AI
Monday, September 22, 2014 9:21:45 PM
International tax rule updates to be agreed by G20 countries
Some of the largest multinational companies to be forced to contribute towards government budgets
Simon Bowers
The Guardian, Tuesday 16 September 2014 08.07 EDT
Jump to comments (106)
Google is likely to be affected by the reform programme. Photograph: Paul Sakuma/AP
Bold updates to international tax .. http://www.theguardian.com/money/tax .. rules designed to force some of the world's biggest multinationals – including Google, Apple .. http://www.theguardian.com/technology/apple, Amazon, Vodafone .. http://www.theguardian.com/business/vodafonegroup .. and GlaxoSmithKline .. http://www.theguardian.com/business/glaxosmithkline – to contribute their fair share towards government budgets are to be agreed by G20 .. http://www.theguardian.com/world/g20 .. countries this weekend.
Under draft rules published on Tuesday by tax experts from the Organisation for Economic Cooperation and Development (OECD .. http://www.theguardian.com/business/oecd) many of the world's largest and best known corporations face being forced to rapidly dismantle their elaborate cross-border corporate structures.
The moves by governments to corral companies back into a joined-up, modernised network of international tax treaties mark the halfway point in a two-year reform project begun by world leaders in Moscow last summer .. http://www.theguardian.com/business/2013/jul/19/oecd-tax-reform-proposals-amazon.
If nerves hold among the 44 countries involved – which together represent 90% of the world's economy – the impact on corporate profits and treasury receipts could be significant in many economies, large and small.
Meanwhile, countries that have courted multinationals with tax-friendly regimes – Bermuda, Ireland and Luxembourg among them – could suffer an investment exodus.
Existing international tax rules, laid down in a network of about 3,000 bilateral tax treaties, have for decades been straining to keep up with innovations in technology and tax avoidance. The OECD has said the G20 reform project is urgently required "to prevent the existing consensus-based international tax framework from unravelling".
Among the initiatives OECD experts claim will have the most impact are new rules to stop companies exploiting differences between tax regimes to conjure up unwarranted tax deductions.
These so-called hybrid mismatch structures are thought to leak billions from treasury coffers around the world each year and are routinely deployed by the world's largest international businesses.
One of the OECD tax experts leading the reform programme, Raffaele Russo, said: "I think with these rules, we really kill them. Time will tell, because you never know how creative people will get, but I think if countries do what these rules require I just don't see how you can do hybrids any more."
Also published in the OECD update are draft rules that will require multinationals to give tax authorities a country-by-country detailed breakdown of their activities and earnings, making it easier for nations to detect patterns of avoidance.
At the same time G20 finance minsters will receive OECD draft rules designed to stamp out so-called treaty shopping. In the past, favourable treaty arrangements have seen, for example, up to 40% of overseas investment in India channelled through Mauritius first.
Among the most contentious issues, however, remains how to treat digital companies such as Microsoft, Apple, Facebook, Amazon and Google that have experienced explosive growth in the last three decades, often developing tax structures as innovative as their products.
The US last year fought off French and Italian efforts for the OECD programme to develop specific rules targeted at computer and internet companies. But all participants in the project have pledged that its second phase, while not singling out the digital sector, must stamp out some of the most egregious behaviour that has thrived in these newer enterprises.
As a result, the likes of Amazon and Google are unlikely to be able to continue to tell tax authorities in Britain and other major European markets that their offshore sales hubs can take billions of pounds of sales without having a taxable presence locally, known in tax jargon as a "permanent establishment".
Further beefing up of existing tax rules over the next 12 months are to make it harder for multinationals to transfer parts of their intellectual property rights to low-tax jurisdictions at modest cost. This could present a challenge to Apple, Google and others.
Russo said: "Have we solved all the problems of the digital economy? I think no. But have we put some clarity in the debate? I think yes."
But the UK chancellor, George Osborne, who two years ago positioned himself as a prominent cheerleader for the project, is this weekend expected to cut an isolated figure as other G20 finance ministers meet in Cairns, Australia, to give formal backing to the OECD's work.
Osborne has angered his peers with Britain's so-called "patent box" tax incentives.
---
INSERT: France pushes moves within G20 to resolve unfair use of patent boxes
“Patent box” are tax breaks on profits generated from patented research
Reuters
Published: 13:00 September 22, 2014
Gulf News
Cairns, Australia: France and other countries within the Group of 20 are pushing for an agreement to stop the unfair use of tax breaks, known as “patent boxes”, used to encourage innovative firms, Finance Minister Michel Sapin said on Sunday at a G20 meeting in Cairns.
“Patent box” are tax breaks on profits generated from patented research, and have become a popular instrument used by countries to attract pioneering firms.
Critics say some governments use them to unfairly poach such companies, and obtain lucrative future tax revenue from them.
“There is increasing pressure, notably from Germany, the United States, France and Italy, to iron out an agreement around patent boxes,” Sapin told a press briefing.
The French minister went on to say that some countries -— the United Kingdom, the Netherlands, Ireland and Spain — had taken heed and modified their use of patent boxes.
“We have a clear message for those lagging behind. We wish them to be evolving so that they don’t contravene tax arrangements,” said Sapin.
http://gulfnews.com/business/economy/france-pushes-moves-within-g20-to-resolve-unfair-use-of-patent-boxes-1.1388186
---
These tax breaks are offered by a handful of European countries to businesses that bring with them lucrative intellectual property profits.
