G20 to tackle transfer pricing with new tax exchange scheme
The days of multinational companies being able to use the Double Irish Dutch Sandwich to avoid taxation may soon be coming to an end, with the G20 group of nations looking to create a reporting standard to allow for automatic exchange of tax information.
In the official communique coming at the end of the group's meeting of finance ministers in Sydney over the weekend, the group said that by its Brisbane meeting in November, the member nations would start to "deliver effective, practical, and sustainable measures" to combat transfer pricing.
"Profits should be taxed where economic activities deriving the profits are performed and where value is created," the communique stated. "We are committed to a global response to Base Erosion and Profit Shifting (BEPS) based on sound tax policy principles."
By September, the group expects to be able to detail its plan for implementing a common reporting standard that allows for reciprocal and automatic exchange of tax information between all relevant parties, including financial institutions.
Come the end of 2015, the group expects to begin the automatic information exchange, with any nations able to begin at an earlier date encouraged to do so.
Australian Treasurer and chair of the Sydney meeting, Joe Hockey, said in a statement that solid progress has been made to ensure that companies pay their fair share of tax.
"This standard will enhance transparency and reduce opportunities for tax evasion and avoidance," he said.
"We are on track for a comprehensive global taxation plan on Base Erosion and Profit Shifting."
In a time of declining tax receipts, governments of the developed world are looking for ways to stem the financial loss.
Despite taking in AU$6.1 billion of revenue for the year until the end of September in Australia, Apple only paid AU$36 million in tax. Similarly, Google has only paid $16 million to the UK tax authority, HM Revenue and Customs, on turnover of $18 billion between 2006 and 2011.
Google chairman Eric Schmidt said in late 2012 that the company is simply engaged in "capitalism".
The G20 group of nations consists of the European Union, the United States, China, Germany, Japan, France, the United Kingdom, Canada, Italy, Russia, India, Mexico, Australia, Saudi Arabia, Brazil, Indonesia, Turkey, South Africa, and Argentina.