G20 governments will need to find great political courage if they are to curb multinationals' multi-billion tax dodging, campaigners warn today.
Christian Aid, ActionAid International, Oxfam, the Global Alliance for Tax Justice, Tax Justice Network and others say governments' attempts to curb the epidemic of tax evasion and avoidance will only succeed if politicians stand up to lobbying by the powerful companies and individuals who benefit hugely from the status quo.
Their warning comes in a new briefing endorsed by 34 organisations and published in the run-up to G20 countries' summit meeting in St Petersburg on 5th and 6th September.
Alex Prats, Principal Economic Justice Adviser at Christian Aid, said: 'Almost every day, we get new evidence that aggressive tax avoidance and sometimes evasion are now the norm for large multinational companies, not the exception. They are making billions from these activities, while ordinary people - especially in poor countries - pay the price in higher taxes and worse public services.
'G20 and other governments have around two years in which to prove whose side they are really on.'
The new briefing argues that governments should explore a range of possible ways to make multinationals pay their fair share.
James Henry, Chair of the Global Alliance for Tax Justice, said: 'The G20 and other governments, as well as the OECD, should explore credible alternatives to the existing rules. At present, despite its good intentions, the OECD seems to be trying to save an international corporate tax system which is fundamentally flawed.'
In July, the OECD published an Action Plan on Base Erosion and Profit Shifting (BEPS) by multinational companies. (1)
Campaigners' new briefing encourages policymakers to pursue a rigorous study of the merits, risks and feasibility of alternatives to the OECD's existing rules, such as unitary taxation and formulary apportionment. (2)
In addition, it urges the OECD and G20 countries to do more to include poor countries in the BEPS discussions on making multinationals pay their fair share.
Maria Villanueva, policy advisor at Oxfam, said: 'The people hardest hit by multinational tax dodging are poor people in developing countries. Developing countries can't compete with corporations' sophisticated methods of tax dodging and lose billions every year in potential revenues. This is a disaster for people living in poverty.
'The OECD and G20 countries should urgently ensure that developing nations are included as equal partners in the international search for solutions - not just asked to rubber-stamp plans agreed elsewhere. So far, with the exception of the BRICS, this has not happened.'
A third part of the briefing looks at what else governments must do, beyond the OECD BEPS Action Plan, to curb the financial secrecy which sustains tax evasion, corruption and money laundering across the world.
Reforms such as automatically exchanging tax information between governments and greater transparency around the identities of the real owners of multinationals and what the companies do in each country where they work must become the norm.
For more information, please contact:
Rachel Baird of Christian Aid on +44 (0)207 523 2446, +44 (0)7850 242950 or email@example.com
Caroline Hooper-Box of Oxfam on 001 202 321 2967 or firstname.lastname@example.org
James Henry of Global Alliance for Tax Justice on 0001 631 725-5202, 001 516-721-1452 and email@example.com
Sol Picciotto of Tax Justice Network on firstname.lastname@example.org
Alice Klein of ActionAid International on +44 (0)203 122 0747 or +44 (0)7812 357047 or email@example.com
1. In February 2013, the OECD published a report called Addressing Base Erosion and Profit Shifting. The report looks at how multinationals avoid tax, what problems tax avoidance is causing for societies around the world and what governments might be able to do in response. The report begins: 'Base erosion constitutes a serious risk to tax revenues, tax sovereignty and tax fairness for OECD member countries and non-member countries alike.'
2. Under unitary taxation, multinational companies would be taxed according to the economic substance of what they do and where they do it - for instance, where they have their factories, offices, staff and sales. Forumulary apportionment is the use of a formula to allocate a multinational's profits between the countries within which it operates, before those countries tax their share of the profits.