Business News

CHENGDU, China, (APP/AFP): The world’s major
economies need to deepen cooperation on tax collection as
companies seek to minimise the amount they pay to governments,
finance ministers said Saturday.
The issue has become controversial in many countries,
with multinational firms from Google to Starbucks facing
accusations of not contributing appropriately to the economies
where they make their money, and multi-billion-dollar merger
proposals being partly driven by tax considerations.
“When the current cross-border tax rules were developed
they were tied to concepts that reflected geography and national boundaries,” US Treasury Secretary Jacob Lew told G20 finance
ministers meeting in the Chinese city of Chengdu.
“When we look at technology and cloud computing a lot of
that has become harder to define.”
“There needs to be a common standard across countries on
important issues of transfer pricing,” he said at a high-level
symposium on tax policy, adding that countries had to deal
“collectively” with issues that lead to non-taxation.
Such moves would transform the global business environment,
and could see multinational companies paying more tax, cutting
returns to shareholders.
Closing loopholes, Lew said, would change the choices
businesses make.
Chinese finance minister Lou Jiwei said that enterprise
and international trade structures had changed “dramatically,
imposing severe challenges to the existing international tax
system”.
The G20 should promote “international coordination and
cooperation in taxation”, he said.
The G20 has previously supported proposals requiring
authorities to share the identities of shell companies’ real
owners, and backed creating a blacklist of international tax
havens that do not cooperate with information-sharing
programmes.
But the discussion as the G20 finance ministers and
central bank chiefs met in Chengdu, in southwestern China,
was wider, addressing base erosion and profit shifting,
known as BEPS.
The term refers to companies using accounting techniques
to move their profits to low- or no-tax jurisdictions, reducing
the amounts they are liable to pay.
Some countries, such as Ireland or Luxembourg, have drawn
major firms to establish headquarters or subsidiaries by virtue
of their tax rules — a key contributor to Dublin declaring earlier
this month that its economy grew by a spectacular 26.3 percent
last year.
“In the 21st century, talent, capital, and even physical infrastructures are increasingly mobile,” said Angel Gurria, secretary-general of the Organisation for Economic Co-operation
and Development (OECD).
“So, a global conversation on these issues, on tax policy,
is obvious…is critical,” he said.
But he acknowledged that jurisdiction could be a sensitive
subject, adding that tax policy remained a sovereign matter.
The seminar — co-hosted by China and Germany, backed by
the OECD, and moderated by IMF chief Christine Lagarde — also
discussed using tax policy to promote growth.
The world economy was in a “new mediocre”, Lagarde said,
with science and technological development offering one of the
best routes to “something much more positive than that”.