The UK has argued they encourage high-tech research and development, others say they are too easy for overseas R&D firms to exploit.
The issue has left the UK increasingly isolated, along with the Netherlands and Luxembourg, in resisting pressure from other nations furious at what they regard as harmful competition.
Elsewhere, early US reticence over the tax reform project appears to have receded a little. Many in Washington still feel that US corporations have been disproportionately cited among the most aggressive abusers of the current international tax rules. But the political mood toward US homegrown multinationals has shifted in recent months.
A rash of so-called "corporate inversion" takeovers – by which US-incorporated groups acquire a rival and transfer their headquarters overseas – has led to angry condemnation from politicians. Such manoeuvres have been criticised as tax-avoidance-driven ploys to keep offshore cash piles beyond the grasp of the US tax authorities.
Barack Obama has described such deals as unpatriotic and has promised new laws to prevent them.
But many tax experts believe the best avenue for bringing multinationals to heel, both within the US and beyond, is via concerted international efforts led by G20 nations.
http://www.theguardian.com/money/2014/sep/16/international-tax-rule-updates-g20-countries
===
Video Transcript: Australia's Treasurer, Joe Hockey, Finance Ministers and Central Bank Governors meeting, closing media conference, Cairns
Published By MILNZ Publisher / September 21, 2014 / Comments Off
MIL OSI – Source: G20 Summit – Press Release/Statement
Headline: Video Transcript: Australia's Treasurer, Joe Hockey, Finance Ministers and Central Bank Governors meeting, closing media conference, Cairns
Watch the video
21 September 2014
Finance Ministers and Central Bank Governors meeting, closing media conference, Cairns
The Hon Joe Hockey MP, Treasurer of Australia
Joe Hockey, Treasurer of Australia: Welcome, everyone. I will make an opening statement, which is rather lengthy but bear with me. We are distributing the communiqués as I speak. Then we’ll go to questions.
So today we have concluded the Cairns meeting of G20 Finance Ministers and Central Bank Governors. This is our third meeting this year. Let me say it was marked by a strong spirit of cooperation, helped no doubt by the wonderful hospitality provided by the people of Cairns.
The main outcome from this meeting was the excellent progress we are making towards meeting our ambitious target from Sydney to lift global economic growth by 2 per cent over the next five years. We have come a long way in a short period of time.
The IMF and OECD have looked at over 900 measures put forward by countries, of which 700 are new measures, and they estimate our efforts could lift global GDP by 1.8 per cent through to 2018. Their analysis has been released today.
We are 90 per cent of the way there to meet our 2 per cent growth goal. But I want to emphasise there is much more for us to do, particularly off a lower base. We showed a unanimous resolve to improve the effort.
Countries will be working right up to the Brisbane Summit and beyond to bring forward additional measures, including policies to boost employment, boost trade, and improve investment conditions.
We are even more determined to press ahead with ambitious growth-enhancing structural reforms and actions to lift quality infrastructure. While the world economy is recovering, growth is uneven, and there are some obvious risks to the outlook.
I am optimistic about what we can achieve if we work collaboratively. It is critical that we take concrete steps to boost growth and create jobs. We will use all levers available, including additional fiscal and monetary policy leverage where appropriate.
We want to create the environment for private sector-led growth and provide our citizens with more jobs and better living standards. The detail of our individual growth strategies will be released in Brisbane and we are determined to hold each other to account for the commitments we’ve made.
We will work with the IMF and the OECD between now and Brisbane on plans to monitor implementation and build effective accountability mechanisms for our growth target.
As part of our new growth strategies, we have focused on lifting investment in infrastructure because of its potential to address demand weakness.
There’s also a key driver for improving productivity. We have now agreed to progress a multiyear Global Infrastructure Initiative. This initiative consists of an integrated set of actions to increase quality infrastructure investment right across the G20 and beyond.
We have committed to develop a database of infrastructure projects to help match potential investors with projects. We want to create a knowledge platform to build public-sector expertise and develop standardised documentation to reduce the costs of new investments right around the world.
The initiative also involves country commitments to improve our domestic investment climates, as this is the key to attracting private sector participation.
We have also agreed to a set of best practice documents to assist countries to promote and prioritise quality investment and foster flows of long-term institutional investment. We’ve agreed to support work to assist in the growth of new sources of finance for that investment.
We are developing a mechanism to deliver this Global Infrastructure Initiative for the Brisbane Summit. While details are still being finalised, we are working towards an implementation plan that would see the creation of a Global Infrastructure Centre as the delivery mechanism.
We’ve worked closely with the business community on our investment agenda and it’s fair to say that our engagement with the G20 and private sector investors has strongly influenced our thinking.
We will continue our involvement with the private sector to deliver measures that make a real and positive difference for investment and job growth.
In addition to a strong focus on structural reform, the meeting discussed how macroeconomic policies can best support the growth outlook. We agreed that monetary policies should continue to support the economic recovery and that it should particularly address deflationary pressures where they are evident.
There was a strong focus on the need to carefully communicate potential monetary policy changes, and in this regard, I want to particularly commend the Chair of the Federal Reserve, Janet Yellen, for the careful and deliberate way she has undertaken this difficult task.
