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Tax avoidance tops G20 agenda

18th Feb 2013
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David Cameron, George Osborne and Angela Merkel have all made speeches condemning “aggressive” international corporate tax avoidance in the past week in what appears to be an effort to co-ordinate international action.

Speaking in Mumbai today, the Prime Minister said the government wanted to keep business taxes low but expected businesses to pay their “fair share” in return.

Cameron likened “aggressive” forms of tax avoidance by multinationals to illegal tax evasion.

He said: “I think there is a legitimate debate to say very aggressive forms of avoidance are not appropriate. And particularly, in a country which has set a very low tax rate, it is fair to ask people to pay it”

Tax transparency is a key priority for the UK’s presidency of the G8 this year. In addition, following his meeting of G20 finance ministers in Moscow over the weekend, where international tax avoidance topped the agenda, Chancellor Osborne wrote in The Observer about why he is committed to global tax reform.

Osborne said the principles governing tax for multinationals had “barely changed” since they were developed a century ago.

“As a result, some large multinationals are able to restructure their business to avoid paying their fair share in tax,” he said. “Some are exploiting the rules by getting profits out of high tax countries and into tax havens, allowing them to pay as little as 5% in corporate taxes while smaller businesses are paying up to 30%. This distorts competition, giving larger companies an advantage over smaller domestic companies. People are rightly asking for something to be done.”

It wasn’t just British politicians jumping on to the tax avoidance bandwagon. Last week German chancellor Angela Merkel took aim at multinational companies that use tax rules in Europe and the US to avoid payments.

“It's not right that giant global companies have huge sales here, in all of Europe, in the United States and elsewhere and then only pay taxes somewhere in a tiny tax haven.

“That's why we're going to fight to finally put an end to tax havens at the G8 meeting this year in Great Britain. The whole world will have to fight for it otherwise we won't accomplish that,” she said.

Last week, too, the Organisation for Economic Co-operation and Development (OECD) outlined the new proposals calling for major tax reform to stop governments’ tax bases being eroded and a rise in tax bills for small businesses.

The OECD added that multinational corporations were increasingly reporting profits in countries other than where their main revenues were generated to avoid taxes.

However, while the Prime Minister and Chancellor were fighting the anti-avoidance fight in the international arenas, at home the main UK water companies were accused today of rampant avoidance.

According to Corporate Watch, six water companies are avoiding millions in tax by routing profits through tax havens, using a regulatory loophole the government has chosen to keep open.

Replies (2)

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By samuelnagadesi
20th Feb 2013 05:14

Tax Avoidance

It is fantastic if all countries cooperate in elimination of tax havens. It is also not permissible to use loopholes for eroding the fiscal base of the source countries even under treaty mechanism. The action to curb harmful tax practices is to be initiated by all countries.

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By Allen Tholana
25th Feb 2013 06:55

eliminating cashing on loopholes needs global efforts since most countries are loosing a lot of tax revenues because of such malpractices especially African countries

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