Brisbane: Australia on Friday vowed a "very aggressive" crackdown on tax avoidance at weekend G20 talks, as a row rages over Luxembourg's sweetheart arrangements with multinationals.
Closing corporate tax loopholes and endorsing a common reporting standard to increase transparency are set to be a primary focus of the G20 summit in Brisbane this weekend.
But the Organisation for Economic Cooperation and Development (OECD) cautioned that if such a level playing field is achieved, it will only make competition heat up to attract revenue from digital companies like Apple and Google as tax havens are shut down.
Leaders of the world's most powerful economies want to ensure companies pay taxes where they make their profits, instead of using complex financial structures that allow them to slash their liabilities, depriving governments of billions in revenue.
The opacity of Luxembourg's beneficial tax deals with a slew of companies, when its government was led by the new head of the EU's executive Jean-Claude Juncker, has erupted as a major dispute heading into the G20.
Host Australia has made tax avoidance a key plank of its G20 presidency with Treasurer Joe Hockey saying the practice of corporations shifting profits amounts to "theft".
He pledged today a "very aggressive" crackdown at the G20, with the United States throwing its support behind the plan.
"They were cautious at first, but obviously the United States itself has been missing out on revenue from a number of these large multinationals," he told ABC radio.
The US government has been aggressively chasing its own taxpayers domiciled abroad who have accounts stashed away in refuges such as Switzerland.
"Now, with everyone committed to a plan and everyone committed to the outcomes of the plan, I am confident that we're going to start seeing some very aggressive approaches towards the largest multinationals," Hockey said.
OECD tax chief Pascal Saint-Amans said the organisation's plan against base erosion and profit shifting (BEPS) would end tax havens, but would not eliminate tax competition, which he expects to intensify as nations compete for business investment on more equal terms.
"If there's no zero-tax havens left, then countries will be keen on competing with more attractive rates," he told Fairfax Media, adding that some countries could lower their corporate tax rates once BEPS was implemented.
"BEPS puts an end to harmful tax competition, but not (all) tax competition. Some countries might move to be more attractive by reducing their (tax) rates. We think that's fine."
The issue of tax avoidance has taken on added significance with Juncker heading to Brisbane for the G20 forum.
Juncker, who took over the European Commission on November 1, is under pressure over generous tax concessions offered to top global companies when he was prime minister of Luxembourg from 1995 to 2013.