Ministers and Central Bank Governors are all too aware of the potential for a build-up in financial risks arising from prolonged low interest rates. All are committed to closely monitoring these risks and building even stronger economic policy frameworks, which are the ultimate defence against the damaging impact of renewed financial market volatility.
But we need to take the pressure off monetary policy. Structural reform is one way to do this. Being smarter about the composition of government spending and taxation is another.
By lifting the quality of budgets, we can help growth while maintaining responsible fiscal strategies and controlling public debt.
There was also recognition that, where appropriate, further fiscal initiatives may be necessary in the short-term to support global growth. Any initiatives in this regard should not compromise plans for longer-term fiscal consolidation.
Let me now turn to the international taxation agenda. This is an ambitious agenda. In fact, that term was used regularly during the discussions. But it is an ambition that is being delivered, which gave a great many Ministers a sense of satisfaction.
We are unified in our mission to modernise global tax rules and close gaps that have emerged in recent years. As the Secretary-General of the OECD, Ángel Gurría, has noted, the G20 has provided very serious political support to efforts to restore a sense of fairness and integrity in our taxation system.
We welcomed significant progress achieved to date on the two-year G20/OECD BEPS action plan, with roughly half the actions delivered this year as promised. This is an extraordinary effort. I congratulate the OECD and the G20 membership, which unanimously endorsed that effort.
This work is structural reform at a global level, and as the Finance Minister of Italy identified in the room, this is structural reform at a global level. We will bring international tax rules into the 21st century and ensure they keep up with changing multinational business models.
We have endorsed far-reaching initiatives which will arm our tax authorities with the information they need to identify tax evaders through the automatic exchange of information using a Common Reporting Standard. We agreed to begin exchanging information through use of the CRS commencing from 2017, and this will send a strong deterrent message to tax cheats with immediate effect.
We’re urging other jurisdictions, particularly financial centres, to match our commitment. For the first time, the G20 has supported further cooperation between our tax authorities on their compliance activities. I look forward to further concrete progress on this space by the Brisbane Summit.
As Chris Jordan, the Australian Taxation Commissioner, has noted, coordination by our tax authorities is a key element in enforcing compliance and identifying tax risks. The G20 will continue to work with developing countries to ensure they benefit from our tax agenda, and there were significant conversations about that. Tax evasion and avoidance is a global problem and the effects are sometimes felt hardest by the poorest people in the poorest countries.
Our work on financial regulation has been central to future-proofing our system against shocks. From the start of the Australian presidency, we set an ambitious goal, and that was identified by Mark Carney, who is Governor of the Bank of England and head of the FSB, who was on video link from London for this discussion.
He said we set an ambitious goal to substantially complete the policy response to the fault lines laid bare by the Global Financial Crisis. I am pleased to say we have largely succeeded in this task as a result of this meeting.
As a result of policy action, our financial institutions are more resilient and less likely to wreak damage on our economies and citizens through costly failures. They have more and better capital and have more defences against liquidity pressures.
We have made, this week here in Cairns, substantial progress in addressing the problem of institutions that are too big to fail. In a major step forward, the FSB will release a proposal for additional buffers for global banks to draw on in the event of failure. This is aimed at further protecting taxpayers if a larger global bank would run into difficulty.
We have also made substantial progress on addressing concerns regarding the shadow banking sector. Lastly, we have reinforced our commitment to reduce systemic risk and increase transparency of markets for complex derivative products.
So as Governor Carney said, the Leaders’ meeting in Brisbane will be the turning point for shifting our focus from designing standards after the Global Financial Crisis to responding to future risks where they emerge. It’s a new Brisbane line.
We began our formal G20 meeting with a session involving our G20 engagement groups. This was an opportunity for us to hear from influential business, labour and civil society leaders on how the G20 can continue to best serve the interests of our citizens.
This was the first time that we have brought together the G20’s engagement groups with Finance Ministers and Central Bank Governors. And I can assure all of the stakeholders that their views were taken into the G20 meeting and had an impact on our decisions.
So in conclusion, this has been a very successful meeting. At the beginning of the year, I want to remind you of this, at the beginning of the year there was no global growth target, no global infrastructure initiative, financial sector reform was slow and the tax integrity program was in its infancy.
As of today, we have committed to over 900 policy initiatives that helped to make the economy around $2 trillion larger over the next four years. This represents millions of new jobs. But I emphasise there is more to do.
As of today, we are 90 per cent of the way to reaching our 2 per cent goal for additional global growth. As of today, we have embraced a once-in-a-century opportunity to reform the international tax system. As of today, we have forged ahead on key areas of reform of the global financial system. And as of today, we have launched a global infrastructure initiative to work with business and remove key barriers to more investment and infrastructure.
By the time of the Brisbane G20 Leaders’ Summit in November, we will deliver, we will deliver real concrete outcomes based on our ambitious goals that were laid down at the G20 Finance Ministers meeting in Sydney at the beginning of the year. Thank you very much.
We’ve got a microphone there.
Reporter: (inaudible)
Joe Hockey, Treasurer of Australia: There are two different issues there. The first is in relation to the use of fiscal policy. There was general recognition that there is not a lot of room in fiscal policy in a number of jurisdictions. However, there was an acceptance that if fiscal policy needs to be used to help to lift short-term growth, then it should be deployed.
In relation to the 2 per cent increase in growth to 2018, the IMF has presented a paper that identifies we are at 1.8 per cent but clearly that would be off a lower base than that which would have been the base in Sydney because there has been a revision to the forecast. Now what we have got to do is focus on how we can deliver.
