G20 gets 'action plan' to fight tax avoidance

OECD General Secretary Angel Gurria attends a press conference on Friday during the G20 Finance Ministers and Central Bank Governors' meeting in Moscow. (AFP/Kirill Kudryavtsev)

MOSCOW: The OECD has presented the G20 nations with a bold strategy to crack down on tax avoidance by corporate giants and the superrich, and so boost overstretched national budgets.

The G20 group of emerging and advanced nations -- including the US, EU, China and Russia -- had asked the Organisation for Economic Cooperation and Development (OECD) to come up with the action plan after agreeing earlier this year to focus on tax avoidance.

The OECD said Friday that governments had to better align tax regulations to prevent big investors from parking huge sums in tax havens.

The plan was presented at the start of the latest meeting of G20 finance ministers and central bankers in Moscow under the Russian presidency, in the hope that it will be agreed in the final communique on Saturday.

"(The plan) sets forth 15 actions that would result in most fundamental changes in the tax systems since the 1920s," said OECD Secretary General Angel Gurria.

"We must address this so that multinationals pay their fair share," he added.

The proposal seeks to end the ability of multinational companies to profit from tax agreements between states and ultimately pay very little or zero tax.

The main champions of the plan -- Germany, Britain, France and Russia -- want it adopted by the entire G20 and implemented within two years.

"Some big companies manage to have a three or four-per-cent tax rate worldwide," French Finance Minister Pierre Moscovici told a news conference.

"These situations are impossible to explain to our fellow citizens... The plan is a major breakthrough," he added.

The British finance minister, Chancellor of the Exchequer George Osborne, said the OECD plan represented "a major step forward".

"The message is clear -- people and companies are to pay the taxes that are due," said Osborne.

There were doubts about Moscow's commitment to the issue, given many Russian firms are registered abroad to escape tax, a practise that was highlighted sharply by the Cyprus crisis.

But Osborne said Moscow was fully involved in the plan.

"The Russian presidency has picked up the issue, there is a clear commitment to endorse this agenda," he said.

Russian Finance Minister Anton Siluanov said it was essential the measures were adopted by the entire G20.

"Applying these measures in a single country or just a group will produce no result," he said.

The United States, which was also involved in drawing up the plan, welcomed a "major step" to address tax avoidance by multinational firms.

US Treasury Secretary Jacob Lew said the plan represents a "concerted effort to raise standards around the world."

The OECD said in its plan that a proper rule system was needed as the current framework was "consensus-based" and risked being entirely undermined, especially as the digital economy becomes ever more important.

"A bold move by policy makers is necessary to prevent worsening problems," said the OECD.

Finance ministers and central bank chiefs will now hope to make a strong and unified statement on tax avoidance in their final communique.

Actions proposed by the OECD include requiring taxpayers to disclose their aggressive tax planning arrangements to the fiscal authorities but also making dispute resolution mechanisms more effective.

Companies in the spotlight in the last months for using these legal, but controversial, methods of booking profits include US giants Google, Amazon and Starbucks.

"Fundamental changes are needed to effectively prevent double non-taxation," the OECD said. "Moreover, governments must continue to work together to tackle harmful tax practices and aggressive tax planning."

The G20 at its meeting is also set to debate the health of the global economy and how to prevent a renewed slowdown as growth in emerging markets cools.

The United States made clear that the fight against unemployment should be at the centre of the agenda with Lew calling on EU states to do more to improve demand and growth.

"Unemployment remains at unacceptably high levels. We must do whatever it takes to address this overriding challenge for our societies," said European Commissioner for Economic and Monetary Affairs Olli Rehn.

Meanwhile two US senators introduced a resolution Friday seeking a change of location for September's G20 summit in St. Petersburg if Moscow allows US intelligence leaker Edward Snowden to remain in Russia.

The resolution by Republican Lindsey Graham and Democrat Chuck Schumer urges Russia to turn Snowden over to the United States so he can face espionage charges.

It also calls on President Barack Obama to recommend a new host city for the summit of the G20 group if Moscow fails to act.

Snowden has been on the run since last month after divulging details of National Security Agency surveillance programs that scoop up vast amounts of telephone and Internet data from millions of Americans and foreigners.

He has been stranded in a Moscow airport since his US passport was revoked, and he has asked Russia for temporary asylum.