G20 and OECD to stop global tax havens
THE G20 and the OECD are taking steps to put an end to global tax havens and make sure multinationals and digital companies pay their fair share of tax to governments.
International tax evasion is a serious problem worldwide and is reflected in the $US2 trillion ($A2.2 trillion) of accumulated profit held offshore by US companies.
Another example of the scale of the problem is the tiny British Virgin Islands territory — a tax haven which is now one of the top five investors in Russia and China.
The G20 finance ministers meeting in Sydney is expected to endorse a single global standard for the automatic exchange of information between tax authorities worldwide.
US Federal Reserve chief Janet Yellen chats with Australian Treasurer Joe Hockey at the G20 talks in Sydney. Picture: Getty Images Source: Getty Images
The new measures involve countries obtaining information from their financial institutions and exchanging the details automatically with other jurisdictions on an annual basis.
Organisation for Economic Cooperation and Development (OECD) director of tax Pascal Saint-Amans said it would address bank secrecy.
“What we propose here is to level the playing field to make sure that all countries do this and that all financial centres around the world will exchange this type of information on an automatic basis,” he told reporters.
Mr Saint-Amans said the G20 had also been working on the standardising the rules governing where the profits of multinationals should be taxed.
“You have a number of companies which have relocated their profits in what we call tax havens — jurisdiction where there is no tax,” he said.
“This is a highly sensitive topic. The G20 have asked the OECD to enhance its work on profit shifting.
Getting down to business … OECD Director Pascal Saint-Amans in Sydney during G20 proceedings. Picture: Sam MooySource: News Corp Australia
“What multinationals are doing is legal, and if it’s legal but you don’t like the outcome what you need to do is change the rules.” The OECD is working on model legislation on where a company is taxed to be presented to another G20 meeting in Cairns in September that could be adopted by countries around the world.
“If they want to protect their tax base they will have model legislation that will work,” he said.
“There will only be one single global standard.” In September, the OECD will also be presenting a report on the digital economy with a view to developing rules taking into account the increasingly digitalised global environment.
“The political message is we are closing down all the loopholes,” Mr Saint-Amans said.
“If taxpayers don’t have trust in the fairness of the tax system then the level of compliance drops.” Australia holds the 2014 G20 presidency.