The job is not done. The job is not done. But by God we have made great strides here in Cairns and in Australia. And that is very encouraging.
Reporter: Thank you. David Crowe from The Australian. Yesterday in this room, Tim Costello from the C20 was relatively critical of the G20, gave it five out of 10 for its results in recent years. The question really is about action, not promises. When do you expect the first growth reforms to actually start taking effect as a result of these ambitions, and what commitments are being made about any monitoring of the ambitions set out?
Joe Hockey, Treasurer of Australia: Well, as I said in my statement, the IMF offered in the room, together with the OECD, to help countries monitor and implement the policies that go to the 2 per cent target. In the case of Australia, for example, our infrastructure package is going to deliver a 1 per cent increase in the size of GDP. So that is one domestic example.
But internationally, a number of countries identified various reforms and made a commitment to further reforms. And the most encouraging thing was a lot of structural reform was actually coming out of countries like China and India and Japan, countries in our region that are absolutely committed to the structural reforms that are going to be necessary to grow the global economy.
So between now and Brisbane, our officials are going to work with the IMF and the OECD on an implementation and monitoring plan, and obviously, having a goal like this is important, obviously delivering nearly 1,000 policies is a step along the way, but it comes down to delivery. That is where the rubber hits the road for more jobs and greater economic growth, and everyone is committed to that.
No other questions? I think our international visitors are probably waiting for their own ministers.
Reporter: Treasurer, a domestic question. Matt Moran from Channel 10. Are you going split legislation to get some budget measures through which will then leave you with a $9 billion black hole?
Joe Hockey, Treasurer of Australia: No, don’t believe everything you read. Yes, sir?
Reporter: That’s all, Treasurer?
Joe Hockey, Treasurer of Australia: That’s all. I’ve seen lots of speculation about what we are going to do, including from participants that were saying one thing to the media one day and on the very same day did something absolutely the opposite of that.
Reporter: Ben Potter from the Australian Financial Review, Treasurer. Yesterday when Mr Gurría was asked about the patent box idea and the OECD’s attitude towards it and he denounced it unequivocally, and I heard you murmur assent. And I’m wondering if that reflects your attitude to the patent box idea, because some of the technology community in Australia has been arguing that it would be a good idea to encourage R&D in Australia.
Joe Hockey, Treasurer of Australia: Well, out of the discussion today, there is an argument there are good patent boxes and there are bad patent boxes. I think that’s still to be resolved in some of the work that the OECD is going to undertake.
A number of countries have patent boxes. Other countries believe that a patent box under circumstances, certain circumstances, could be a tool that is used to gather revenue and profits in the form of lower taxes that might be accrued in another jurisdiction.
Now, they are the things that need to be worked through by the OECD. But as a number of Ministers identified, it’s not just about the integrity of the tax system, it’s also about we shouldn’t be in the business of tearing apart the collective tax base for individual advantage.
My attitude? Well, it depends on how they;re structured and they have got one name but many different definitions and objectives.
Yes?
Reporter: Shane Wright from The West Australian.
Treasurer, the communique mentions or includes Ebola for the first time. Was there a discussion about what the potential human and economic risks are posed by the outbreak? And does that also go to the point that, despite all the best laid plans of mice and men, there are events that could derail what’s going to come from what you have outlined?
Joe Hockey, Treasurer of Australia: Of course there are events that could derail our ambitions but we need to be ambitious, we need to give people hope that tomorrow and the years beyond are going to be better than today. We have to. And as global Finance Ministers, it is easy to be caught in the slipstream of negativity, to be caught in the slipstream of looking at a glass as being half empty.
The views vary but the bottom line is we can’t be pessimistic about the future. And we want to do everything we can to create an environment where there is greater optimism.
In relation to Ebola, yes, there was a discussion about Ebola and the president of the World Bank made a significant contribution in that matter. This is a global challenge. And Australia has just stepped up again to the plate with additional funding support for measures that will help to address the spread of the virus.
There was a discussion about a number of other geopolitical risks as well, but having said that we believe that the fundamentals of the world economy are good and we are trying to use the levers that we have to make them better.
Okay. Nothing else? One more.
Reporter: (inaudible)
Joe Hockey, Treasurer of Australia: Yes, that’s right.
Reporter: (inaudible)
Joe Hockey, Treasurer of Australia: No, we are one year after.
Reporter: (inaudible)
Joe Hockey, Treasurer of Australia: Sorry? No, no, no. The fact is, well, Ángel Gurría has a broad definition of early adopters, he covers the first two years. But the fact is we were always going to be in the second year with some others, primarily because even though our major Australian banks are ready, smaller institutions like credit unions and others are not ready. And if we were to bring it forward to the first year rather than the second year, it would cost those institutions about $200 million just to come 12 months earlier.
So it is better that the whole nation go at once and we are going all at once because that is still a cost to business of about $50 million, and primarily to the smaller financial institutions. But certainly we are in the group of early adopters, there is no argument about that. As you will see from the list that is distributed, a number of very large countries are not in the first two years at all.
Reporter: Just a quick question, Treasurer. Are you happy with your budget negotiations? Have you done any deals with Labor? Are you happy with where it’s at?
Joe Hockey, Treasurer of Australia: I’m not going to speculate. Thank you very much.
