G20 backs fundamental reform of corporate taxation
By Tom Bergin and Maya Dyakina
LONDON/MOSCOW (Reuters) - The G20 backed a "fundamental" rethink of the rules on taxing multinational corporations on Friday, taking aim at loopholes used by companies such as Apple and Google to avoid billions of dollars in taxes.
The group of leading economies released an action plan drawn up by the Organisation for Economic Co-operation and Development (OECD) that said the existing system didn't work, especially when it came to taxing companies that trade online.
"It is a major breakthrough and is at the heart of the social contract," France's finance minister, Pierre Moscovici, told a news conference on the sidelines of a meeting of finance ministers from the Group of 20 leading nations in Moscow.
"People and companies have to pay the taxes that are due, it's the only way to operate in a fair and competitive society," added British finance minister George Osborne.
Large budget deficits and public anger at inter-company structures designed to channel profits into tax havens have prodded governments to act.
Google, Apple and others say they follow the law wherever they operate and pay what tax is due, while tax specialists point out that companies have a duty to shareholders to organize their affairs in a tax-efficient way within the laws set by politicians.
Pascal Saint-Amans, Director of the OECD's Centre for Tax Policy, said governments' frustration with companies' aggressive tax avoidance had created a "once in a century" opportunity to overhaul the rules, which date back to the League of Nations in the 1930s.
Currently, tax systems respect inter-company contracts even if they evidently seek to shift profits out of countries where they are earned into low or no-tax jurisdictions. New rules will seek to put more emphasis on economic substance, the Paris-based think tank said. Continued...