Global: G20 to back moves to expose tax evaders
06 September 2013
Posted by: Authors: Vanessa Houlder and Javier Blas
Authors: Vanessa Houlder and Javier Blas
The Dutch government has offered to renegotiate loophole-ridden tax treaties with nearly two dozen developing countries, in a sign of the drive to crack down on avoidance and evasion that is set to intensify at the summit of world leaders in Russia this week.
Leaders of the G20 countries meeting in St Petersburg are due to throw their weight behind moves to close corporate tax loopholes and expose tax evaders through greater transparency.
Pascal Saint-Amans, the top tax official at the Paris-based Organisation for Economic Co-operation and Development, said the meeting was expected to pave the way for the automatic exchange of tax information in what he described as a "very big and significant” development. The European Commission said it would "push for the automatic exchange of information to become the global standard” and support efforts to help ensure its swift implementation.
The meeting is also set to endorse an ambitious plan to close loopholes in the international corporate taxsystem, which was published by the OECD in July.
The drive to crack down on tax abuses commands support throughout the G20, as countries struggle to rebuild their public finances and tackle evasion and corruption. Last month China demonstrated its support for the agenda by signing a multilateral treaty providing mutual assistance for tracking down tax cheats.
The offer by the Netherlands to revise tax treaties with countries such as Zambia – where the existing 36-year-old treaty has no anti-abuse clauses – comes after months of pressure from campaigners angered by the impact of tax avoidance on developing countries.
Lilianna Ploemen, Dutch development co-operation minister, said: "By making use of loopholes in tax treaties in combination with differences between national tax rules, internationally operating companies can avoid paying tax. It means that poor countries miss out on tax revenues, funds they clearly need for matters such as infrastructure and education.”
The Dutch government also said it would improve transparency and tighten up on shell companies using the Netherlands for tax purposes, according to a letter from the trade and finance ministers to parliament last week.
Mr Saint-Amans said the significance of the Dutch moves was unclear at this stage but the move demonstrated the influence of the G20 drive against base erosion and profit shifting.
The move by Amsterdam comes as the surge in foreign investment in Africa has triggered a race among offshore financial centres to sign deals to reduce the tax bills of overseas companies and protect their investment on the continent.
The race has wrongfooted the Netherlands – traditionally a big offshore centre – as earlier this year it launched a review of several of its double-tax agreements with poor nations, including those already signed with Ghana, Uganda and Zambia, after pressure from anti-poverty and tax avoidance groups.
As the Netherlands takes a pause, lawyers and government officials in Africa said that Mauritius, Singapore and Luxembourg were seeking negotiations with host African nations to sign investor protection and promotion agreements, which can minimise the risk of nationalisation by forcing fair compensation and arbitration, as well as double taxation avoidance agreements, which reduce the tax bill that companies face.
Data on revenues lost to developing countries from evasion, avoidance and the use of tax havens is unreliable but most estimates exceed the level of aid received by developing countries – around $100bn a year, according to the OECD.
The Africa Progress Panel, an international think-tank chaired by Kofi Annan, former UN secretary-general, this week called on the G20 to ensure that international tax reforms benefit Africa too. The G20 is expected to endorse an initiative designed to help developing countries improve the effectiveness of their tax authorities known as "tax inspectors without borders”.