Governments plan to take on big businesses that shift their cash from high to low tax countries in a co-ordinated campaign against tax avoidance.
The world’s 20 leading industrial economies (G20) plus the Organisation of Economic Cooperation development countries that are not already member of the G20 are to start automatic tax information sharing by the end of 2015.
The aim is to stop multinational corporations avoid paying tax in countries where they make their sales by sending the money to more tax friendly jurisdictions.
Companies like Apple, Google and Amazon are sitting on cash mountains of billions of dollars.
This money, say governments, distorts competition because they can afford build up piles of money to finance operations, putting companies that pay their taxes at a disadvantage.
Unfair advantage
Russian premier Vladimir Putin unveiled the new tax strategy at the close of this weekend’s meeting of G20 ministers.
A declaration from the summit said: “If the G20 nations do not do something about this, the practice could undermine the fairness and integrity of the global tax system. Businesses that operate like this across borders have an unfair advantage over those that only run domestic operations.”
Russian Finance Minister Anton Siluanov said: “Governments feel their tax bases should be widened to help pay for budget deficits. It’s no surprise that ordinary taxpayers and domestic businesses are angry when they see corporations making sales in one country, paying little or no taxes in another, and taking profit out of the countries where they are making their money.”
In their defence, corporations tell governments that they are merely working within the law to protect profits for their shareholders.
Tax in isolation
The countries involved in the G20 and OECD are not only the most developed industrial nations, but also the largest markets for the sale of goods and services worldwide.
The governments feel legislating for tax in isolation leaves holes in the law for multinational companies to exploit, and are switching to tax sharing agreements, like the new American Foreign Account Tax Compliance Act (FATCA) and similar British and European plans to swap tax data on individual taxpayers.
As an indication of how widespread the new tax plans are, below is a table of G20 and OECD countries – most of the OECD European nations are also represented by the European Union on the G20.
G20 and OECD Countries
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G20 |
OECD |
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Argentina |
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Australia |
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Austria |
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Belgium |
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Brazil |
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Canada |
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China |
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Chile |
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Czech Republic |
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Denmark |
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Estonia |
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European Union |
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Finland |
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France |
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Germany |
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Greece |
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Hungary |
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Iceland |
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Ireland |
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Israel |
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Italy |
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India |
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Indonesia |
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Japan |
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Luxembourg |
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Mexico |
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Netherlands |
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New Zealand |
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Norway |
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Poland |
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Portugal |
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Russia |
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Saudi Arabia |
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Slovakia |
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Slovenia |
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South Africa |
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South Korea |
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Spain |
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Sweden |
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Switzerland |
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Turkey |
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UK |
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USA |
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