TaxCorporate TaxG20 poised to sign tax avoidance agreement

G20 poised to sign tax avoidance agreement

G20 leaders are to sign an agreement clamping down on tax avoidance at St Petersberg meeting

G20 poised to sign tax avoidance agreement

MEMBER NATIONS of the G20 group are expected to announce an agreement to tackle tax avoidance activities by wealthy corporations and individuals at a summit of world leaders in Russia this week.

Meeting in St Petersberg, representatives of developing and developed nations are expected to sign an accord closely modelled on a 15-point OECD action plan presented to the group in July, when they met in Moscow.

In that meeting, the body said a “truly global model for multilateral and bilateral automatic exchange of information” is required to clamp down on tax avoidance and evasion.

In a communiqué released by the G20 following that meeting, the group called the system to be implemented universally “without further delay”.

The UK already operates such systems with all its overseas territories with significant financial centres. The deals see the UK, along with other countries involved in the pilot, automatically provided with much greater levels of information about bank accounts held by their taxpayers in those jurisdictions, including names, addresses, dates of birth, account numbers, account balances and details of payments made into those accounts. It also includes information on certain accounts held by entities, such as trusts.

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.

In particular, the companies have been using transfer pricing, which some claim has the effect of mitigating their liabilities. The method sees multinational corporations value and purchase goods and services moving across international borders from one of the group’s corporate entities to another. An ‘arm’s length’ principle is usually applied to ensure the transaction is made at market value, but there have been questions raised over whether all companies do so in practice.

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

Research produced by Oxfam warned this week that such behaviour was not only harmful to the countries in which companies were based, but was also damaging to developing nations, with African countries losing 2% of national income to tax avoidance by businesses.

“Urgent and concrete action” is required “to fix a broken tax system that allows companies to suck billions of dollars out of Africa”, the charity said.

Head of development finance and public services Emma Seery added: “The G20 should be ashamed to be at the helm of an economic system that allows companies to rip off Africa to this extent. The G20 would never allow companies to fiddle them out of a trillion dollars. It is an outrage that the poorest countries not only suffer this, but are not even invited to the table to take part in tax talks.”

Related Articles

Big names, little tax: Airbnb, Facebook, Kellogg’s, eBay

Corporate Tax Big names, little tax: Airbnb, Facebook, Kellogg’s, eBay

1w Alia Shoaib, Reporter
EU divided over radical tax reforms targeting tech giants

Corporate Tax EU divided over radical tax reforms targeting tech giants

2w Alia Shoaib, Reporter
How to educate your clients about tax avoidance

Corporate Tax How to educate your clients about tax avoidance

3w Clear Books | Sponsored
Colin: Tell them about the money, mummy

Business Regulation Colin: Tell them about the money, mummy

11m Taking Stock
Five key tax and business burdens the chancellor must ease in Autumn Statement

Business Regulation Five key tax and business burdens the chancellor must ease in Autumn Statement

11m Kevin Reed, Writer
CGT clampdown nets HMRC £124m – but could lead to increase in use of avoidance schemes

Corporate Tax CGT clampdown nets HMRC £124m – but could lead to increase in use of avoidance schemes

3w Austin Clark, Reporter
‘Google tax’ nets HMRC £281m

Corporate Tax ‘Google tax’ nets HMRC £281m

1m Emma Smith, Managing Editor
Autumn Statement: Investment and tax avoidance highlighted in Hammond's speech

Corporate Tax Autumn Statement: Investment and tax avoidance highlighted in Hammond's speech

11m Kevin Reed, Writer