Tech company rorts 'threaten global tax take'

Last updated 13:13 13/02/2013

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"Ordinary individuals" may start dodging their taxes if governments don't act now to stamp out multinational tax rorts, the Organisation for Economic Cooperation and Development has warned in a new report.

New Zealand Revenue Minister Peter Dunne last year joined his counterparts in Britain, Germany, France and Australia in endorsing efforts by the OECD to eliminate international tax loopholes.

These include the "double Irish" and "Dutch sandwich" company structures that are now frequently used by multinationals dealing in intangible intellectual property to route profits to tax havens.

The rorts have reportedly been used by Google, Facebook, Microsoft, Apple and pharmaceutical company Phizer to avoid paying billions of dollars of tax on their non-United States profits.

Finance Ministers and central bankers from across the G20 are due to discuss the issue in Moscow on Friday.

In a report prepared for that meeting, the OECD 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.

The OECD's top tax official, tax policy director Pascal Saint-Amans, told Fairfax last month that he hoped a solution could be in place within two years.

Dunne has said he is "open-minded" about scrapping a centuries-old legal ban that prevents Inland Revenue from discussing the tax affairs of individual companies. Last week, he issued a statement reiterating support for the OECD's efforts.

"What OECD nations are doing is designing a new approach for a new world where internet-based transactions are the norm," he said.

British-based charity ActionAid, which combats poverty in the third world, 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.

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"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".

- The Dominion Post


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