G20 finance ministers meeting in Moscow have pledged to crack down on tax avoidance by multinationals companies.
The final communique said members were determined to develop measures to stop firms shifting profits from a home country to pay less tax elsewhere. The UK, France and Germany were the main movers behind the drive.
The communique also said members would refrain from devaluing their currencies to gain economic advantage, amid fears of a new “currency war”. The fears had been sparked by Japan’s recent policies, which have driven down the value of the yen, aiding its exporters.
A recent survey carried out by the Organisation of Economic Co-operation and Development (OECD) found that multinational firms could exploit gaps between tax rules in the different countries in which they operate.
The finance ministers of the UK, France and Germany - George Osborne, Pierre Moscovici and Wolfgang Schaeuble - said international action was needed to crack down on companies which transfer profits from their home country to another in order to pay lower taxes.
Mr Osborne decried a global taxation system he said had been guided by principles set out by the League of Nations in the 1920s, with few changes since. He said: “We want businesses to pay the taxes that we set in our countries. And that cannot be achieved by one country alone.”
Mr Moscovici said France was “strongly determined to fight against tax fraud, tax avoidance, and tax evasion”. He added: “We must avoid situations in which some companies use international and domestic law to be taxed nowhere.”
OECD secretary general Angel Gurria said laws had to be changed: “Avoiding double taxation has become a way of having double non-taxation.”
The G20 communique read: “We are determined to develop measures to address base erosion and profit shifting, take the necessary collective action and look forward to the comprehensive action plan the OECD will present to us in July.”
A number of companies, including Amazon, Google and Starbucks, have come under the spotlight for their taxation strategies in recent months. Another giant international company, Facebook, has now been accused of ducking its tax obligations.
Facebook allegedly paid no corporate income tax in the US last year, and instead reclaimed $451m in taxes from the Internal Revenue Service, despite recording profits of over $1bn, US lobby group Citizens for Tax Justice has claimed.
Thanks to tax deductions the social network can claim on stock options granted to its executives as part of its recent listing on the Nasdaq stock exchange, the company stands to benefit from a further $2bn of tax deductions in the future, the lobby group alleged.
Standard Digital News: G20 vows to combat corporate tax avoidance