Wednesday

22nd May 2019

G20 to discuss tax avoidance rules, but critics dubious

  • The OECD proposes a requirement for companies to provide tax officials a country-by-country report of their activities. (Photo: Steven Shingler)

The European Commission has welcomed new international tax rules proposed on Monday (5 October) as "a very important milestone", but critics say tax avoidance on a scale revealed last year in the so-called Luxleaks scandal will still be possible.

The Organisation for Economic Cooperation and Development (OECD), which came up with the new rules, said on Monday that governments lose between $100 billion (€89 billion) and $240 billion (€214 billion) annually because multinational companies use aggressive tax planning methods to pay as little tax as possible.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

The OECD figure, which it says is "conservatively estimated", represents 4 to 10 percent of the world's corporate income tax revenues.

Angel Gurria, secretary-general of the OECD, says tax avoidance strategies erode the trust of citizens in the fairness of tax systems. His organisation uses the term "base erosion and profit shifting", or BEPS, to refer to the issue.

"BEPS is depriving countries of precious resources to jump-start growth, tackle the effects of the global economic crisis and create more and better opportunities for all", said Gurria in a statement.

He added that the measures proposed by OECD "will put an end to double non-taxation, facilitate a better alignment of taxation with economic activity and value creation, and when fully implemented, these measures will render BEPS-inspired tax planning structures ineffective".

The measures include a requirement for companies to provide tax officials a country-by-country report of their activities.

The OECD was tasked two years ago to come up with measures used by the industrialised countries that make up the group of twenty, or G20.

On Thursday (8 October), finance ministers of countries that are part of the G20 will discuss the new rules in Peru. The G20 includes Germany, France, Italy, the UK, and the EU (represented by the Commission and the European Central Bank).

EU tax commissioner Pierre Moscovici on Monday said the OECD package of measures will "help countries around the world find common solutions to common tax challenges".

His boss, Commission president Jean-Claude Juncker, came under political fire last year, when it emerged that Luxembourg was approving tax-avoidance strategies during Juncker's time as prime minister of the small European duchy. The scandal, which involved Luxembourg providing companies with secret, attractive tax rulings, was dubbed Luxleaks.

"We must now ensure that these measures are implemented consistently and coherently, to ensure a level playing field for all businesses and countries involved", added Moscovici in a statement.

Loopholes

However, critics say that even if all measures are implemented, a continuation of Luxleaks-type tax avoidance facilitated by tax rulings is still possible.

"The fact that such rulings exist is strongly linked to the fact that the international tax laws are highly complex and full of loopholes, and that many countries have introduced different types of special tax arrangements for multinational corporations", said Eurodad, a network of European NGOs.

"Whereas the OECD BEPS will not change the practice to use secret tax rulings, it will increase the complexity of the international tax system", it added.

NGO Tax Justice Network said the new rules were weakened thanks to an "army of paid corporate tax advisers and lobbyists".

"This has been the first serious global effort to combat widespread corporate tax cheating – and that in itself has been a huge step forward", it said in a statement. "[However,] many of the proposals are weak, and will still provide multinational companies with opportunities to move profits away from the countries where those profits are generated, and in doing so reduce tax revenues."

PriceWaterhouseCoopers, one of the four consultancy firms that is heavily involved in helping companies pay as little tax as possible, also called the new rules a "milestone".

"Much hinges on whether, and how, governments worldwide decide to implement the recommendations. … For areas where the OECD has found it harder to reach consensus there is the risk that countries introduce their own measures which could well result in a real risk of double taxation for businesses", the company said.

News in Brief

  1. German MPs show interest in 'Magnitsky' sanctions
  2. CoE: Rights violations in Hungary 'must be addressed'
  3. EU affairs ministers rubber-stamp new ban on plastics
  4. Private companies campaign to boost turnout in EU poll
  5. Austrian government chaos as far-right ministers step down
  6. Farage hit by milkshake during campaign tour
  7. New president dissolves Ukraine's parliament
  8. Sweden Democrat MEP ousted for revealing sex harassment

Feature

Romania enlists priests to promote euro switchover plan

Romania is due to join the single currency in 2024 - despite currently only meeting one of the four criteria. Now the government in Bucharest is enlisting an unlikely ally to promote the euro to the public: the clergy.

Trump and Kurz: not best friends, after all

The visit of Austrian chancellor Sebastian Kurz to the White House on Wednesday showed that the current rift in transatlantic relations is deepening by the day.

Stakeholders' Highlights

  1. Vote for the EU Sutainable Energy AwardsCast your vote for your favourite EUSEW Award finalist. You choose the winner of 2019 Citizen’s Award.
  2. Nordic Council of MinistersEducation gets refugees into work
  3. Counter BalanceSign the petition to help reform the EU’s Bank
  4. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  5. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  6. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  7. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat
  8. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North
  9. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  10. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody
  11. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  12. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic commitment to driving global gender equality
  2. International Partnership for Human RightsMeet your defender: Rasul Jafarov leading human rights defender from Azerbaijan
  3. UNICEFUNICEF Hosts MEPs in Jordan Ahead of Brussels Conference on the Future of Syria
  4. Nordic Council of MinistersNordic talks on parental leave at the UN
  5. International Partnership for Human RightsTrial of Chechen prisoner of conscience and human rights activist Oyub Titiev continues.
  6. Nordic Council of MinistersNordic food policy inspires India to be a sustainable superpower
  7. Nordic Council of MinistersMilestone for Nordic-Baltic e-ID
  8. Counter BalanceEU bank urged to free itself from fossil fuels and take climate leadership
  9. Intercultural Dialogue PlatformRoundtable: Muslim Heresy and the Politics of Human Rights, Dr. Matthew J. Nelson
  10. Platform for Peace and JusticeTurkey suffering from the lack of the rule of law
  11. UNESDASoft Drinks Europe welcomes Tim Brett as its new president
  12. Nordic Council of MinistersNordic ministers take the lead in combatting climate change

Join EUobserver

Support quality EU news

Join us