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G20 set for 'very aggressive' crackdown on tax avoidance

Friday, November 14, 2014 - 18:47
AUSTRALIA-141114.jpg
Australia on Friday vowed a "very aggressive" crackdown on tax avoidance at weekend G20 talks, as a row rages over Luxembourg's sweetheart arrangements with multinationals.

[BRISBANE] Australia on Friday vowed a "very aggressive" crackdown on tax avoidance at weekend G20 talks, as a row rages over Luxembourg's sweetheart arrangements with multinationals.

Closing corporate tax loopholes and endorsing a common reporting standard to increase transparency are set to be a primary focus of the G20 summit in Brisbane this weekend.

But the Organisation for Economic Cooperation and Development (OECD) cautioned that if such a level playing field is achieved, it will only make competition heat up to attract revenue from digital companies like Apple and Google as tax havens are shut down.

Leaders of the world's most powerful economies want to ensure companies pay taxes where they make their profits, instead of using complex financial structures that allow them to slash their liabilities, depriving governments of billions in revenue.

The opacity of Luxembourg's beneficial tax deals with a slew of companies, when its government was led by the new head of the EU's executive Jean-Claude Juncker, has erupted as a major dispute heading into the G20.

Host Australia has made tax avoidance a key plank of its G20 presidency with Treasurer Joe Hockey saying the practice of corporations shifting profits amounts to "theft".

He pledged on Friday a "very aggressive" crackdown at the G20, with the United States throwing its support behind the plan.

"They were cautious at first, but obviously the United States itself has been missing out on revenue from a number of these large multinationals," he told ABC radio.

The US government has been aggressively chasing its own taxpayers domiciled abroad who have accounts stashed away in refuges such as Switzerland.

"Now, with everyone committed to a plan and everyone committed to the outcomes of the plan, I am confident that we're going to start seeing some very aggressive approaches towards the largest multinationals," Mr Hockey said.

OECD tax chief Pascal Saint-Amans said the organisation's plan against base erosion and profit shifting (BEPS) would end tax havens, but would not eliminate tax competition, which he expects to intensify as nations compete for business investment on more equal terms.

"If there's no zero-tax havens left, then countries will be keen on competing with more attractive rates," he told Fairfax Media, adding that some countries could lower their corporate tax rates once BEPS was implemented.

"BEPS puts an end to harmful tax competition, but not (all) tax competition. Some countries might move to be more attractive by reducing their (tax) rates. We think that's fine."

The issue of tax avoidance has taken on added significance with Mr Juncker heading to Brisbane for the G20 forum.

Mr Juncker, who took over the European Commission on November 1, is under pressure over generous tax concessions offered to top global companies when he was prime minister of Luxembourg from 1995 to 2013.

The allegations are politically explosive at a time when many EU countries are still struggling with the impact of austerity, particularly since Mr Juncker is spearheading a call for tax reform in his new role.

The European Commission is investigating several member states over allegations they offered corporate giants such as Apple, Starbucks and Amazon state aid in the form of sweetheart tax deals.

At a meeting of G20 finance ministers in September, OECD chief Angel Gurria said the plan to close loopholes amounted to the biggest change to international tax rules in more than a century.

He revealed that global efforts to crack down on tax avoidance had already identified 37 billion euros (US$53 billion) from voluntary disclosure programmes involving 24 countries over five years, adding that "more will come".

The first BEPS recommendations list seven goals that would help to ensure companies pay tax in the countries where they generate income.

They include proposals on closing loopholes that allow for the abuse of tax treaties and to go after the accounts of multinational businesses kept offshore in low-tax jurisdictions, which Gurria estimated to total about US$2.0 trillion.

AFP