Tax evasion, havens on G20 hit list
Finance ministers and central bankers from the world’s most powerful economies have vowed to crack down on offshore tax evasion by big multinationals.
Bill English was among the who’s who of the finance world meeting in Sydney yesterday. New Zealand is not one of the G20 but was conferred unofficial G21 status after the host, the Australian Government, extended an invitation to participate.
The G20 backed a draft plan from the OECD to clamp down on companies such as Google, Apple and Amazon, and agreed to implement a standard for automatically exchanging information between tax authorities by 2015.
Mr English said the meeting provided “a firm sense of direction”. “There was a bit of discussion about whether everyone can meet that deadline, including New Zealand. But no-one is going to let that get in the way of momentum.”
The larger economies with high levels of debt “are pretty determined to prevent their tax bases being eroded”, he said.
The G20 move was related to information sharing and would not change domestic tax laws.
“There is quite a lot of work to do to get more international co-operation for actual changes in tax laws, but the transparency and even the threat of transparency will change behaviour among these international companies.”
Tax havens would come in for “moral persuasion”. “If those who want to see progress get on with progress then it creates a bit more pressure on the others to comply. Until groups like the G20 do anything, we are unlikely to see others move.” Inland Revenue was on the cusp of a $1.5 billion technology upgrade, he said. “We have an old system . . . we are just getting started and we have to make sure any new initiatives can fit into our upgrade process and not disrupt it.”
New Zealand has a “reasonably robust” international tax system, but the growing digital economy was likely to throw up some problems.
“We need to be thinking about some of these really difficult issues, like the definition of location of a company, or the location of business activities that are entirely digital. No-one has got any better answers to that than we have.”
Mr English also met British Chancellor George Osborne and Canadian Finance Minister Jim Flaherty.
The G20 finance ministers will meet again at Cairns in September.
Labour leader David Cunliffe said multinational tax avoidance has been recognised for some time as a “severe” issue. As well as international co-operation, countries must look at that they are doing to complement that and “get early wins on the board”.
“We think [the current government] have been asleep at the wheel waiting for the G20 to do stuff rather than thinking about what can be done as well.”
Greens co-leader Russel Norman also welcomed the move. “It’s progress. [The OECD work] totally relies on international co-operation, otherwise it just can’t work.
“Google and all of them will just base themselves in whatever country isn’t co-operating with the international system.”