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On Friday, February 15, Vladimir Putin, Russian president, welcomed G-20 finance ministers and central bank governors to the Kremlin.
G-20 (Group of Twenty) finance ministers and central bank governors on Saturday at a meeting in
Moscow backed plans to tackle massive tax avoidance by multinational
"We are determined to develop measures to address base erosion and profit
shifting, take the necessary collective action and look forward to the
comprehensive action plan the OECD will present to us in July," the final
Germany, the UK, France and Germany have led a campaign at the G-20 meeting for an international clampdown on corporate tax avoidance
which has significantly accelerated in the past decade.
A report this week by the OECD (Organisation for Economic Cooperation and
Development), the Paris-based think-tank for 34 mainly developed countries, found
that multinational companies used loopholes that allow them to pay no corporate taxes or as little as 5% in corporate taxes when smaller businesses
are paying up to 30%
positive effects of globalization must not lead to multinational companies
artificially shifting their profits and avoiding fair contributions to the tax
revenues of our countries," Wolfgang Schäuble, German finance minister, said in Moscow on Saturday,
according to Deutsche Welle, the German broadcaster.
George Osborne, UK chancellor, said multinationals must be forced to pay their
fair share. They must, "like anyone else, pay the taxes they owe," Osborne said.
"The global economy has changed massively over the last decade, but global tax
rules have stood still for almost a century," he added.
“The economic context is now of a globalised world where there are more
investment and capital flows and where new forms of business are developing
especially in the area of digital economy,” said Pierre Moscovici, French finance
minister. “We must ensure that this new form of business also pays its
fair share and therefore we must avoid some situations in which some companies
use international and domestic law to be taxed nowhere.”
George Osborne is expected to announce that Britain will chair a new transfer pricing
group which will look at how to reform the system which allows profits to be
diverted to parent companies or to lower tax jurisdictions, via royalty and
It is one of three groups set up by the OECD to look at the tax issues which
will help the group prepare a "plan of action" to be put forward to the G-20 in
July. Germany and the United States/France lead the other two groups which will
look at how to determine tax jurisdiction, particularly in the context of
With the rise of e-commerce, countries such as Ireland, the Netherlands and
Luxembourg, have facilitated a huge increase in tax avoidance that was bound
to trigger a reaction.
The UK is Google's biggest overseas market but when it reports a loss
there, while it transfers all its UK end-user revenues to Ireland to pay an effective
rate of 0.18% of revenues, it was bound to trigger outrage.
Amazon.co.uk, Britain's biggest online retailer, generated sales of more than
£3.3bn in the country in 2011 but paid no corporation tax on any of the profits
from that income -- and is under investigation by the UK tax authorities.
Regulatory filings by parent company Amazon.com with the US securities and
exchange commission (SEC) revealed the tax inquiry into the UK operation, which
sells nearly one in four books sold in Britain, and the investigation focuses
on a period when ownership of the British business was transferred to a
The SEC filings, highlighted by Bookseller magazine, show that in three years,
Amazon generated sales of more than £7.6bn in the UK without attracting any
corporation tax on the profits from those sales.
report (see also Google's UK, French and Irish accounts data).
The American Chamber of Commerce in Ireland -- a unit of the US Chamber of
Commerce, America's most powerful business lobby - - on Friday rejected the OECD
report on corporate tax rules and claimed that Ireland's tax regime for
multinational was 'fair, transparent and just.'
On transparency, among the biggest companies, Apple in Ireland has kept its accounts hidden
since 2005; Intel Ireland is a branch of a Cayman Islands mailbox company and no
financial data is released; Irish units of Pfizer, the world's biggest drugs
company, are branches of a Dutch limited partnership; Microsoft also hides the
financial of some of its Irish units.
"...the Government must not shy away from
robustly protecting our competitive tax regime," Peter Keegan, country
executive at Bank of America Merrill Lynch and president of the American Chamber
of Commerce Ireland told a lunch meeting in
Dublin. "We can stand firm in the knowledge that our tax regime is
internationally recognised as fair, transparent and just. Ireland is not a tax
haven and this is confirmed by the OECD and by the many tax treaties we have in
place. Investors in Ireland build businesses of substance. We should not feel
the need to be defensive or in any way embarrassed about this legitimate use of
tax as a competitive tool.”
Delusion is unlikely to be a successful strategy.
The G-20 nations have also said in Moscow that there would be no so-called “currency war”.
They gave a
commitment to refrain from competitive devaluations and stated monetary policy
would be directed at price stability and growth.
represents about 90% of global GDP, 80% of world trade (including trade within
the European Union) as well as two-thirds of the world's population, according
to the IMF.
comprises the 19 leading developed and emerging countries of the world:
Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia,
Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey,
the UK and the US, plus the European Union and the European Central Bank. The
managing director of the International Monetary Fund and the president of the
World Bank, plus the chairs of the International Monetary and Financial
Committee and Development Committee of the IMF and World Bank, also participate
at G-20 meetings.