Multinationals looking to shift profits to avoid paying their fair share of tax will find it harder to avoid tax.
Multinationals looking to shift profits to avoid paying their fair share of tax will find it harder to avoid tax, the Chancellor George Osborne announced following a meeting with G20 Finance Ministers to agree international tax rules and outline next steps.
The Chancellor’s comments were made following the G20 meeting in Lima, Peru where Finance Ministers agreed the OECD’s final Base Erosion and Profit Shifting (BEPS) recommendations. The recommendations are the culmination of a major and unparalleled international effort to tackle tax avoidance by multinationals.
Since 2012, when the Chancellor put tax avoidance on the G20 agenda, the UK has helped reform international tax rules and led the way with action to prevent corporations from paying little or no taxes. This includes:
- being the first country to take steps to introduce the country-by-country reporting template for multinationals. It will mean multinational companies have to provide HMRC with information on where they pay taxes and earn profits around the world [Winter 2014]
- being the first country to take steps to stop multinationals from exploiting the difference between countries’ tax rules to avoid paying tax through new ‘hybrid mismatch’ rules [Winter 2014]
- making it harder for multinational companies to divert their profits out of the UK through introducing the Diverted Profits Tax which ensures multinationals pay tax in the UK when economic activity has taken place in the UK [April 2015]
- helping developing countries, like Ghana, tackle tax avoidance by working with them to improve their tax rules and infrastructure [Summer 2015]
- working in the EU to agree a process for tax authorities to exchange information on the tax affairs of multinational companies to improve transparency [Autumn 2015]
Chancellor of the Exchequer George Osborne said:
The UK has led the campaign to change the international tax system and as a result countries across the world are now better equipped to deal with corporate tax avoidance.
We’ve already demonstrated our commitment to tackling BEPS and we will take new steps to introduce these new international rules into our domestic tax laws. My view is simple - the UK will have among the most competitive and lowest businesses taxes in the world, but these taxes must be paid.
Now that the BEPS process is complete, the government will continue to work with the G20 and other international partners to take forward the recommendations. It is already chairing an innovative process to update international tax treaties and has this week published draft legislation to introduce country-by-country reporting.