G-20 Plans to Fight Legal Tax Evasion by Multii-National Corporations

National leaders of the world's largest economies, known as the G-20, have developed a plan to make uniform a list of tax principles for large corporations.  The official name of the G-20 organization is the Organization for Economic Development and Cooperation.  It is attempting to combat the problem of large corporations utilizing the variations in tax laws to avoid paying significant amounts in income taxes.  The legal practice of tax avoidance results in higher taxes on individuals and small business to prevent revenue shortfalls.

 

Among the rules proposed are strict guidelines for the definition of a permanent presence for a company.  Additionally, there are proposals to combat the avoidance of taxes through limiting the exchanging of profits and losses between a company's subsidiaries, disguised as internal corporate payments for goods, copyrights, and/or patent royalties.  In short, the tax avoidance practices consist of methods to transfer on paper corporate profits from high tax countries to low tax countries.  Conversely, the treatment of costs involves shifting them from low tax countries to high tax ones.

 

Over the last several decades the globalization of business has increased tremendously.  It was simply a matter of time before governments began to catch up through the implementation of international agreements.  The G-20 proposal is such an example.

 

For full coverage of the G-20 proposals, please see the following article in the New York Times, http://www.nytimes.com/2013/07/20/business/global/g-20-nations-back-plan-to-curb-corporate-tax-evasion.html?hp