Leaders of the world’s main economies have agreed that international action must be taken against tax avoidance and evasion.
Meeting in St Petersburg, leaders of the G20 nations covered a range of tax-related issues, including tax avoidance by multinational companies, tax information exchange and the need to work with developing countries to bolster their ability to collect the tax due to them.
Discussing tax avoidance by multinational companies, the world leaders gave their backing to the Organisation for Economic Cooperation and Development’s (OECD) action plan on base erosion and profit shifting (BEPS), presented to G20 finance ministers at July’s Moscow meeting.
They called on member countries to examine how the international tax rules allow multinationals enterprises to reduce overall taxes paid by artificially shifting profits to low-tax jurisdictions, and committed to taking the necessary collective and individual action to tackle the issues identified by the OECD.
To strengthen their efforts to tackle tax evasion, the leaders committed to a new global standard based on automatic tax information exchange, and called on the OECD to draw up the standard by February 2014.
They also called on all countries to join the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, an existing means of tax information exchange, in order to widen the number of countries benefiting from it.
Finally, the leaders emphasised that developing countries should be able to reap the benefits of a more transparent international system in order to collect more tax. As well as helping build the tax collection capacity of developing countries, they have asked the OECD and other organisations to work together to develop a roadmap setting out how developing countries can participate in automatic information exchange.
Speaking after the meeting, Chancellor George Osborne said:
Earlier this year the UK government put a fairer tax system at the heart of the agenda when David Cameron chaired the G8 summit. This week’s agreement shows the G20 leaders adopting this agenda and making it their own and that is a huge milestone on the road to making the international tax rules fairer.
In Moscow in July the Chancellor jointly launched the OECD’s report on base erosion and profit shifting, calling for the G20 finance ministers to build on the groundbreaking agreements made at the G8.
Following that meeting the non-OECD G20 members (Argentina, Brazil, China, India, Russia, Saudi Arabia, South Africa and Indonesia) joined the OECD’s BEPS project as associates, meaning that they will participate in the work on an equal footing with OECD members.
The Prime Minister put tax avoidance and evasion at the heart of his G8 agenda for May’s summit in Lough Erne. The UK used its presidency of the G8 to promote transparency and ensure everyone pays the tax due, as well as supporting the G20’s work on tackling profit-shifting by multinational companies.
Image by President of the European Council on Flickr. Used under Creative Commons.