The Organisation for Economic Cooperation and Development (OECD) has said many firms ‘abuse’ current tax rules by moving their profits to different countries so they don’t have to pay tax.
A statement has been issued by finance ministers from the UK, U.S., Australia, France and other countries backing the automatic exchange of tax information across borders.
The announcement has been made two days after the G20 meeting, which took place in Moscow and has been described by UK Chancellor George Osborne as an ‘important’ step towards a fair global tax system.
The loophole that allows companies to transfer their profits across borders was made in the 1920s so that companies working in more than one country could avoid unfair double taxation. Now this rule is being abused to allow ‘double non-taxation’.
The G20 finance ministers have said they: “Fully endorse the OECD proposal for a truly global model” of information sharing.
They have even called upon other countries to make their tax information available as soon as possible.
The changes could be in place by 2015, although the process will be complicated due to the hundreds of tax treaties that exist between countries.
Tax avoidance is a huge problem because at the moment it is entirely legal but it amounts to a substantial sum of money.
Big, trusted names like Google, Amazon and Apple have all been slammed for the small amount of tax they pay.
Only recently, Google was attacked by MPs for transferring £3.2 billion of UK sales to Dublin so they could avoid paying tax.
It is thought coffee chain Starbucks is doing the same, although the firm has now reacted to public criticism by promising to pay more.
Companies claim their actions are legal and done to protect their shareholders.
To find out more about the tax companies are expected to pay, and how an accountant can help, please visit our Corporation Tax page.
View and comment on the original BBC article.