–
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http://foreignaffairs.co.nz/2014/09/21/video-transcript-australias-treasurer-joe-hockey-finance-ministers-and-central-bank-governors-meeting-closing-media-conference-cairns/
Some of the largest multinational companies to be forced to contribute towards government budgets
Simon Bowers
The Guardian, Tuesday 16 September 2014 08.07 EDT
Jump to comments (106)
Google is likely to be affected by the reform programme. Photograph: Paul Sakuma/AP
Bold updates to international tax .. http://www.theguardian.com/money/tax .. rules designed to force some of the world's biggest multinationals – including Google, Apple .. http://www.theguardian.com/technology/apple, Amazon, Vodafone .. http://www.theguardian.com/business/vodafonegroup .. and GlaxoSmithKline .. http://www.theguardian.com/business/glaxosmithkline – to contribute their fair share towards government budgets are to be agreed by G20 .. http://www.theguardian.com/world/g20 .. countries this weekend.
Under draft rules published on Tuesday by tax experts from the Organisation for Economic Cooperation and Development (OECD .. http://www.theguardian.com/business/oecd) many of the world's largest and best known corporations face being forced to rapidly dismantle their elaborate cross-border corporate structures.
The moves by governments to corral companies back into a joined-up, modernised network of international tax treaties mark the halfway point in a two-year reform project begun by world leaders in Moscow last summer .. http://www.theguardian.com/business/2013/jul/19/oecd-tax-reform-proposals-amazon.
If nerves hold among the 44 countries involved – which together represent 90% of the world's economy – the impact on corporate profits and treasury receipts could be significant in many economies, large and small.
Meanwhile, countries that have courted multinationals with tax-friendly regimes – Bermuda, Ireland and Luxembourg among them – could suffer an investment exodus.
Existing international tax rules, laid down in a network of about 3,000 bilateral tax treaties, have for decades been straining to keep up with innovations in technology and tax avoidance. The OECD has said the G20 reform project is urgently required "to prevent the existing consensus-based international tax framework from unravelling".
Among the initiatives OECD experts claim will have the most impact are new rules to stop companies exploiting differences between tax regimes to conjure up unwarranted tax deductions.
These so-called hybrid mismatch structures are thought to leak billions from treasury coffers around the world each year and are routinely deployed by the world's largest international businesses.
One of the OECD tax experts leading the reform programme, Raffaele Russo, said: "I think with these rules, we really kill them. Time will tell, because you never know how creative people will get, but I think if countries do what these rules require I just don't see how you can do hybrids any more."
Also published in the OECD update are draft rules that will require multinationals to give tax authorities a country-by-country detailed breakdown of their activities and earnings, making it easier for nations to detect patterns of avoidance.
At the same time G20 finance minsters will receive OECD draft rules designed to stamp out so-called treaty shopping. In the past, favourable treaty arrangements have seen, for example, up to 40% of overseas investment in India channelled through Mauritius first.
Among the most contentious issues, however, remains how to treat digital companies such as Microsoft, Apple, Facebook, Amazon and Google that have experienced explosive growth in the last three decades, often developing tax structures as innovative as their products.
The US last year fought off French and Italian efforts for the OECD programme to develop specific rules targeted at computer and internet companies. But all participants in the project have pledged that its second phase, while not singling out the digital sector, must stamp out some of the most egregious behaviour that has thrived in these newer enterprises.
As a result, the likes of Amazon and Google are unlikely to be able to continue to tell tax authorities in Britain and other major European markets that their offshore sales hubs can take billions of pounds of sales without having a taxable presence locally, known in tax jargon as a "permanent establishment".
Further beefing up of existing tax rules over the next 12 months are to make it harder for multinationals to transfer parts of their intellectual property rights to low-tax jurisdictions at modest cost. This could present a challenge to Apple, Google and others.
Russo said: "Have we solved all the problems of the digital economy? I think no. But have we put some clarity in the debate? I think yes."
But the UK chancellor, George Osborne, who two years ago positioned himself as a prominent cheerleader for the project, is this weekend expected to cut an isolated figure as other G20 finance ministers meet in Cairns, Australia, to give formal backing to the OECD's work.
Osborne has angered his peers with Britain's so-called "patent box" tax incentives.
---
INSERT: France pushes moves within G20 to resolve unfair use of patent boxes
“Patent box” are tax breaks on profits generated from patented research
Reuters
Published: 13:00 September 22, 2014
Gulf News
Cairns, Australia: France and other countries within the Group of 20 are pushing for an agreement to stop the unfair use of tax breaks, known as “patent boxes”, used to encourage innovative firms, Finance Minister Michel Sapin said on Sunday at a G20 meeting in Cairns.
“Patent box” are tax breaks on profits generated from patented research, and have become a popular instrument used by countries to attract pioneering firms.
Critics say some governments use them to unfairly poach such companies, and obtain lucrative future tax revenue from them.
“There is increasing pressure, notably from Germany, the United States, France and Italy, to iron out an agreement around patent boxes,” Sapin told a press briefing.
The French minister went on to say that some countries -— the United Kingdom, the Netherlands, Ireland and Spain — had taken heed and modified their use of patent boxes.
“We have a clear message for those lagging behind. We wish them to be evolving so that they don’t contravene tax arrangements,” said Sapin.
http://gulfnews.com/business/economy/france-pushes-moves-within-g20-to-resolve-unfair-use-of-patent-boxes-1.1388186
---
These tax breaks are offered by a handful of European countries to businesses that bring with them lucrative intellectual property profits.
