G20 meet in Russia focuses on tax reforms; US absent
20 Jul 2013
As the G20 meeting got underway in the Russian capital, the focus was on global companies routing billions of dollars from sales to British customers through Luxembourg, paying negligible tax in the UK.
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Russian Finance Minister Anton Siluanov (Photo: RIA Novosti) |
This was among a series of international loopholes marked for closure in a programme of reforms backed by G20 group of developed nations.
The "once-in-a-century" move to patch up holes in international tax rules was unveiled in Moscow by the UK's Chancellor of the Exchequer George Osborne, along with fellow finance ministers from France and Germany, who have together been the driving force behind calls for tax reforms.
Under current rules, online retail giant Amazon Inc's £4.2 billion annual sales in the UK, which rely on a network of eight mega-warehouses across Britain, are routed through Luxembourg. The UK's revenue & customs has no taxation rights over any profits from those sales.
With the new proposals, multinationals with warehouses will be taxed in the country where the distribution centres are located.
Notably absent from the launch event was US Treasury Secretary Jack Lew.
According to a report in London's The Guardian, the US is growing increasingly frustrated with sniping from European politicians targeted at some of the most successful US multinationals, like Starbucks, Google and Amazon.
Lew used an article in the Financial Times to call on Europe and other economies to knuckle down and focus on fostering growth rather than squabbling over taxing rights.
France's finance minister Pierre Moscovici said the 15-point action plan produced by the Organisation for Economic Cooperation and Development (OECD), a club of industrialised nations, was a "major breakthrough" and was "at the heart of the social contract"
The OECD plan has the support of the increasingly influential economies of the BRIC countries - Brazil, China and India - as well as others like Luxembourg, the Netherlands and Ireland. All these nations have been accused of beggar-thy-neighbour tax policies.
"It is clear multinational companies have developed an unprecedented know-how for minimising their worldwide tax pressure," Moscovici said. "These situations are literally impossible to explain to our fellow citizens."
Osborne agreed. "People and companies have to pay the taxes that are due, it's the only way to operate in a fair and competitive society … our message is clear: everyone must pay their fair share of tax," he said.