In a joint statement published on Friday (September 6), the leaders said they would take steps to close loopholes that allow legal tax avoidance by big businesses and also pledged to help developing nations tackle tax evasion by helping them track funds in tax havens.
More than 50 countries have now signed up to an international convention to facilitate the exchange of information on tax issues. However, many developing countries have not signed up, and the G20 countries have agreed to share expertise on tracking funds to encourage them on board.
Regarding the perfectly legal activities of big businesses that avoid large tax bills by moving profits from country to country, the statement said that the G20 would be putting forward recommendations to set up a system so that profits are taxed "where economic activities deriving the profits are performed and where value is created"
The leaders said that tax avoidance, harmful practices and aggressive tax planning have to be tackled, and added that the growth of the digital economy also poses challenges for international taxation.
The summit called on member countries to examine their own domestic laws that contribute to profit shifting and also called on them to join the Office for Economic Co-operation and Development’s (OECD) Multilateral Convention on Mutual Administrative Assistance in Tax Matters.
The proposed tax information exchange plan agreed at the summit will be drafted by the OECD and borrows heavily from the Foreign Account Tax Compliance Act drawn up by the US, which came into force this year and requires financial firms globally to disclose details of the assets of all American citizens held overseas.
For more information, please contact Glazers, Chartered Accountants in London or visit www.glazers.co.uk
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