Advertisement

HindustanTimes Fri,25 Apr 2014

World

G8 leaders strike deal to fight tax evasion 'scourge'
AFP
Enniskillen, June 18, 2013
First Published: 22:13 IST(18/6/2013)
Last Updated: 22:14 IST(18/6/2013)

The world's leading industrialised nations struck a deal on Tuesday to crack down on the "scourge" of tax evasion and share more cross-border financial information.

Gathered in Northern Ireland for a summit, G8 leaders vowed concrete steps to target not only illegal tax evasion but also tax avoidance by multinationals such as Google, Amazon and Starbucks that costs taxpayers billions in lost revenues.

"Tax authorities across the world should automatically share information to fight the scourge of tax evasion," the G8 said in a statement after a two-day summit.

"Countries should change rules that let companies shift their profits across borders to avoid taxes, and multinationals should report to tax authorities what tax they pay where," it said.

The declaration, which came after talks on financial policy on Tuesday, also called for greater transparency on corporate ownership.

"Companies should know who really owns them and tax collectors and law enforcers should be able to obtain this information easily," the statement said.

Host Prime Minister David Cameron made tax, trade and transparency - the so-called "Three Ts" - a key focus of the two-day G8 summit, which has otherwise been dominated by the conflict in Syria.

After announcing on Monday the launch of negotiations next month for a crucial EU-US free trade pact, the focus turned on Tuesday to the other two "Ts".

According to a draft of the final summit communique obtained by AFP, the leaders agreed measures to share information internationally and to each publish national "Action Plans" on corporate ownerships and trusts used to avoid taxes.

"We commit to establish automatic exchange of information between tax authorities as the new global standard," the draft reads, promising to develop a "multilateral model which will make it easier for governments to find and punish tax evaders".

It promises to "rapidly" create a system for "multinationals to report to tax authorities where they make their profits and pay their taxes across the world".

Much of the concern over tax avoidance has focused on big companies which operate legally within the tax system to minimise what they pay: a strategy knows as tax optimisation.

The draft says G8 nations will work on these issues with the OECD, which provided ammunition for an offensive against tax evasion in a report outlining how to bring about automatic sharing of financial information.

The report - commissioned at the G8's request - suggests that countries adopt broad, standardised legislation so that bilateral information-sharing agreements can be quickly and easily negotiated.

It warned that without solutions that cross continents, tax evaders will simply move to countries beyond regulators' reach.

"Offshore tax evasion is a global issue requiring global solutions," noted the report, "otherwise the issue is simply relocated, rather than resolved."

It also urged countries to look at more than just bank accounts so that people do not simply shift their funds into other assets or vehicles such as trusts.

On Saturday, Cameron strengthened his hand by securing a commitment from Britain's overseas territories, including financial centres such as Bermuda and Jersey, to promote transparency and the exchange of information between tax jurisdictions.

Last year the United States and five European countries decided to move in the same direction by drafting a model agreement based on a 2010 US law.

It obliges all banks automatically to provide US authorities with all information they hold concerning all assets owned by US taxpayers, instead of upon request as was previously the practice.

The White House published its action plan at the summit, committing it to push for "comprehensive legislation" on identifying company ownership information.

In a setback for transparency efforts however, Swiss lawmakers on Tuesday refused to bow to pressure to approve a deal with the United States exposing US tax dodgers with assets in Swiss banks.

Lawmakers refused for the second time to hold an emergency debate on the "Lex USA" deal, which Washington has demanded must come into force by July 1.

The deal is seen as crucial if Swiss banks are to escape the threat of a raft of lawsuits in the United States, as well as being barred from the profitable American market.

The G8 brings together the world's leading industrialised countries - Britain, Canada, France, Germany, Italy, Japan, and the United States - and Russia.


Advertisement
Copyright © 2014 HT Media Limited. All Rights Reserved