G20 to crack down on corporate tax avoidance
G20 members gave the green light on Friday to a package of measures aimed at cracking down on corporate **tax avoidance by big multi-nationals.
**Tax avoidance is legal; it refers to lawful activities that help people and companies reduce their tax bill. Tax evasion, on the other had, is illegal.
Finance ministers agreed to back the Base Erosion and Profit Shifting (BEPS) plan created by the Organisation for Economic Co-operation and Development (OECD) which aims to close the loopholes companies use to avoid taxes.
The ministers “renewed a commitment for rapid, widespread and consistent implementation of the BEPS measures and reiterated the need for the OECD to prepare an inclusive monitoring framework by early-2016 in which all countries will participate on an equal footing.”
Over the past few years there has been public outrage at the tax structuring of companies that allow them to avoid taxes without breaking any laws. Examples of large multi nationals that have extremely low tax bills include Google, Apple, Starbucks, and McDonald’s.
According to Reuters, European Economic Affairs Commissioner Pierre Moscovici said: “This is a reaction of people who cannot stand anymore that they pay their fair share of taxes, that they contribute to fiscal consolidation while companies, especially multinationals, can avoid tax,”
The G20 decision was announced by Turkish Deputy Prime Minister Cevdet Yilmaz. He called it a “historic moment” for the battle against tax avoidance.
“These are very complicated issues that required an extensive technical effort and a hard-to-build consensus in some cases,” Yilmaz said at a press conference in Lima.
Stopping companies from moving from high-tax jurisdictions to low-tax jurisdictions will require a “very large group of countries”
Preventing companies from shifting profits to low-tax jurisdictions and debt to high-tax jurisdictions will require the participation of “a very large group of countries”, he added.
“Rich governments are all bark and no bite when it comes to corporate tax dodging,” commented Oxfam’s Manon Aubry.
“Base erosion and profit shifting is sapping our economies of the resources needed to jump-start growth, tackle the effects of the global economic crisis and create better opportunities for all,” said OECD Secretary-Feneral Angel Gurria.
Corporate tax or corporate income tax are terms used in the USA and Canada, while people in the UK and Ireland say corporation tax.