Oxfam welcomes some progress at this weekend’s G20 finance ministers meeting in Cairns that could help put an end to tax dodging by multinational corporations, but the aid agency said the most transformative changes to rebalance the global tax system are still off the agenda.
Oxfam Australia Policy Manager Jo Pride said given tax-dodging by multinationals drained around US $100 billon from developing countries each year, clearer commitments were needed on how developing countries would get an equal say in the process of global tax reform.
“We’re pleased to see Treasurer Joe Hockey’s recognition that the effects of tax avoidance are sometimes felt hardest by the poorest people in the poorest countries, but the package of measures agreed by finance ministers falls short in meeting this objective,” Ms Pride said.
The finance ministers have promised to finalise the OECD-led Base Erosion and Profit Shifting (BEPS) project of tackling the practice of reporting profits in low-taxing countries and reporting losses in high-taxing countries in order to minimise tax – by 2015.
“The G20 finance ministers have announced a number of measures designed to engage developing countries more deeply in the BEPS agenda, including requesting more representative bodies such as the UN, World Bank and IMF, to support developing countries to tackle BEPS and to develop a process for developing countries to directly input in to the BEPS process,” Ms Pride said.
“This is welcome, but there is still not a clear commitment on how this will be achieved, and given all the loopholes of the current system, it is critical that this deeper engagement leads to developing countries getting an equal say in decision-making on international tax reform efforts, otherwise we risk continuing the status quo.”
Oxfam is pleased to note the finance ministers’ continued commitment to improving disclosure of the beneficial ownership of companies, to make it harder for individuals and multinationals to stash funds in tax hideaways in other countries.
Oxfam is calling for this information to be made public, as well as reporting by multinational companies of taxes paid in all countries where they have a legal presence, as a deterrent to money laundering and tax avoidance.
An OECD proposal to involve developing countries in a new tax information exchange was provided to finance ministers in Cairns.
Among its recommendations is a proposal to temporarily commit to providing developing countries with the overseas financial account information of their taxpayers on a non-reciprocal basis, and to assist them in building their capacity to participate in exchanges of information with other countries on a reciprocal basis. If this proposal is implemented, it would be a positive step to help developing countries tackle tax evasion.
“But despite some progress on tax dodging, finance ministers have largely gone missing on inequality,” Ms Pride said. “The OECD, World Bank, IMF and others have recognised that rising extreme inequality is a threat to the pace and sustainability of economic growth. Yet, disappointingly, the finance ministers failed to commit to pursuing an inclusive, equitable and sustainable growth path.”
The G20 Labour and Employment Ministers had called for economic growth to be inclusive at their recent meeting in Melbourne.
Source: Oxfam Australia