The UK has argued they encourage high-tech research and development, others say they are too easy for overseas R&D firms to exploit.
The issue has left the UK increasingly isolated, along with the Netherlands and Luxembourg, in resisting pressure from other nations furious at what they regard as harmful competition.
Elsewhere, early US reticence over the tax reform project appears to have receded a little. Many in Washington still feel that US corporations have been disproportionately cited among the most aggressive abusers of the current international tax rules. But the political mood toward US homegrown multinationals has shifted in recent months.
A rash of so-called "corporate inversion" takeovers – by which US-incorporated groups acquire a rival and transfer their headquarters overseas – has led to angry condemnation from politicians. Such manoeuvres have been criticised as tax-avoidance-driven ploys to keep offshore cash piles beyond the grasp of the US tax authorities.
Barack Obama has described such deals as unpatriotic and has promised new laws to prevent them.
But many tax experts believe the best avenue for bringing multinationals to heel, both within the US and beyond, is via concerted international efforts led by G20 nations.
http://www.theguardian.com/money/2014/sep/16/international-tax-rule-updates-g20-countries
===
Video Transcript: Australia's Treasurer, Joe Hockey, Finance Ministers and Central Bank Governors meeting, closing media conference, Cairns
Published By MILNZ Publisher / September 21, 2014 / Comments Off
MIL OSI – Source: G20 Summit – Press Release/Statement
Headline: Video Transcript: Australia's Treasurer, Joe Hockey, Finance Ministers and Central Bank Governors meeting, closing media conference, Cairns
Watch the video
21 September 2014
Finance Ministers and Central Bank Governors meeting, closing media conference, Cairns
The Hon Joe Hockey MP, Treasurer of Australia
Joe Hockey, Treasurer of Australia: Welcome, everyone. I will make an opening statement, which is rather lengthy but bear with me. We are distributing the communiqués as I speak. Then we’ll go to questions.
So today we have concluded the Cairns meeting of G20 Finance Ministers and Central Bank Governors. This is our third meeting this year. Let me say it was marked by a strong spirit of cooperation, helped no doubt by the wonderful hospitality provided by the people of Cairns.
The main outcome from this meeting was the excellent progress we are making towards meeting our ambitious target from Sydney to lift global economic growth by 2 per cent over the next five years. We have come a long way in a short period of time.
The IMF and OECD have looked at over 900 measures put forward by countries, of which 700 are new measures, and they estimate our efforts could lift global GDP by 1.8 per cent through to 2018. Their analysis has been released today.
We are 90 per cent of the way there to meet our 2 per cent growth goal. But I want to emphasise there is much more for us to do, particularly off a lower base. We showed a unanimous resolve to improve the effort.
Countries will be working right up to the Brisbane Summit and beyond to bring forward additional measures, including policies to boost employment, boost trade, and improve investment conditions.
We are even more determined to press ahead with ambitious growth-enhancing structural reforms and actions to lift quality infrastructure. While the world economy is recovering, growth is uneven, and there are some obvious risks to the outlook.
I am optimistic about what we can achieve if we work collaboratively. It is critical that we take concrete steps to boost growth and create jobs. We will use all levers available, including additional fiscal and monetary policy leverage where appropriate.
We want to create the environment for private sector-led growth and provide our citizens with more jobs and better living standards. The detail of our individual growth strategies will be released in Brisbane and we are determined to hold each other to account for the commitments we’ve made.
We will work with the IMF and the OECD between now and Brisbane on plans to monitor implementation and build effective accountability mechanisms for our growth target.
As part of our new growth strategies, we have focused on lifting investment in infrastructure because of its potential to address demand weakness.
There’s also a key driver for improving productivity. We have now agreed to progress a multiyear Global Infrastructure Initiative. This initiative consists of an integrated set of actions to increase quality infrastructure investment right across the G20 and beyond.
We have committed to develop a database of infrastructure projects to help match potential investors with projects. We want to create a knowledge platform to build public-sector expertise and develop standardised documentation to reduce the costs of new investments right around the world.
The initiative also involves country commitments to improve our domestic investment climates, as this is the key to attracting private sector participation.
We have also agreed to a set of best practice documents to assist countries to promote and prioritise quality investment and foster flows of long-term institutional investment. We’ve agreed to support work to assist in the growth of new sources of finance for that investment.
We are developing a mechanism to deliver this Global Infrastructure Initiative for the Brisbane Summit. While details are still being finalised, we are working towards an implementation plan that would see the creation of a Global Infrastructure Centre as the delivery mechanism.
We’ve worked closely with the business community on our investment agenda and it’s fair to say that our engagement with the G20 and private sector investors has strongly influenced our thinking.
We will continue our involvement with the private sector to deliver measures that make a real and positive difference for investment and job growth.
In addition to a strong focus on structural reform, the meeting discussed how macroeconomic policies can best support the growth outlook. We agreed that monetary policies should continue to support the economic recovery and that it should particularly address deflationary pressures where they are evident.
There was a strong focus on the need to carefully communicate potential monetary policy changes, and in this regard, I want to particularly commend the Chair of the Federal Reserve, Janet Yellen, for the careful and deliberate way she has undertaken this difficult task.
