Reforming International Tax System Must be Priority of G20

The G20 must take necessary steps to reform the international taxation system to stop wealthy tax dodgers, beginning at its Finance Ministers and Central Bank Governors meeting this weekend (22-23 Feb) in Sydney.

Oxfam says that billions of dollars are lost each year in tax loopholes and avoidance. This gap must be plugged. Much of this money should be spent on services such as health and education in developing countries, helping to lift people out of poverty and reduce their dependence on aid.

Oxfam spokesperson Dr. Helen Szoke, the chief executive of Oxfam Australia, welcomed news that the Australian Government had included international tax reform as a priority issue for its 2014 presidency of the G20.

As a result, this year's G20 will be judged on how it tackles tax avoidance, promotes international tax transparency and ensures that developing countries benefit from the changes, particularly in relation to information sharing. "As the G20 host, Australia has the responsibility of leadership to help restore fairness and integrity to the international tax system," Dr. Szoke said.

Tackling tax avoidance

"The international tax regime is broken. This is contributing to widening income inequality and the scandal that we see today of the 85 richest people owning the same wealth as half the world's population," she said. "Rich corporations and individuals cannot be allowed to keep squirrelling their profits away in tax havens in order to dodge their tax responsibilities."

"This 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 and 2010, sub-Saharan Africa lost on average $63.4 billion dollars this way each year, or more than twice what it received in aid."

G20 finance ministers must make progress towards better-functioning domestic and international tax systems. These systems are vital for both rich countries to strengthen their economies, and developing countries to help them achieve sustainable economic and human development.

Involving developing countries

"The only way to ensure that developing countries will benefit from these tax reforms is to involve them in the process from Day One," Dr. Szoke said. "That is why, this weekend, we want to see G20 Finance Ministers agree on a process that will allow all developing countries to participate in the OECD-led Base Erosion and Profit Shifting (BEPS) project."

BEPS seeks to crack down on companies that declare their profits in low-taxing countries and their losses in high-taxing ones, in order to wriggle out of their tax liabilities.

Increasing transparency

Oxfam also is asking for progress on transparency. "The G20 should require multinational companies to publish a breakdown of their employees, assets, sales, profits and taxes in every country where they operate," she said.

"Reforming the international tax regime and increasing transparency will not only help lift people out of poverty and reduce dependency on aid, but will help the G20 achieve its aims this year for stronger economic growth and employment," Dr. Szoke said.