The G20 group of countries has officially supported plans to fight against international tax evasion by multinational companies. In a statement, the G20 countries agreed to exchange tax information and support the Organization for Economic Cooperation and Development (OECD) in its plans to prevent multinational companies from avoiding tax by moving their profits across borders.
These decisions were reached after two days meeting of finance ministers from G20 countries in Moscow, Russia.
According to George Osborne, the United Kingdom Chancellor of the Exchequer, the decisions were necessary in establishing a global tax system that is fair and efficient for the modern economy.
The issue of big international companies avoiding tax has been a sensitive one for a long time. Companies such as Google, Apple, Amazon and Starbucks have perfected the art of using loopholes within tax regulations to avoid being taxed.
Starbucks had to bow to public pressure to pay more tax after questions arose concerning transfer of money to a Dutch sister company.
Google was this year criticized for routing £3.2 billion in UK sales through Dublin thus avoiding taxation.
These firms have argued that they are doing nothing illegal and they have a duty to shareholders to minimize tax payments so as to maximize profits.
The OECD said that some of the existing tax rules created in the 1920s were designed to avoid double taxation of companies operating in more than one country. However, these same rules were being used to create ‘double non-taxation’.
Finance ministers from different countries were urged to fully support the proposed model and exchange tax information without hesitation. Plans were set in place to fully close up the existing loopholes. Tax experts however say this is quite ambitious considering that there are hundreds of tax treaties between countries. All these treaties have to be amended for all the loopholes to be sealed.