UK Politics

George Osborne urges multinational tax crackdown

  • 16 February 2013
  • From the section UK Politics
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Chancellor George Osborne has renewed his call for international action to tackle so-called "profit shifting" by multinational companies to avoid tax.

Mr Osborne is meeting other finance ministers of the G20 group of major economies in Moscow.

The UK, Germany and France want to reform rules which let firms switch profits and costs between countries.

Labour's Ed Miliband said he "didn't see much evidence" Mr Osborne was actually tackling the problem.

Several well-known firms have been criticised over the amount of tax they pay on large UK revenues.

The BBC's Hugh Pym says the issue is "high on the list of priorities for policymakers at a time when companies like Amazon, Starbucks and Google have come under fire over the size of their tax payments".

The emergence of details regarding tax-avoidance strategies by multinational firms has sparked controversy, and calls for an overhaul of tax laws will be highlighted to finance ministers by the Organisation for Economic Co-operation and Development (OECD), in a report published this week.

The chancellor told BBC News: "We want a tax system that makes it competitive for businesses to set up in Britain and create jobs, but we also want a tax system where business pay their taxes and that's what we're setting up achieving here with other countries at this meeting in Moscow.

"International companies are an important source of jobs - we want them in Britain. We are making sure the taxes in Britain are low but we do expect those international companies to pay those taxes.

"The international tax laws for these companies have not really changed in decades, even though the international economy has changed a lot - people shop online, for example - and so the only way to deal with that is to work with other countries to make sure the international tax laws change and then international companies will pay their fair share of taxes."

But Labour leader Ed Miliband said: "George Osborne makes lots of promises on tackling tax avoidance, but I don't see much evidence of it.

"What he should be worrying about is the living standards of people in this country.

"Of course, he should be dealing with tax avoidance, but one of the things he's doing is cutting taxes for the richest people in society - £100,000 tax cut for the richest people in Britain - the wrong thing to do at a time when everyone else's living standards are squeezed."

International standards plea

The UK will chair a committee set up by the OECD looking at "transfer pricing" - how global firms calculate the payments passed between their subsidiaries in different countries - which can be used to shift profits from high-tax jurisdictions to lower-tax ones.

The committee is one of three looking at the tax issues which will help the OECD prepare a "plan of action" to be put forward to the G20 in July.

Germany will head a panel looking at the ways in which companies have reduced their tax base - their taxable income and assets - while France and the US will jointly consider the problem of identifying the correct tax jurisdiction for business activities, particularly e-commerce.

Mr Osborne said Britain had cut its corporation tax rate by more than any other country in the G20 over the past two years, which he said was "a message to the world that we are open for business that has seen companies return to Britain, and helping to create and secure thousands of jobs and millions in investment".

He said: "Our commitment to the most competitive corporate tax system goes hand in hand with our call for strong international standards to make sure that global companies, like anyone else, pay the taxes they owe.

"That's why Britain, with Germany and France, asked the OECD to scrutinise the international rules, and we will together welcome their report to the G20 this weekend. The report shows this is an international issue that requires international action."

The chancellor said global tax rules "have stood still for almost a century", adding that "Britain will lead the international effort to bring them into the 21st Century".

He wants to use Britain's presidency of the G8 in 2013 to push international progress on the reform of international tax rules, which were first developed by the League of Nations in the mid-1920s and remain essentially unchanged.

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