Multinational giants, such Google and Apple, should find it harder to cover their profits from tax from the next year, as G20 finance ministers meeting in Cairns this weekend welcomed progress towards finalising measures that will crack down on multinational tax avoidance and promised to wrap-up the job by the end of 2016.
The Organisation for Economic Cooperation Development (OECD) is working on a 15-point plan to ensure multinationals pay tax on all their profits somewhere. That involves eliminating rorts such as the "double Irish, Dutch sandwich" that have been used by multinationals including Google and Apple to syphon profits to tax havens. The body finished its recommendations on the first seven points of the action plan earlier this month. They deal with technical issues such as hybrid mismatches, transfer payments and tax treaty abuse.
British-based charity organization Oxfam said some progress had been achieved in Cairns but it was concerned "transformative changes to rebalance the global tax system" were off the agenda.
Oxfam Australia policy manager Jo Pride said "tax-dodging" by multinationals drained about US$100 billion from developing countries each year and clearer commitments were needed on how developing countries would get an equal say in global tax reform.
"The G20 finance ministers have announced a number of measures designed to engage developing countries more deeply ... but there is still not a clear commitment on how this will be achieved and ... it is critical that this deeper engagement leads to developing countries getting an equal say in decision-making on international tax reform efforts," she said.
Also, despite the G20 ministers welcomed that progress in Cairns, consultancy PwC said the recommendations were not formally ratified at the meeting because some details may need to be tweaked in the light of the ongoing work on the remaining eight points of the action plan.
"Businesses will need to take action, in some cases urgent action, both to comply with new requirements and to consider the ways in which they do business in different countries," PwC said.
A new global reporting standard that will make it easier for national tax collectors to automatically share information on where multinationals are reporting their profits was endorsed by finance ministers in Cairns.
They said in a communique issued on Sunday that the standard would result in a step-change in their ability to tackle and deter cross-border tax evasion. "We will begin exchanging information automatically between each other and with other countries from 2017, subject to the completion of necessary legislative procedures," the communique said.
