Leaders from eight of the world's wealthiest countries spent the final hours of their summit Tuesday focusing how to make sure that multinational companies can no longer rely on shelters and loopholes to avoid paying the tax they owe.
Leaders from eight of the world’s wealthiest countries spent the final hours of their summit Tuesday focusing how to make sure that multinational companies can no longer rely on shelters and loopholes to avoid paying the tax they owe.
British Prime Minister David Cameron, host of the two-day G-8 summit at a remote lakeside golf resort in Northern Ireland, promised “significant developments on tax” in a tweet before heading into a morning discussion on the subject with the leaders of the United States, Germany, Russia, France, Italy, Canada and Japan.
British lawmakers have sharply criticized Google, Starbucks and other U.S. multinationals operating in Britain for exploiting accounting rules by registering their profits in neighboring countries such as Ireland, which charges half the rate of corporate tax, or paying no tax at all by employing offshore shell companies.
But Britain itself stands accused of being one of the world’s premier links in the tax-avoidance chain. Several of the UK’s own island territories – including Jersey, Guernsey and the British Virgin Islands – serve as shelters and funnel billions each week through the City of London, the world’s second-largest financial market.
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“Of course Britain’s got to put its own house in order,” said Britain’s treasury chief, Chancellor of the Exchequer George Osborne, who was invited to address the G-8 meeting on corporate tax reform. Before the summit, Britain announced a provisional agreement with the finance chiefs of nine of its offshore dependencies to improve their sharing of information on individuals and companies banking cash there.
Many of the world’s leading companies, ranging from Apple to the management company of U2, employ complex corporate structures involving multiple subsidiaries in several countries to minimize the tax bills in their home nation. One such maneuver, called the “double Irish with a Dutch sandwich” allows foreign companies to send profits through one Irish company, then to a Dutch company and finally to a second nominally Irish company that is headquartered in a usually British tax haven.
The U.S. said it was committed to reforming the global accounting rules and collecting more of U.S. companies’ profits banked outside American shores.
“The goal of cracking down on tax avoidance, bringing greater transparency to it, this is something we’ve pursued in the United States, and we agree with Prime Minister Cameron that we can work together multilaterally to promote approaches that achieve those objectives,” said Ben Rhodes, President Barack Obama’s deputy national security adviser.
Campaigners for more transparent corporate tax regimes appealed to Britain and the G-8 to ensure that reforms benefited the poorest countries of Africa, South America and Asia, not just the richest western enclaves of capital.
“G-8 leaders must decide whether they want to shape the transparency revolution or resist the tide of history,” said Adrian Lovett, Europe executive director at development campaign group One.
G-8 delegations also faced a final few hours of behind-the-scenes haggling to see whether all eight could express a joint position on ending the 2-year-old civil war in Syria.
Russia’s Vladimir Putin, who backs the government of Bashar Assad against rebel forces, refused to shift his stance during Monday night’s working dinner on the issue. The other seven leaders, including U.S. President Barack Obama, have shown varying degrees of support for the rebels.
Cameron also is seeking a commitment from the countries attending the summit to stop paying ransoms to kidnappers in hopes of deterring the practice following January’s bloody capture by al-Qaeda-linked militants of an Algerian gas facility. Ten Japanese, five Britons, three Americans and a French national were among the 40 civilians killed as Algerian forces retook the facility.
Hostage-taking of foreign workers for cash payments is on the rise across much of West Africa, particularly Nigeria with its own oil industry dominated by Western companies and foreign managers.
“I want us to discuss how we crack down on terrorist ransoms because this would suffocate one of the main sources of funding for these terrorist organizations, and of course would reduce the incentive to take our citizens hostage,” Cameron said ahead of Tuesday’s discussions.
Cameron has invited the leaders of Libya and the African Union to join the talks table over lunch Tuesday.
The summit is concluding with rapid-fire statements by each departing leader. Obama continues his European trip Tuesday night in Germany.