Google to cooperate on tax avoidance

TOM PULLAR-STRECKER
Last updated 10:11 14/02/2013

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Google has signalled it is ready and willing to engage with the Organisation for Economic Cooperation and Development in its drive to stamp out tax avoidance by multinationals.

Google has been under the spotlight for its tax practices since Bloomberg reported it paid just 2.5 per cent tax on its profits outside the US in 2010 and avoided US$2 billion (NZ$2.3b) in taxes last year.

Chief executive Eric Schmidt inflamed public opinion in Britain in December when he defended the company's tax structure as "proudly capitalistic", also drawing a promise from the OECD's top tax official, Pascal Saint-Amans, that he would be diligent in his work to eliminate multinational tax avoidance.

In an apparent signal that the company accepted changes might now be on the way, a Google spokesman told Fairfax Media it "was aware of the discussion within the OECD and happy to contribute as appropriate".

Although seemingly bland, it is understood the one-line statement was intended as an olive branch.

New Zealand Revenue Minister Peter Dunne yesterday welcomed a new OECD report that warned the global tax system was threatened by rorts. He said international cooperation meant "the days of large multinationals escaping taxation will be numbered".

Dunne last year joined his counterparts in Britain, Germany, France and Australia in endorsing the drive by the OECD to eliminate international tax loopholes.

These include the "double Irish" and "Dutch sandwich" company structures that are reportedly used by multinationals dealing in intangible intellectual property - including Google, Facebook, Microsoft, Apple and pharmaceutical company Pfizer - to funnel billions of dollars of profits to tax havens.

Finance Ministers and central bankers from across the G20 are due to discuss the OECD's report in Moscow tomorrow.

The report said the integrity of corporate income tax - which made up 10 per of the OECD's total tax take - was at stake. But it went further, saying overall confidence in the tax system could be undermined without concerted global action.

"If other taxpayers, including ordinary individuals, think that multinational corporations can legally avoid paying income tax, it will undermine voluntary compliance by all taxpayers - upon which modern tax administration depends," it said.

The report said the OECD aimed to develop a "comprehensive action plan" in time for a meeting of its fiscal affairs committee in June. Saint-Amans, told Fairfax last month that he hoped a solution could be in place within two years.

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Dunne said OECD nations were designing "a new approach for a new world where internet-based transactions are the norm".

British-based charity ActionAid, which combats poverty in the third world, also welcomed the OECD report and called for "fundamental reforms".

"This week an ActionAid investigation revealed that companies like the Associated British Foods group use a range of financial engineering to ensure they pay 'virtually no corporate tax' in desperately poor countries like Zambia," it said.

Consultancy KPMG said the OECD's "widely anticipated" report was the product of concerns from "a wide range of stakeholders' and was likely to be endorsed by the G20 at its Moscow meeting.

"By mid 2013 we could see the OECD, G20 and the European Union countries working together on a range of initiatives aimed at developing a revised framework for taxation of profits arising to multinationals, particularly those operating newer business models," it said.

Saint-Amans said that rather than rather trying to close loopholes one by one, his goal was to make "double non-taxation" - the non-taxing of company profits - "impossible". Last month he called for big businesses to support the OECD in that goal.

- The Dominion Post

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