Ministers and Central Bank Governors are all too aware of the potential for a build-up in financial risks arising from prolonged low interest rates. All are committed to closely monitoring these risks and building even stronger economic policy frameworks, which are the ultimate defence against the damaging impact of renewed financial market volatility.
But we need to take the pressure off monetary policy. Structural reform is one way to do this. Being smarter about the composition of government spending and taxation is another.
By lifting the quality of budgets, we can help growth while maintaining responsible fiscal strategies and controlling public debt.
There was also recognition that, where appropriate, further fiscal initiatives may be necessary in the short-term to support global growth. Any initiatives in this regard should not compromise plans for longer-term fiscal consolidation.
Let me now turn to the international taxation agenda. This is an ambitious agenda. In fact, that term was used regularly during the discussions. But it is an ambition that is being delivered, which gave a great many Ministers a sense of satisfaction.
We are unified in our mission to modernise global tax rules and close gaps that have emerged in recent years. As the Secretary-General of the OECD, Ángel Gurría, has noted, the G20 has provided very serious political support to efforts to restore a sense of fairness and integrity in our taxation system.
We welcomed significant progress achieved to date on the two-year G20/OECD BEPS action plan, with roughly half the actions delivered this year as promised. This is an extraordinary effort. I congratulate the OECD and the G20 membership, which unanimously endorsed that effort.
This work is structural reform at a global level, and as the Finance Minister of Italy identified in the room, this is structural reform at a global level. We will bring international tax rules into the 21st century and ensure they keep up with changing multinational business models.
We have endorsed far-reaching initiatives which will arm our tax authorities with the information they need to identify tax evaders through the automatic exchange of information using a Common Reporting Standard. We agreed to begin exchanging information through use of the CRS commencing from 2017, and this will send a strong deterrent message to tax cheats with immediate effect.
We’re urging other jurisdictions, particularly financial centres, to match our commitment. For the first time, the G20 has supported further cooperation between our tax authorities on their compliance activities. I look forward to further concrete progress on this space by the Brisbane Summit.
As Chris Jordan, the Australian Taxation Commissioner, has noted, coordination by our tax authorities is a key element in enforcing compliance and identifying tax risks. The G20 will continue to work with developing countries to ensure they benefit from our tax agenda, and there were significant conversations about that. Tax evasion and avoidance is a global problem and the effects are sometimes felt hardest by the poorest people in the poorest countries.
Our work on financial regulation has been central to future-proofing our system against shocks. From the start of the Australian presidency, we set an ambitious goal, and that was identified by Mark Carney, who is Governor of the Bank of England and head of the FSB, who was on video link from London for this discussion.
He said we set an ambitious goal to substantially complete the policy response to the fault lines laid bare by the Global Financial Crisis. I am pleased to say we have largely succeeded in this task as a result of this meeting.
As a result of policy action, our financial institutions are more resilient and less likely to wreak damage on our economies and citizens through costly failures. They have more and better capital and have more defences against liquidity pressures.
We have made, this week here in Cairns, substantial progress in addressing the problem of institutions that are too big to fail. In a major step forward, the FSB will release a proposal for additional buffers for global banks to draw on in the event of failure. This is aimed at further protecting taxpayers if a larger global bank would run into difficulty.
We have also made substantial progress on addressing concerns regarding the shadow banking sector. Lastly, we have reinforced our commitment to reduce systemic risk and increase transparency of markets for complex derivative products.
So as Governor Carney said, the Leaders’ meeting in Brisbane will be the turning point for shifting our focus from designing standards after the Global Financial Crisis to responding to future risks where they emerge. It’s a new Brisbane line.
We began our formal G20 meeting with a session involving our G20 engagement groups. This was an opportunity for us to hear from influential business, labour and civil society leaders on how the G20 can continue to best serve the interests of our citizens.
This was the first time that we have brought together the G20’s engagement groups with Finance Ministers and Central Bank Governors. And I can assure all of the stakeholders that their views were taken into the G20 meeting and had an impact on our decisions.
So in conclusion, this has been a very successful meeting. At the beginning of the year, I want to remind you of this, at the beginning of the year there was no global growth target, no global infrastructure initiative, financial sector reform was slow and the tax integrity program was in its infancy.
As of today, we have committed to over 900 policy initiatives that helped to make the economy around $2 trillion larger over the next four years. This represents millions of new jobs. But I emphasise there is more to do.
As of today, we are 90 per cent of the way to reaching our 2 per cent goal for additional global growth. As of today, we have embraced a once-in-a-century opportunity to reform the international tax system. As of today, we have forged ahead on key areas of reform of the global financial system. And as of today, we have launched a global infrastructure initiative to work with business and remove key barriers to more investment and infrastructure.
By the time of the Brisbane G20 Leaders’ Summit in November, we will deliver, we will deliver real concrete outcomes based on our ambitious goals that were laid down at the G20 Finance Ministers meeting in Sydney at the beginning of the year. Thank you very much.
We’ve got a microphone there.
Reporter: (inaudible)
Joe Hockey, Treasurer of Australia: There are two different issues there. The first is in relation to the use of fiscal policy. There was general recognition that there is not a lot of room in fiscal policy in a number of jurisdictions. However, there was an acceptance that if fiscal policy needs to be used to help to lift short-term growth, then it should be deployed.
In relation to the 2 per cent increase in growth to 2018, the IMF has presented a paper that identifies we are at 1.8 per cent but clearly that would be off a lower base than that which would have been the base in Sydney because there has been a revision to the forecast. Now what we have got to do is focus on how we can deliver.
