US backs G20 crackdown on global tax loopholes

The United States threw its weight behind a push to make global taxation reform a key goal for the Group of 20 advanced and emerging economies, supporting moves to close loopholes used by major multinationals to avoid tax.

US treasury secretary Jack Lew backed the need for tax harmonisation, saying all nations should adopt the automatic exchange of information as a global standard.

“The G20’s work on tax cooperation is among our most important new initiatives,” Mr Lew told reporters in Sydney, ahead of the weekend meeting of G20 finance ministers and central bankers.

Australia, as host of the meeting and one of the most heavily reliant countries in the Organisation for Economic Cooperation and Development (OECD) on corporate tax receipts, is pushing hard for reform.

Big budget deficits and revelations that companies such as Apple and Google use structures that lawmakers have labeled "contrived" to avoid billions of dollars in taxes, have led to growing calls to close corporate tax loopholes. The companies say they follow the existing tax rules.

Mr Lew and Australian finance minister Joe Hockey announced they had struck a deal under the United State’s Foreign Account Tax Compliance Act that targets “non-compliant” taxpayers using foreign bank accounts.

International Monetary Fund chief Christine Lagarde, also in Sydney for the meeting, singled out accounting for revenues from new global digitised businesses such as Google and Apple as a "big ongoing problem".

Ms Lagarde called for a radical rethink of international tax arrangements, saying governments needed to take into account intangible products provided by companies where the locality of the headquarters or service centre is uncertain.

Reuters