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Lough Erne declaration will require sustained effort, leaders warned
The leaders of the G8 economies have agreed new measures on tax transparency, with the aim of clamping down on evasion, corporate avoidance, and money laundering.
An automatic exchange of information between tax authorities will be established as a new global standard as part of measures that experts have warned could affect smaller firms and even entire economies, as well as the global corporations at which they are targeted.
At the week’s summit at Lough Erne, County Fermanagh, the participant nations stated their support for the Organisation for Economic Cooperation and Development’s work to tackle avoidance by multinationals – which will be expected report to the tax authorities of each country they make their profits, under template of regulations to be drawn up by the G8.
The leaders also pledged to provide support to developing nations to collect the tax they are owed. Following the UK’s announcement that it will establish a register of company ownership, the G8 agreed to similar action to require companies to obtain and hold information on who owns and controls them and ensure the information is available to tax authorities and law enforcement.
Smaller UK firms with foreign sales or infrastructure should follow closely the tax changes pledged by the G8, advised Nick Farmer, associate director at Menzies LLP.
“The changes may be conceived to enable countries to tax major international internet trading business selling into their territory more readily, but will also have widespread effect on all UK businesses that have foreign sales or operations,” he said. “This is why the developments are going to be of wider interest than to just multinationals.”
The chairman of Taxand, Frédéric Donnedieu de Vabres, was unconvinced by the G8’s pledges, “After so much talk, there appears to be little tangible action,” he claimed.
“A general consensus on a central register of company ownership and the ten-point declaration may have been agreed in principle, but where does the issue go from here? Fundamentally, this is not a topic the G8 can tackle alone. The involvement of the G20 and OECD will be the bare minimum required to truly effect global change,” said Donnedieu de Vabres.
“Seismic changes of this kind intrinsically move at glacial speed – but the consequences of these proposals could have a dramatic effect on business and economies alike. We should be careful what we wish for.”
Baker Tilly tax partner George Bull called the Lough Erne declaration “an important first step towards the goal of greater tax fairness”, but expressed concern about how it and the related UK action plan will be implemented.
He said, “Sustained effort by all the G8 nations will be required to translate the declaration into action. After this promising start, a long and very difficult journey lies ahead for all those involved in bringing greater transparency and justice to taxation.”
