(Updates throughout with reaction from more anti-poverty groups)
LONDON (Thomson Reuters Foundation) - Anti-poverty campaigners praised the G20 decision on Friday to automatically share tax information but called on the world’s 20 richest nations to give poor countries a seat at the table in rewriting the rules for a global crackdown on tax evasion.
“Not enough has been done so far in bringing developing countries into the discussion. They must make sure that their voice is built in from the start,” said John Christensen, an international director at Tax Justice Network, said.
Tax evasion by corporations exploiting legal loopholes that allow them to book profits in low tax countries or by individuals who take advantage of complex networks of tax shelters and move money offshore robs developing countries of money needed to tackle poverty.
The Group of 20 pledged in a communiqué at a summit in St. Petersburg, Russia, to help developing nations fight tax evasion by assisting them in tracking funds their citizens hide in tax havens. They said they wanted developing countries to sign up to an international convention on the exchange of taxpayer information.
But they also acknowledged this poses logistical and resource challenges for poorer nations. Few developing countries are among the more than 50 countries that have signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, under which they agree to help each other catch tax dodgers by automatically passing information on the financial activities of foreign citizens to the tax authority in those individuals home countries.
The communiqué said G20 members would begin exchanging tax information automatically by the end of 2015.
“The G20 have put their first nail in the coffin of corporate tax dodging, but they've given no guarantees how or when the rip-off of the poorest countries will stop,” Carlos Zarco, director of Oxfam Mexico, said in a statement.
“Developing countries have had warm words from the richest countries before, so this time must be different. They deserve a seat at the table when global tax rules are rewritten, because it is their citizens whose lives are on the line,” he added.
Global Financial Integrity, which campaigns against illicit finance, hailed the G20’s decision to automatically share data as historic, but agreed more must be done to help the world’s poorest.
“The G20 must commit to including developing countries in the committee tasked with drafting the treaty, ensuring that its terms are both beneficial to and implementable by developing countries. This commitment can’t wait until the next G20 finance ministers meeting in February,” said Heather Lowe, GFI’s director of government affairs.
The G20 also promised to crack down on the practice of profit shifting, in which multinational corporations artificially shift profits to low tax jurisdictions. “Profits should be taxed where economic activities deriving the profits are performed and where value is created,” it said.
Oxfam America says African nations lose nearly 2 percent of their gross domestic product (GDP) as a result of corporate profit shifting,
Alex Parts, principal adviser on economic justice at Christian Aid, welcomed the G20’s backing for reforms long were demanded by tax justice campaigners. But he criticized them for not including developing countries in the commitment for immediate sharing of tax information.
“Although the G20 acknowledges that developing countries must reap the benefits of international work to stop tax dodging by multinational companies, it has not made any real commitments to make it possible in practice,” he added.
At the G8 summit in Northern Ireland in June, the leaders of the world’s rich economies signed up to a number of aims, including improved transparency about who owns shell companies. Transparency campaigners had hoped that the G20 would build on that commitment but were left disappointed.
“With near-silence from the G20 on beneficial ownership, it seems that we have lost some of the international momentum created at the G8 in June,” Parts said.
Tax evaders, corrupt officials and money launderers are known to use companies, many of which only exist on paper, to hide their illicit funds. This is possible because a number of jurisdictions allow companies to hide their true or beneficial owners.
((Additional reporting by Stella Dawson))