George
Osborne and Wolfgang Schäuble to pursue tax avoidance by large companies such
as eBay and Amazon
guardian.co.uk,
Patrick Wintour, Monday 5 November 2012
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| George Osborne agreed to the co-operation agreement with Germany. Photograph: Oli Scarff/Getty Images |
George Osborne has joined forces with the German finance minister, Wolfgang Schäuble,
to announce an international crackdown on tax avoidance by big multinationals,
such as eBay and Amazon.
Osborne
said he and Schäuble, meeting at the G20 finance ministers's summit in Mexico,
had called for "concerted international co-operation to strengthen
international tax standards that at the minute may mean international companies
can pay less tax than they would otherwise owe".
Neither man
was eager to identity individual corporate culprits, but government sources
said the spread of e-commerce and the ponderous nature of international
corporate tax rules have left governments trailing behind multinationals as
they shift profits around the globe.
The two
men, determined to give the issue a political push, said they would back the
OECD's current work on identifying possible gaps in the standards, as a first
step in promoting a better way of dealing with profit shifting and base erosion
of corporate tax at the global level. The OECD is viewed as the guardian of
global tax standards.
Trying to
show a balance between his defence of low tax rates and the need to act against
firms that repeatedly pay virtually no tax, Osborne said: "We want
competitive taxes that say Britain is open for business and that attract global
companies to invest in and bring jobs to our country, but we also want global
companies to pay those taxes. The best way to achieve that is through
international action that ensures strong standards, without pricing ourselves
out of the global market."
The joint
statement by the two countries – a rare example of Anglo-German co-operation –
said: "International tax standards have had difficulty keeping up with
changes in global business practices, such as the development of e-commerce in
commercial activities."
It adds:
"As a result, some multinational businesses are able to shift the taxation
of their profits away from the jurisdictions where they are being generated,
thus minimising their tax payments compared to smaller, less international
companies."
In the
statement, Britain and Germany said they expect the first report from the OECD
at the next G20 meeting in Russia in February 2013.
The two men
agreed their joint approach when the chancellor visited Berlin on Thursday. The
co-operation comes ahead of a meeting between David Cameron and Angela Merkel
on Wednesday.
Government
sources said there was growing international political support for a crackdown
on some of these multinationals that were in some cases either paying next to
no tax or funelling profits to low corporation tax regimes such as the Cayman
Islands, the Netherlands or Ireland. The sources added there was equal
determination to act in the US, even though many of the companies under the microscope
are US-based.
Changes to
the international standards have to be agreed at the international level. But
the British government believes there have been time lags in updates to
technical tax standards that may be creating unintentional gaps in them. The
OECD will present the next stage of its proposals to its committee of fiscal
affairs (CFA) on 16 November in Paris.
Britain has
the lowest rate of corporation tax in the G7, and has cut its rate by more than
any other G20 country over the past two years (from 28% in 2010 to 22% by
2014). In the last year, around half of the £136bn of taxes paid in the UK by
the biggest businesses, came from foreign-owned businesses; while inward
investment created or safeguarded more than 100,000 jobs.
THe HMRC
has raised more than £1.5bn since March 2010 through increased efforts in
tackling transfer pricing. The transfer pricing rules aim to ensure that
multinationals pay the right amount of tax by determining the taxable profits
of each company as if it were an independent entity trading on arm's length
terms with other members of the same group.
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| How much tax is paid by major US companies in the UK? |
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