• G8 points us in the right direction on tax

    Posted by Jennifer

    30 June, 2013

    As promised, tax featured high on the agenda of the recent G8 meetings hosted in Northern Ireland. The resulting communiqué from this meeting of the leaders of the world’s largest economies indicated their desire to find solutions to global challenges of tax evasion and avoidance. And they did so in such a way that recognised the importance of these changes for developing countries.

    The communiqué said:

    “It is in everyone’s interests for developing countries to be able to: strengthen their tax base to help create stable and sustainable states; improve their ability to fund their budgets through their own domestic revenues; and increase ownership of their own development processes.”

    We couldn’t agree more!

    The outcomes of the summit included positive movement towards each of our three policy asks concerning tax justice. Country by country reporting of the financial affairs of multinational companies has been officially endorsed at the highest level and the OECD has been asked to develop a standard template that could serve as a model.

    Automatic exchange of information between tax authorities of different countries has been proposed as a “new global standard”.

    Disclosure of beneficial ownership of companies was also flagged as a potential future step forward. This is important because the transfer of money stolen through tax evasion or corruption often involves front companies that do no real business and where there are attempts to hide the real owner of the company.  

    David Cameron, host of the summit, described these outcomes as having “the potential to rewrite the rules on tax and transparency for the benefit of countries right across the world, including the poorest countries in the world.”

    However, despite the grand rhetoric coming from within, many observers have criticised the results of the summit as being a series of “vague promises”, lacking any real plan to move these statements from intention to action, both at a national and international level.

    Crucially, the G8 balked at calling for the information revealed through country by country reporting and automatic information exchange to be openly accessible by the public. That level of transparency, it seems, is still a step too far. Without it, however, there is the real risk that cosy deals or less-than-vigorous pursuit of tax dodgers will go unchecked.

    The G8 have offered a series of signposts pointing us in the right direction, but a lot more work is needed before we reach our destination.

    Momentum towards a more just international tax system has been building globally in recent months, with calls to redress deficiencies in the global tax system coming from all directions: the Australian and other national governments, the OECD, the United Nations and now the G8.

    The G20, which will have its annual meeting of finance ministers in July in Russia, will be the next opportunity for positive steps. The G20 grouping consists of twenty of the world’s largest economies, including several emerging countries including Indonesia, Mexico, China and Brazil. This broader representation of membership lends a greater level of legitimacy to the G20 than is enjoyed by the ‘rich countries’ club’ that is the G8.

    Let’s hope the G20 finance ministers – including our new Treasurer, Chris Bowen - are able to take the excellent sentiments of the G8 meeting and turn them in concrete commitments and actions. Significantly, the OECD is also expected to present a comprehensive plan of action for reform of the global tax system to this meeting.

    Click here to call upon the Australian Treasurer to remember the poor when participating in the upcoming G20 discussions on international tax in July.

    For more analysis of the outcomes of the G8 for tax, check out the following:

    This Tax Justice Network blog

    This article from ActionAid

    This blog from The Guardian

    This opinion piece for the Executive Director of the Overseas Development Institute