownership, but pundits warn the involvement of the G20 and OECD are the bare minimum to effect meaningful change.
Then there are concerns over the administrative burden countries would face as a result of such a change, with some having to construct new systems to cope with them.
For G8 members, though, that is not a hurdle that should cause their agenda to falter.
“Countries should change rules that let companies shift their profits across borders to avoid taxes, and multinationals should report to tax authorities what tax they pay where,” their joint statement read.
Enforcing that change, though, is likely to prove an incredibly unwieldy, time-consuming process, and while European Commission president José Manuel Barroso rightly said substance on the issue is more important than speed, many advisers are worried that the already yawning gap between tax law and the practices of multinationals will widen.
For many, though, the agreement is simply a reiteration of the governments’ widely-known stances, rather than the action plan they claim it is. The profession is waiting for the G8’s actions to match their words, and it seems they are unconvinced it will.