19 August 2017

U.S. Ready to Join Six-Nation Tax Alliance

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CANBERRA, Australia—The U.S. is ready to join China and four other countries in an alliance to fight efforts by multinational corporations to avoid paying taxes, according to people familiar with the matter.

The alliance, an Australian initiative, will also include Japan and Britain. The U.S. could sign on this week during a two-day meeting in Tokyo on fighting corporate tax avoidance, people familiar with the U.S. position told The Wall Street Journal.

"Australia has pulled together six major countries to sit down and share intelligence on the activities of multinational enterprises," Australian Tax Commissioner Chris Jordan told The Wall Street Journal in an emailed response to questions.

"This collaboration has allowed us to better understand what is happening in our own countries and determine whether what is being represented in one country reflects what is being represented in another."

Governments across the globe are mobilizing to collect more taxes from multinational corporations that use tax havens and other legal methods to pay minimal or no taxes to national governments. According to some estimates, the world's governments lose US$3 trillion in tax revenue a year to such efforts.

The Group of 20 industrial and developing economies agreed in February to work to develop common rules on cross-border taxation to crack down on tax evasion and the use of international havens such as Bermuda and Ireland. The six-nation alliance is also intended to advance the G20's stated mission by taking concrete action. Australia is currently chair of the G20.

Mr. Jordan said tax officials with national governments need to become more like multinational companies by organizing on an international scale. He described the new alliance—which includes the world's three biggest economies—as a much-needed first step.

It's unclear which country is the sixth member of the alliance, but corporate taxation experts believe it to be either Germany or France. Officials from participating countries have been reluctant to publicly acknowledge their involvement due to potential for corporations to challenge the legality of cross-border information-sharing.

Anger over corporate tax avoidance has risen in recent years, particularly as many governments have faced ballooning budget deficits and soaring debt since the global financial crisis.

Some multinational corporations slash their tax burden in individual countries through legal methods such as shifting their tax domicile and parking profits overseas. U.S. law, for example, allows companies to not record or pay taxes on profits earned by overseas subsidiaries if the money isn't brought back to the U.S.

The biggest U.S. companies, including General Electric Co.  and Apple Inc., are parking nearly US$1.2 trillion in profits offshore, according to a report released last year by liberal advocacy group U.S. PIRG, which analyzed the public filings of the top 100 U.S. public companies.

Australia's Mr. Jordan said he hoped this week's meeting in Tokyo, which is being held by the G20, would help broaden acknowledgement that G20 members and others need to work across borders and develop new mechanisms to build a better and fairer international tax system.

Click here for the full article in the Wall Street Journal.

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