Europeans want multinationals to pay fair share of taxes | News | DW | 16.02.2013
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Europeans want multinationals to pay fair share of taxes

European finance ministers are planning to put regulations in place that will stop multinational corporations from avoiding paying taxes. The announcement came at a G20 finance ministers meeting.

German Finance Minister Wolfgang Schäuble was one of the driving forces behind the initiative, along with his British and French counterparts.

"The positive effects of globalization must not lead to multinational companies artificially shifting their profits and avoiding fair contributions to the tax revenues of our countries," Schäuble said at the G20 meeting in Moscow on Saturday.

Britain's chancellor of the exchequer, George Osborne, said multinationals must be forced to pay their fair share.

They must, "like anyone else, pay the taxes they owe," Osborne said. "The global economy has changed massively over the last decade, but global tax rules have stood still for almost a century," he added.

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G20 draft promises to stop currency war

France's finance minister, Pierre Moscovici, expressed a similar sentiment.

What the three referred to was a practice known as "profit shifting" in which major corporations move earnings from one country to another to reduce their tax bill.

According to a study released Saturday by the Organisation for Economic Co-operation and Development (OECD), some multinationals use tax havens to pay as little as 5 percent tax on corporate profits. Smaller businesses, which have no offshore subsidiaries to shift money to, pay as much as 30 percent.

"These strategies, though technically legal, erode the tax base of many countries and threaten the stability of the international tax system," Angel Gurria, the OECD's secretary-general said in a statement. "As governments and their citizens are struggling to make ends meet, it is critical that all taxpayers - private and corporate - pay their fair amount of taxes," he added.

The OECD is to work with national governments over the next few months to draw up a plan to combat the problem, with Germany to lead one of three working groups.

No to 'economic warfare'

At Saturday's meeting, the finance ministers also followed up a G7 talk in London earlier this week by pledging to refrain from devaluing their currencies in an effort to make their economies more competitive.

There have been fears that other major economies could "retaliate" after Japan embarked on a policy course of monetary easing in a bid to devalue the yen, thereby cheapening the country's exports and making them more competitive overseas. This followed the election of new Japanese Prime Minister Shinzo Abe.

"Currencies should not be used as a tool of competitive devaluation," George Osborne said. "The world should not make the mistake that it has made in the past of using currencies as tools of economic warfare."

pfd/mkg (Reuters, dpa, AFP)