Tackling tax avoidance and evasion

Introduction to G20 Tax Initiatives

  • The G20 has made significant advancements in combating tax evasion and avoidance since the 2008 economic crisis.

  • Financial scandals exposed extensive offshore tax evasion practices.

  • Existing international tax rules allowed for legal profit shifting to low or no tax jurisdictions.

Actions Taken by the G20

  • To tackle tax evasion, the G20 has collaborated with the OECD in two major initiatives:

    • Implementation of global tax transparency standards.

    • Development of the OECD G20 Base Erosion and Profit Shifting (BEPS) package.

Global Tax Transparency Standards

  • The G20 supports developing countries in applying tax transparency projects with technical assistance.

  • Global Forum on Transparency:

    • Established after 2009, it includes over 150 member countries and jurisdictions.

    • Transition from about 40 tax information exchange agreements in 2008 to over 5,000 agreements today.

    • In 2017 and 2018, 19 jurisdictions initiated automatic information exchanges regarding 47 million offshore accounts worth 4.9 trillion euros.

  • Impact on Disclosure:

    • Nearly half a million individuals disclosed hidden assets before information exchanges began.

    • €95 billion in recovered assets reported so far, signalling the start of a broader recovery effort.

    • Estimated 20-25% reduction in foreign-owned offshore bank deposits.

Base Erosion and Profit Shifting (BEPS) Initiative

  • In 2013, the OECD and G20 initiated joint action to combat tax avoidance caused by BEPS.

  • Financial Impact:

    • Estimates indicated tax avoidance by multinationals could cost between $100 billion and $240 billion annually.

  • OECD G20 Inclusive Framework:

    • Over 125 countries collaborate to oversee BEPS measure implementation.

    • Milestones reached include:

      • Approximately 2,000 agreements for country-by-country tax exchanges.

      • A multi-lateral convention being established to reduce loopholes in global tax treaties.

Future Directions

  • Current priority is addressing tax challenges presented by digitalization of the economy.

  • Aiming for a consensus-based long-term solution by the end of 2020.

  • Proposed Two Pillar Approach:

    • Fundamental changes to the international tax system to foster a fairer and more sustainable tax environment.

  • Emphasizes the need for coordinated global action to address the evolving tax challenges.