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UK, France and Germany to back global tax rules at G20 UK, France and Germany to back global tax rules at G20
(35 minutes later)
The UK Chancellor George Osborne and his French and German counterparts are to call for global tax rules to clamp down on corporate tax avoidance.The UK Chancellor George Osborne and his French and German counterparts are to call for global tax rules to clamp down on corporate tax avoidance.
The three will seek backing from other leaders at the G20 summit in Moscow.The three will seek backing from other leaders at the G20 summit in Moscow.
A survey carried out by the OECD found that multinational companies could exploit gaps between the tax rules in different countries they operated in.A survey carried out by the OECD found that multinational companies could exploit gaps between the tax rules in different countries they operated in.
Meanwhile, a leaked draft communique indicated G20 finance ministers would not chide Japan for weakening the yen.Meanwhile, a leaked draft communique indicated G20 finance ministers would not chide Japan for weakening the yen.
The move comes as another giant international company has been accused of ducking its tax obligations.The move comes as another giant international company has been accused of ducking its tax obligations.
Facebook allegedly paid no corporate income tax in the US last year, and instead reclaimed $451m in taxes from the Internal Revenue Service, despite recording profits of over $1bn, US lobby group Citizens for Tax Justice has claimed.Facebook allegedly paid no corporate income tax in the US last year, and instead reclaimed $451m in taxes from the Internal Revenue Service, despite recording profits of over $1bn, US lobby group Citizens for Tax Justice has claimed.
"Transfer pricing" rules apply to the cost of parts, the fee payment and the interest on the loan. If Widget Inc overcharged for any of these, it would reduce CompuGlobalHyperMegaNet UK Ltd's corporation tax bill in the UK, while increasing CompuGlobalHyperMegaNet Inc's taxable profits in another country."Transfer pricing" rules apply to the cost of parts, the fee payment and the interest on the loan. If Widget Inc overcharged for any of these, it would reduce CompuGlobalHyperMegaNet UK Ltd's corporation tax bill in the UK, while increasing CompuGlobalHyperMegaNet Inc's taxable profits in another country.
*For usage of intellectual property rights and brands owned by the US company*For usage of intellectual property rights and brands owned by the US company
Thanks to tax deductions the social network can claim on stock options granted to its executives as part of its recent listing on the Nasdaq stock exchange, the company stands to benefit from a further $2bn of tax deductions in the future, the lobby group alleged.Thanks to tax deductions the social network can claim on stock options granted to its executives as part of its recent listing on the Nasdaq stock exchange, the company stands to benefit from a further $2bn of tax deductions in the future, the lobby group alleged.
Facebook could not be contacted by the BBC for comment.Facebook could not be contacted by the BBC for comment.
'Stood still for a century''Stood still for a century'
The report by the Organisation of Economic Co-operation and Development (OECD) was released earlier this year, and found that:The report by the Organisation of Economic Co-operation and Development (OECD) was released earlier this year, and found that:
  • inconsistencies between different countries' tax rules enable companies to move their profits to lower tax jurisdictions
  • the amount of taxable profits in a given country increasingly depends on hard-to-value intangibles such as intellectual property rights, services or brands
  • international royalties and licence fee payments, mostly paid between different subsidiaries within the same business group, grew 170-fold between 1970-2009
  • tax rules fail to take proper account of the growing volume of e-commerce, which presents particular problems as to which country has tax jurisdiction
  • inconsistencies between different countries' tax rules enable companies to move their profits to lower tax jurisdictions
  • the amount of taxable profits in a given country increasingly depends on hard-to-value intangibles such as intellectual property rights, services or brands
  • international royalties and licence fee payments, mostly paid between different subsidiaries within the same business group, grew 170-fold between 1970-2009
  • tax rules fail to take proper account of the growing volume of e-commerce, which presents particular problems as to which country has tax jurisdiction
The report "shows the global economy has changed massively over the last decade, but global tax rules have stood still for almost a century," said Mr Osborne.The report "shows the global economy has changed massively over the last decade, but global tax rules have stood still for almost a century," said Mr Osborne.
The OECD is also preparing a plan of action, which is to be laid before the G20 in July, assuming that the Moscow summit gives this plan its blessing.The OECD is also preparing a plan of action, which is to be laid before the G20 in July, assuming that the Moscow summit gives this plan its blessing.
The action plan will be formulated with the help of three committees.The action plan will be formulated with the help of three committees.
The UK will chair a committee looking at transfer pricing - how international corporate empires calculate the payments passed between their subsidiaries in different countries, which can be used to shift profits from high-tax jurisdictions to lower-tax ones.The UK will chair a committee looking at transfer pricing - how international corporate empires calculate the payments passed between their subsidiaries in different countries, which can be used to shift profits from high-tax jurisdictions to lower-tax ones.
