World leaders of the wealthiest countries at the G-8 summit in Northern Ireland have new ideas to stop the flow of corporate profits toward business-friendly countries.
World leaders at the G-8 summit have declared that governments must work together to close loopholes that allow multinational companies to avoid paying taxes in their home countries.
Their collective statements on tax issues have focused on evasion, which is illegal in the United States, but the above statement and others have also attacked the practice of tax avoidance, which uses tax laws to minimize companies' tax burdens and is legal.
The G8 called on the Organisation for Economic Co-operation and Development (OECD), which advises rich nations on economic policies, to develop a template under which multinational corporations could be required to report profits and tax payments on a country-by-country basis, to tax authorities.
Tax campaigners had called for published country-by-country reporting to help shame companies into paying their fair share of taxes.
The G8 also said countries should change rules that let companies shift their profits across borders to avoid taxes.
The leaders of the world's wealthiest countries want to make successful private businesses feel bad about not paying more in taxes. Canada was reportedly the only holdout in opposing the initiative.
“We did not expect to see Canada as a holdout,” said Richard Murphy of the Tax Justice Network. He said he believes Canada is being difficult for philosophical reasons, believing that competitive tax systems are important drivers of investment.
Canadian Prime Minister Stephen Harper chose not to embrace his country's free-market renaissance, but said instead that action would require the consultation of his country's provinces (still—when was the last time we've heard that on this side of the border?)
The new initiative against tax-dodging was foreshadowed in May when the U.S. Senate hauled Apple CEO Tim Cook into a hearing on the company's offshore profits in relation to its Irish holdings. Check Reason's coverage of the hearing here, what Katherine Mangu-Ward thinks of The New York Times' questionable comparison to the IRS scandal, and read J.D. Tuccille's piece on what to expect when tax collectors comefor all of us.