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 firms.

"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 communiqué said.

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%

"The 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 service payments.

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 e-trading.

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 Luxembourg company.

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.

2012 report (see also Google's UK, French and Irish accounts data).

This Week: OECD calls for reform of global corporate tax rules

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.

Infographic G-20 countries

The G-20 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.

The G-20 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.

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