G20 makes progress on international tax reform but must do more for low-income countries

Progress by G20 Finance Ministers toward tackling the issue of multinational tax avoidance has been welcomed by Oxfam Australia Chief Executive Dr. Helen Szoke, though there is a need for more specifics on how and when low-income countries will benefit.

Dr. Szoke said the announcement at the conclusion of the G20 Finance Ministers meeting in Sydney today of a global growth target would likely gain much attention, but she said for poor people that suffered from widening inequality, the big news lay in international tax reform.

“Oxfam has been calling for international tax reform for some time now, and while it was particularly encouraging to see the communiqué commit G20 governments to ‘engage with and support low-income and developing countries’, the G20 Finance Ministers failed to agree any specifics of when and how low income countries will fully benefit from reforms to stop tax dodging by wealthy companies,” Dr. Szoke said.

A small step towards transparency that needs improvement

The communiqué issued today signals strong support for reform of the international taxation system and for the OECD Base Erosion and Profit Shifting project which tackles tax avoidance and minimisation. The communiqué also endorsed a single global standard for the annual automatic exchange of information between tax authorities around the globe.

“This endorsement is a significant step towards transparency of the international taxation system, making it more difficult for multinationals to avoid paying tax,” Dr. Szoke said.

But she said the G20 and OECD should go further by requiring multinational companies to publish a breakdown of their employees, assets, sales, profits and taxes in every country where they operate.

Developing countires need to be included in the process

G20 Leaders have also committed to support developing countries to engage in the OECD process to ensure they benefit from the reform.

“The best way to ensure that developing countries will benefit from these tax reforms is to involve them fully in the decision-making process, and to design the reforms so low-income countries benefit from day one,” Dr. Szoke said.

"Working for the Few"

A recent Oxfam report showed that the world’s 85 richest people own the same wealth as half the world’s population. “Rich corporations and individuals must not be allowed to keep concealing their profits away in tax havens,” Dr. Szoke said.

The combination of tax avoidance and low tax rates facilitates the illicit flow of huge amounts of capital from the world’s poorest countries. Between 2008-2010, sub-Saharan Africa lost on average US$63.4bn this way each year, more than twice what it received in aid.

“Instead of leaving poor countries, this capital should be invested on services such as health and education in developing countries, helping to lift people out of poverty and reduce their dependence on aid,” Dr. Szoke said.