Germany will head a panel looking at the ways in which companies have reduced their tax base - their taxable income and assets - while France and the US will jointly consider the problem of identifying the correct tax jurisdiction for business activities, particularly e-commerce.Germany will head a panel looking at the ways in which companies have reduced their tax base - their taxable income and assets - while France and the US will jointly consider the problem of identifying the correct tax jurisdiction for business activities, particularly e-commerce.
'Currency war''Currency war'
Meanwhile, the G20 finance ministers in Moscow are expected to avoid singling Japan out for criticism over recent weakness of its currency, a leaked draft communique has indicated.Meanwhile, the G20 finance ministers in Moscow are expected to avoid singling Japan out for criticism over recent weakness of its currency, a leaked draft communique has indicated.
The news sent the yen sharply lower, falling 1.5% against the dollar.The news sent the yen sharply lower, falling 1.5% against the dollar.
The government of Japanese Prime Minister Shinzo Abe, elected in December, has pushed the country's central bank to adopt a much looser monetary policy, including a doubling of its inflation target, in order to help revive the country's moribund economy.The government of Japanese Prime Minister Shinzo Abe, elected in December, has pushed the country's central bank to adopt a much looser monetary policy, including a doubling of its inflation target, in order to help revive the country's moribund economy.
Japan has not directly intervened in the currency markets to weaken the yen. Unlike many other Asian exporters, it has a fully convertible currency, meaning that anyone can buy or sell the yen, so that its value is set by the markets.
Nonetheless, the markets' anticipation of Mr Abe's elections and the resulting change of attitude at the central bank has seen the yen fall 15% in value against the dollar since September, coming off all-time highs against several major currencies.
The weak yen gives Japan's exporters a price advantage, raising fears of a "currency war" - competitive devaluations by other big exporters.The weak yen gives Japan's exporters a price advantage, raising fears of a "currency war" - competitive devaluations by other big exporters.
The previously strong yen had contributed to Japan experiencing a trade deficit - importing more than it exports - since 2011, following decades of surpluses.
An unnamed G20 delegate was quoted by Reuters as saying: "There wasn't anybody putting Japan on the spot. That's quite frankly a bit of a surprise."
'Beggar thy neighbour'
The draft wording, if it is adopted in the official communique, would mean the broader G20 group of nations agreeing to adopt a similar attitude towards Japan's policies to that adopted by the G7 earlier this week.The draft wording, if it is adopted in the official communique, would mean the broader G20 group of nations agreeing to adopt a similar attitude towards Japan's policies to that adopted by the G7 earlier this week.
The G7, which includes Japan, said they would not set targets for the exchange rates of their currencies.The G7, which includes Japan, said they would not set targets for the exchange rates of their currencies.
As well as all of the industrialised nations of the G7, the G20 also comprises several major developing countries, including rival Asian exporting nations of Japan, South Korea and China.
China, and many other G20 countries, do limit the trading in their currencies and set targets for their exchange rates.
Other industrialised economies such as the US and eurozone have expressed unease that the weaker yen, which gives Japan a competitive advantage, could be used as an excuse by other exporter nations to intervene directly in the currency markets in order to weaken their own currencies.
Such "beggar-thy-neighbour" policies might leave convertible currencies such as the dollar, euro and pound painfully overvalued.
US and European leaders have sought to play down rhetoric over the "currency war" issue.US and European leaders have sought to play down rhetoric over the "currency war" issue.
The head of the European Central Bank, Mario Draghi, said loose talk about currencies was "inappropriate, fruitless and self-defeating".The head of the European Central Bank, Mario Draghi, said loose talk about currencies was "inappropriate, fruitless and self-defeating".
The White House announced on Friday that President Obama would receive a visit from Prime Minister Abe on 22 February, although their talks would cover a broad range of concerns, and not just trade. Mr Draghi had himself deftly talked down the value of the euro at a regular press conference last week, when he said that the central bank was "monitoring" the exchange rate.
However, Mr Draghi had himself deftly talked down the value of the euro at a regular press conference last week, when he said that the central bank was "monitoring" the exchange rate.
Gerry Rice, a spokesman for the IMF, said that the talks of a currency war were "overblown".Gerry Rice, a spokesman for the IMF, said that the talks of a currency war were "overblown".
"Our multilateral assessment does not indicate very significant deviations from the fair value for the relevant currencies," he added."Our multilateral assessment does not indicate very significant deviations from the fair value for the relevant currencies," he added.