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G20 backs plan to halt tax avoidance

The G20 on Saturday fully endorsed an action plan set out by the OECD to clamp down on tax avoidance which its creators say could lead to the biggest change in the global tax system since the 1920s.

The Organisation for Economic Cooperation and Development (OECD) presented G20 finance ministers and central bank chiefs with the plan at their meeting in Moscow, aiming to stop big multinationals using theoretically legal schemes to pay as little tax as possible.

The issue has gathered importance at a time of economic difficulty, with governments keen to use every means to rake in as much cash into depleted budgets as they can.

The OECD plan aims at creating a broad super-national system of regulation that will remove the incentive for companies to use practises like registering in a third country to pay a minimum of tax and other schemes.

“We fully endorse the ambitious and comprehensive Action Plan submitted at the request of the G20 by the OECD,” the G20 said in its final statement.

“Ensuring that all taxpayers pay their fair share of taxes is a high priority in the context of fiscal sustainability, promoting growth, and the needs of developing countries to build capacity for financing development.”

“Tax avoidance, harmful practices and aggressive tax planning have to be tackled,” the communique added.

The statement stopped short of giving a deadline for implementation of the action plan. The OECD had previously said it could be implemented by 2014.

But the statement added: “We look forward to regular reporting on the development of proposals.”

Companies in the spotlight in the last months for using these legal, but controversial, methods of booking profits include US giants Google, Amazon and Starbucks.

The OECD said in its plan that a proper rule system was needed as the current framework was “consensus-based” and risked being entirely undermined, especially as the digital economy becomes ever more important.

Actions proposed by the OECD include requiring taxpayers to disclose their aggressive tax planning arrangements to the fiscal authorities but also making dispute resolution mechanisms more effective.

“(The plan) sets forth 15 actions that would result in most fundamental changes in the tax systems since the 1920s,” said OECD Secretary General Angel Gurria as he presented the plan on Friday.

“We must address this so that multinationals pay their fair share,” he added.

French Finance Minister Pierre Moscovici said that under the current system some big companies were getting away with paying just 3-4 percent tax, something that could not be justified to ordinary citizens.