G8 leaders have called for a change of international corporate tax rules and the establishment of a mechanism to track just where multinational companies make their profits, all in an effort to "rewrite the rules on tax" across the world.
By Vanessa Houlder
June 18, 2013 4:52 pm
G8 leaders have called for a shake-up of international corporate tax rules and the establishment of a mechanism to track just where multinational companies make their profits as part of a plan designed to “rewrite the rules on tax” across the world.
The leaders of eight of the world’s biggest economies all signed a 10-point Lough Erne Declaration which calls for greater transparency into corporate profits around the world.
At a closing press conference, David Cameron, the British prime minister, said the leaders had commissioned “a new international mechanism that will identify where multinational companies are earning their profits and paying their taxes so we can track and expose those who aren’t paying their fair share.”
The new tool, he said, would ensure “proper tax justice in our world”.
Mr Cameron had made “breaking down the walls of corporate secrecy” and tackling aggressive tax avoidance priorities for this year’s discussions of the world’s eight leading economies.
One of the key focal points of the G8 move is so-called beneficial ownership practices around the world, which allow the real owners of companies in tax havens to remain shielded from view and tax authorities.
In their closing statement, the G8 leaders said: “Companies should know who really owns them and tax collectors and law enforcers should be able to obtain this information easily.”
Countries, meanwhile, “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”.
Developing nations should have “the information and capacity to collect the taxes owed them”, and extractive companies should “report payments to all governments – and governments should publish income from such companies”.
However, the Lough Erne declaration contained no concrete reforms – it mentioned the word “should” 13 times.
Britain pledged to improve the transparency around companies and trusts while the US also said it would “continue to advocate” for the passage of comprehensive legislation on beneficial ownership to establish the true ownership of companies, although it would leave any actual moves to the 50 states.
Gavin Hayman of advocacy group Global Witness said the White House could help end the ability of companies to incorporate anonymously in US states by making a concerted push. “Obama now needs to work hard with Congress to turn this welcome commitment into legislation with teeth,” he said.
He described plans unveiled by the UK government on preventing misuse of companies and trusts as “pretty good”. “The UK has genuinely moved its position. The US and the UK were the twin poles of financial secrecy”.
On non-tax matters, the declaration called for land transactions to be more transparent, respecting the rights of local communities; and governments should roll back protectionism and cut wasteful bureaucracy at borders to expedite international trade, and publish more information on laws, budgets, spending, national statistics and government contracts.
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