Tuesday, November 06, 2012

Cracking down on the tax cheats

With governments around the world imposing harsh austerity, attention is finally being paid to multinational tax cheats such as Starbucks, Facebook, and Apple, who take advantage of tax havens and cross-jurisdictional agreements to shirk their responsibilities. Their cheating deprives governments of revenue, and people can see that it is why their local library is being shut down, their hospital has queues, their school doesn't have computers. The level of outrage is now so high that even the UK's pro-tax-cheating Tories have been forced to act, with a new agreement with Germany to close the loopholes the cheats rely on:

Osborne said he and Schäuble, meeting at the G20 finance ministers' summit in Mexico, had called for "concerted international co-operation to strengthen international tax standards that at the minute may mean international companies can pay less tax than they would otherwise owe".

Neither was he eager to identity individual corporate culprits

[G]overnment sources said the spread of e-commerce, and the ponderous nature of international corporate tax rules had left governments trailing as multinationals shift profits around the globe.

Osborne and Schäuble said they would back work by the Organisation for Economic Co-operation and Development to identify possible gaps in tax laws.

It remains to be seen whether anything comes of this, but at least they've been forced to give the appearance of action.

Meanwhile, New Zealand is also a victim of this sort of tax cheating. And we contribute to the problem through allowing foreign trusts to operate in secret and pay no tax in New Zealand. Its time we cracked down on this, and stopped enabling tax cheating and money laundering by opening up or closing down these trusts. We can hardly expect other countries to help us force companies to pay their proper taxes in New Zealand if we don't do the same in return.