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Tuesday
Sep222009

G20 may discuss a global company tax rate

Governments of the world’s leading economies are discussing setting a global corporation tax rate to stop multinational companies moving operations to the lowest bidder to stop them paying less tax.

The global recession has given governments a more transparent picture of how big companies, banks and tax havens have collaborated to go way beyond legal tax avoidance and now they are working to plug the holes that gave seen billions of pounds channelled in to secret bank accounts. The leading economic nations – the G20 – are responsible for 90% of the world economic output. They meet in Pittsburgh USA this week to discuss world financial matters – and on the agenda is a restructure of corporation tax.

The accounting and baking policies of some offshore firms have led to the British economy drained of £25 billion a year, according to Treasury figures.

Over the weekend, government officials for many countries have discussed reorganising corporation tax rates for some time.

The G20 has also had a systematic campaign to close down tax havens over the past years.

'The UK has traditionally been completely against any such idea,' a Whitehall source told the Financial Mail. 'But now it is prepared to talk about it.' 

'The G20 has tackled tax havens during the past year and there is a view that sees this as another part of the same equation.' 

The UK collected £42.8 billion in corporation tax last year, a fall from £46.4 billion the previous tax year. 

The UK rate of 28% ranks eight in the Organisation of Economic Development listing of 30 countries, so unless everyone else increases their corporation tax rates, the UK rate will have to fall – and every 1% off will mean a drop of £600 million in collected tax.

Measures under discussion to bring smaller nations to heel are scrapping tax treaties, sanctions and extra taxes for companies who try and avoid paying the correct rates of corporation tax.

Nevertheless, tax harmonisation efforts in the European Union have always failed, so any agreement in the US thi9s week would herald a new era of cooperation between governments.

 



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