The job is not done. The job is not done. But by God we have made great strides here in Cairns and in Australia. And that is very encouraging.
Reporter: Thank you. David Crowe from The Australian. Yesterday in this room, Tim Costello from the C20 was relatively critical of the G20, gave it five out of 10 for its results in recent years. The question really is about action, not promises. When do you expect the first growth reforms to actually start taking effect as a result of these ambitions, and what commitments are being made about any monitoring of the ambitions set out?
Joe Hockey, Treasurer of Australia: Well, as I said in my statement, the IMF offered in the room, together with the OECD, to help countries monitor and implement the policies that go to the 2 per cent target. In the case of Australia, for example, our infrastructure package is going to deliver a 1 per cent increase in the size of GDP. So that is one domestic example.
But internationally, a number of countries identified various reforms and made a commitment to further reforms. And the most encouraging thing was a lot of structural reform was actually coming out of countries like China and India and Japan, countries in our region that are absolutely committed to the structural reforms that are going to be necessary to grow the global economy.
So between now and Brisbane, our officials are going to work with the IMF and the OECD on an implementation and monitoring plan, and obviously, having a goal like this is important, obviously delivering nearly 1,000 policies is a step along the way, but it comes down to delivery. That is where the rubber hits the road for more jobs and greater economic growth, and everyone is committed to that.
No other questions? I think our international visitors are probably waiting for their own ministers.
Reporter: Treasurer, a domestic question. Matt Moran from Channel 10. Are you going split legislation to get some budget measures through which will then leave you with a $9 billion black hole?
Joe Hockey, Treasurer of Australia: No, don’t believe everything you read. Yes, sir?
Reporter: That’s all, Treasurer?
Joe Hockey, Treasurer of Australia: That’s all. I’ve seen lots of speculation about what we are going to do, including from participants that were saying one thing to the media one day and on the very same day did something absolutely the opposite of that.
Reporter: Ben Potter from the Australian Financial Review, Treasurer. Yesterday when Mr Gurría was asked about the patent box idea and the OECD’s attitude towards it and he denounced it unequivocally, and I heard you murmur assent. And I’m wondering if that reflects your attitude to the patent box idea, because some of the technology community in Australia has been arguing that it would be a good idea to encourage R&D in Australia.
Joe Hockey, Treasurer of Australia: Well, out of the discussion today, there is an argument there are good patent boxes and there are bad patent boxes. I think that’s still to be resolved in some of the work that the OECD is going to undertake.
A number of countries have patent boxes. Other countries believe that a patent box under circumstances, certain circumstances, could be a tool that is used to gather revenue and profits in the form of lower taxes that might be accrued in another jurisdiction.
Now, they are the things that need to be worked through by the OECD. But as a number of Ministers identified, it’s not just about the integrity of the tax system, it’s also about we shouldn’t be in the business of tearing apart the collective tax base for individual advantage.
My attitude? Well, it depends on how they;re structured and they have got one name but many different definitions and objectives.
Yes?
Reporter: Shane Wright from The West Australian.
Treasurer, the communique mentions or includes Ebola for the first time. Was there a discussion about what the potential human and economic risks are posed by the outbreak? And does that also go to the point that, despite all the best laid plans of mice and men, there are events that could derail what’s going to come from what you have outlined?
Joe Hockey, Treasurer of Australia: Of course there are events that could derail our ambitions but we need to be ambitious, we need to give people hope that tomorrow and the years beyond are going to be better than today. We have to. And as global Finance Ministers, it is easy to be caught in the slipstream of negativity, to be caught in the slipstream of looking at a glass as being half empty.
The views vary but the bottom line is we can’t be pessimistic about the future. And we want to do everything we can to create an environment where there is greater optimism.
In relation to Ebola, yes, there was a discussion about Ebola and the president of the World Bank made a significant contribution in that matter. This is a global challenge. And Australia has just stepped up again to the plate with additional funding support for measures that will help to address the spread of the virus.
There was a discussion about a number of other geopolitical risks as well, but having said that we believe that the fundamentals of the world economy are good and we are trying to use the levers that we have to make them better.
Okay. Nothing else? One more.
Reporter: (inaudible)
Joe Hockey, Treasurer of Australia: Yes, that’s right.
Reporter: (inaudible)
Joe Hockey, Treasurer of Australia: No, we are one year after.
Reporter: (inaudible)
Joe Hockey, Treasurer of Australia: Sorry? No, no, no. The fact is, well, Ángel Gurría has a broad definition of early adopters, he covers the first two years. But the fact is we were always going to be in the second year with some others, primarily because even though our major Australian banks are ready, smaller institutions like credit unions and others are not ready. And if we were to bring it forward to the first year rather than the second year, it would cost those institutions about $200 million just to come 12 months earlier.
So it is better that the whole nation go at once and we are going all at once because that is still a cost to business of about $50 million, and primarily to the smaller financial institutions. But certainly we are in the group of early adopters, there is no argument about that. As you will see from the list that is distributed, a number of very large countries are not in the first two years at all.
Reporter: Just a quick question, Treasurer. Are you happy with your budget negotiations? Have you done any deals with Labor? Are you happy with where it’s at?
Joe Hockey, Treasurer of Australia: I’m not going to speculate. Thank you very much.
–
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