New global rules to help clamp down on corporate tax evasion and avoidance could be in place as early as next year, says the Organization for Economic Co-operation and Development.
The Paris-based organization handed the G20 finance ministers — including Canada’s Jim Flaherty — a three-step game plan during their meetings Friday, which if implemented, will establish the infrastructure for global co-operation on the controversial issue.
The plan calls for a universal and automatic exchange of financial information, development of an operation platform for common reporting and due diligence of rules, and the creation of a multilateral platform to protect confidentiality.
Dennis Howlett, the executive director of Canadians for Tax Fairness, says he’s encouraged by the progress and expects the G20 ministers to endorse the plan.
Howlett, however, also cautioned that the key to its success — or failure — will be how quickly and effectively nations implement the proposals.
Although Canada has said it backs efforts to end tax havens, it`s not clear if Ottawa supports all the proposals before the G20, particularly the rules governing “beneficial ownership” that would seek to establish the true ownership of an account or operation.
We will be pushing Canada to support these proposals,” said Howlett. “Information exchange isn’t going to work very well if you don’t know in what country the ultimate ownership in a tax haven trust account or shell company resides.”
Strong beneficial ownership rules could also be used to ferret out organized crime and terrorist groups, he said.
Howlett said some of the current Canadian practices are not up to the new, proposed standard, adding that corporate registration is at times under provincial and other times, federal jurisdiction, which adds another layer of complication.
The issue has received international attention recently after technology giants Google and Apple were accused of taking advantage of legal loopholes to avoid paying billions of dollars in taxes.
OECD official Pascal Saint-Amans says lax international rules that date back to the 1930s have led to a “golden era” in tax avoidance.
Decisions made at the G20 finance ministers’ meeting in Moscow, which wraps up Saturday, are expected to be endorsed by the leaders’ of the world’s largest economies at their summit in St. Petersburg in September.