Five questions answered on the crackdown on tax avoidance

G20 finance ministers make an announcement.

G20 finance ministers meeting in Moscow today announced a global crackdown on tax arbitrage by multinational companies. We answer five questions on the proposed crackdown.

Why has this crackdown been launched?

It’s been announced in a bid to tackle base erosion and profit sharing by multinational firms and hopes to address recent sustained criticism of the low tax paid by firms such as Google, Amazon and Starbucks.

It’s hoped it will push up tax rates for firms that specifically arrange their tax affairs so they only pay a small amount. 

What’s the plan?

An action plan has been drawn up by Paris-based Organisation for Economic Co-operation and Development (OECD) for the G20. It sets out more than a dozen ideas to block gaps between national tax systems and tackle practices that artificially separate taxable income from the activity that generates it.

It includes proposals to tackle abuses of tax and to prevent tax avoidance by shifting intangibles between group companies.

It also aims to neutralise the impact of “hybrid” structures used to reduce billions of dollars of tax.

Other countries that are outside the OECD, such as China and India, will be invited to take part in the programme.

What will the outcome be?

This will depend on the co-operation of governments over the next two years, but it is largely hoped that “the golden age of ‘we don’t pay taxes anywhere’ is over,” as said by Pascal Saint-Amans, the top tax official at the OECD.

But this may not happen if commitments of business and governments dwindle.

What have the experts said?

Will Morris, chair of the BIAC’s tax committee, speaking to The Financial Times, said: “In some areas, the international tax system has not kept pace with globalisation and changing business models, and it is appropriate to look again at those areas and consider, based on all the evidence, whether any changes are required.”

What have the critics said about this initiative? 

A campaign group that pushes for tax reform, The Tax Justice Network, also speaking to the FT said:  “piecemeal recommendations for states to apply patches to the increasingly leaky international tax system...would be like trying to plug the holes in a sieve.”

Photograph: Getty Images

Heidi Vella is a features writer for Nridigital.com

GETTY
Show Hide image

Cabinet audit: what does the appointment of Andrea Leadsom as Environment Secretary mean for policy?

The political and policy-based implications of the new Secretary of State for Environment, Food and Rural Affairs.

A little over a week into Andrea Leadsom’s new role as Secretary of State for Environment, Food and Rural Affairs (Defra), and senior industry figures are already questioning her credentials. A growing list of campaigners have called for her resignation, and even the Cabinet Office implied that her department's responsibilities will be downgraded.

So far, so bad.

The appointment would appear to be something of a consolation prize, coming just days after Leadsom pulled out of the Conservative leadership race and allowed Theresa May to enter No 10 unopposed.

Yet while Leadsom may have been able to twist the truth on her CV in the City, no amount of tampering will improve the agriculture-related side to her record: one barely exists. In fact, recent statements made on the subject have only added to her reputation for vacuous opinion: “It would make so much more sense if those with the big fields do the sheep, and those with the hill farms do the butterflies,” she told an audience assembled for a referendum debate. No matter the livelihoods of thousands of the UK’s hilltop sheep farmers, then? No need for butterflies outside of national parks?

Normally such a lack of experience is unsurprising. The department has gained a reputation as something of a ministerial backwater; a useful place to send problematic colleagues for some sobering time-out.

But these are not normal times.

As Brexit negotiations unfold, Defra will be central to establishing new, domestic policies for UK food and farming; sectors worth around £108bn to the economy and responsible for employing one in eight of the population.

In this context, Leadsom’s appointment seems, at best, a misguided attempt to make the architects of Brexit either live up to their promises or be seen to fail in the attempt.

At worst, May might actually think she is a good fit for the job. Leadsom’s one, water-tight credential – her commitment to opposing restraints on industry – certainly has its upsides for a Prime Minister in need of an alternative to the EU’s Common Agricultural Policy (CAP); a policy responsible for around 40 per cent the entire EU budget.

Why not leave such a daunting task in the hands of someone with an instinct for “abolishing” subsidies  thus freeing up money to spend elsewhere?

As with most things to do with the EU, CAP has some major cons and some equally compelling pros. Take the fact that 80 per cent of CAP aid is paid out to the richest 25 per cent of farmers (most of whom are either landed gentry or vast, industrialised, mega-farmers). But then offset this against the provision of vital lifelines for some of the UK’s most conscientious, local and insecure of food producers.

The NFU told the New Statesman that there are many issues in need of urgent attention; from an improved Basic Payment Scheme, to guarantees for agri-environment funding, and a commitment to the 25-year TB eradication strategy. But that they also hope, above all, “that Mrs Leadsom will champion British food and farming. Our industry has a great story to tell”.

The construction of a new domestic agricultural policy is a once-in-a-generation opportunity for Britain to truly decide where its priorities for food and environment lie, as well as to which kind of farmers (as well as which countries) it wants to delegate their delivery.

In the context of so much uncertainty and such great opportunity, Leadsom has a tough job ahead of her. And no amount of “speaking as a mother” will change that.

India Bourke is the New Statesman's editorial assistant.