G8 leaders agree tax evasion measures

 

David Cameron; "You have to collect the taxes that are owed. That is only fair for companies and for people who play by the rules"

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Leaders of the G8 major economies have agreed new measures to clamp down on money launderers, illegal tax evaders and corporate tax avoiders.

Governments agreed to give each other automatic access to information on their residents' tax affairs.

They will also require shell companies - often used to exploit tax loopholes and invest money anonymously - to identify their effective owners.

The summit communique urged countries to "fight the scourge of tax evasion".

G8 facts

  • Informal, exclusive body aimed at tackling global challenges
  • Established in 1975 in Rambouillet, France
  • Original members: France, Germany, Italy, Japan, UK, US
  • Later members: Canada (joined at 1976 summit, San Juan, Puerto Rico), Russia (joined at 1998 summit, Birmingham, UK)

The measures are designed to combat illegal evasion of taxes, as well as legal tax avoidance by large corporations that make use of loopholes and tax havens.

The summit in Northern Ireland also saw the launch of free trade negotiations between the EU and US, which UK Prime Minister David Cameron, who was hosting the summit, dubbed "the biggest bilateral trade agreement in history".

Tax, trade and transparency - dubbed "The Three Ts" - were placed at the top of the UK's agenda for its presidency of the G8, which consists of the UK, US, Germany, France, Italy, Russia, Canada and Japan.

But the summit has been overshadowed by the conflict in Syria.

The G8 leaders - including Russian President Vladimir Putin, an ally of Syrian leader Bashar al-Assad - backed calls for Syrian peace talks to be held in Geneva "as soon as possible".

Mr Cameron said the leaders had managed "to overcome fundamental differences", but no timetable for the Geneva talks was given, and the statement made no mention of what role Mr Assad could play in the future.

Shadowy arrangements

Leaders agreed that multinationals should tell all tax authorities about what taxes they pay and where.

"Countries should change rules that let companies shift their profits across borders to avoid taxes," the communique said.

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It follows revelations about the ways in which several major firms - including Google, Apple, Starbucks and Amazon - have minimised their tax bills.

Illegal activities, including tax evasion and money laundering, will be tackled by the automated sharing of tax information.

Ahead of the summit, the Organisation for Economic Co-operation and Development (OECD), proposed to share tax information by building on an existing system set up by the US and five major European economies, but on a global scale.

"This international tax tool is going to be a real feature of ensuring that we get proper tax payment and proper tax justice in our world," said Mr Cameron, who claimed that it meant "those who want to evade taxes have nowhere to hide".

The OECD includes all of the G8 members except Russia.

Among the information to be shared will be who actually ultimately benefits from the shadowy shell companies, special purpose companies and trust arrangements often employed by tax evaders and money launderers.

Earlier in the day, Chancellor George Osborne unveiled plans for a UK register of companies and their owners.

The White House also announced a similar plan for the US.

Last week the UK also unveiled a deal with its crown dependencies and overseas territories - including the Channel Islands, Gibraltar and Anguilla - to start sharing more information on which foreign companies bank their profits there.

About a fifth of offshore tax havens, which are used by multinationals to shelter cash from the tax authorities, are British dependencies.

"Of course Britain's got to put its own house in order," said Mr Osborne, adding that the government would launch a consultation on whether the register should be published or just be available to the HMRC.

Speaking during the summit, Mr Osborne said more progress had been made on reforming the global tax system in the past 24 hours than the "past 24 years".

Conflict zones

The G8 communique also demanded more transparency from mining firms.

It follows revelations that many major mining companies use complex ownership structures in the Netherlands and Switzerland to avoid paying taxes on the minerals they extract in developing countries.

"Developing countries should have the information and capacity to collect the taxes owed them," the communique said.

"Other countries have a duty to help them."

The governments agreed that mining companies should disclose all the payments they make, and that "minerals should not be plundered from conflict zones".

"We agreed that oil, gas and mining companies should report what they pay to governments, and that governments should publish what they receive, so that natural resources are a blessing and not a curse," said Mr Cameron.

Ransom crackdown

The G8 leaders also agreed to stamp out ransom payments to kidnappers for the release of hostages.

Mr Cameron said tens of millions of dollars in ransom money had been paid around the world in the last three years.

UK government officials have often expressed their frustration at alleged ransom payments being made to secure the release of French, Italian and other European hostages seized in the Sahara and elsewhere, says the BBC's Security correspondent Frank Gardner.

But since those governments have never publicly owned up to paying ransoms this G8 agreement may be easier to sign than to enforce, he adds.

 

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  • rate this
    -25

    Comment number 129.

    Lets just say that the G8 were successful and managed to stop all loop holes that companies and individuals use to avoid and evade paying taxes due.

    In this case the higher tax burden would mean smaller profits thus prices would rise to raise profits and it would be all of us who would pay in the end. But there again there's nothing unusual there.

  • rate this
    +2

    Comment number 94.

    What was actually needed was tax reform that tied taxation to the public value collected by an individual or organisation. This would be unavoidable as the individual has to pay to get at the public value. This reform would also have stopped the housing bubble in its tracks and prevented the so called 'banking crisis'. What we get instead is loss of control of our tax system. We did 'ask' for it.

  • rate this
    +17

    Comment number 74.

    The only way to do this is to flat tax every one and get rid of all of the silly tax allowances and breaks. Of course, this is also unfair so I suppose we will continue to watch the rich get richer at the disgustingly logarithmic rate that they have enjoyed for the past ten years.

  • rate this
    +8

    Comment number 46.

    There is a massive loophole within the EU which I don't see how they can cloe.
    The EU allows for free trade within Europe but all the countries have different rates of tax. So all the big companies base themselves in the country with the least tax and then trade freely from there throughout the EU.
    The only way to prevent this would be to have a more federal EU, but I can't see that happening.

  • rate this
    +10

    Comment number 44.

    Look, I don't pay a penny more tax than I have to, and I don't suppose you do either. The reason I pay is because I'd get in trouble with the law if I didn't. The idea that big corporations should pay take out of a moral urge, out of the goodness of their hearts, is ridiculous. If they're avoiding tax illegally they should be prosecuted. End of!

 

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