Britain, Germany and France called on other Group of 20 nations to curb tax avoidance by international corporations that shift profits to territories where they can pay the lowest amounts.
Citing research they commissioned from the Organization for Economic Cooperation and Development that identifies loopholes, finance ministers from the three nations said they will spearhead work to get companies to pay tax where it’s due. The countries provided the OECD with data to help identify schemes used by companies.
“We do want businesses to pay the taxes that we set them in our countries,” Chancellor of the Exchequer George Osborne said today in Moscow, where he and fellow G-20 finance ministers are meeting. His German counterpart Wolfgang Schaeuble said that “multinationals, like local businesses,” must “pay their fair share of tax.”
Western nations, seeking to shrink budget deficits, are looking for ways to raise more money from companies to placate voters squeezed by falling living standards and cuts to public spending. The Paris-based OECD is working on plans which, if approved by the U.K., Germany and France, will be put for adoption to the G-20 in July.
Following the OECD’s analysis, Britain will now lead an international committee looking to rewrite transfer-pricing rules that allow companies to shift profits to lower-tax jurisdictions. Germany will take the lead on work looking at erosion of the tax base and France and the U.S. will examine ways to determine tax jurisdiction, particularly for companies involved in e-commerce.
Amazon.com Inc. was among three U.S. companies singled out by U.K. lawmakers last year for not paying enough tax in Britain. Members of Parliament’s Public Accounts Committee criticized the online retailer, Starbucks Inc. and Google Inc. for using complex accounting methods to reduce their tax liabilities in the U.K.
Testimony by the retailers at a Nov. 13 hearing at times drew laughter from lawmakers who queried how Amazon made 20 million euros ($27 million) profit on sales of 9.1 billion euros across Europe and questioned why Starbucks remained in Britain as it had recorded losses for most of the 15 years it had operated in the country. Google paid 6 million pounds in company tax in Britain last year.
The U.K. government said this week it would bar companies with a history of breaking tax rules from winning government contracts.
Under proposals published two days ago, companies bidding for contracts starting on April 1 will have to make a declaration about their tax compliance, and departments will for the first time have the power to refuse contracts on the grounds a company has broken anti-avoidance rules.
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