The G-8 Clamps Down on Tax Evasion, but Critics Say Plan Falls Short

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IAN LANGSDON / EPA

World leaders pose for a photo at the G-8 summit in Lough Erne, Northern Ireland, on June 18, 2013

Leaders of the G-8 nations have agreed on a series of measures designed to clamp down on tax evasion and tax avoidance. A communiqué released from the summit of eight of the world’s largest economies sets out 10 points aimed at promoting “fair taxes” and “increased transparency,” including that shell companies (companies that serve as a vehicle for business transactions without having any significant assets or operations themselves, and are often used to exploit tax loopholes and invest money anonymously) should identify their effective owners.

Following recent revelations that some multinational companies like Amazon, Starbucks and Google have reduced their tax bills by using tax loopholes and tax havens, British Prime Minister Cameron had given action on tax havens and transparency about company ownership center stage at the two-day meeting, held in Northern Ireland, of leaders from the U.K., U.S., France, Germany, Italy, Canada, Japan and Russia. Earlier on Tuesday, George Osborne, Britain’s Chancellor of the Exchequer, told BBC Radio 4 that the G-8 summit had done more to end tax secrecy and corporate-tax evasion in the past 24 hours than had been achieved in the past 24 years, and said he thought “real concrete progress” would be made.

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But for campaigners, the G-8’s agreement proved disappointing. “The agreement on tax is full of ‘coulds,’ and there’s not a single ‘shall,’” Richard Murphy, an economist and director of Tax Research UK, tells TIME. “So there are no positive commitments to do anything. That’s incredibly weak.”

Murphy acknowledged that it had been a successful G-8 summit in terms of putting these issues on the agenda and saying very clearly they have to be addressed. “But the world leaders have failed to step up to what is demanded of them and deliver the reforms that will actually beat both tax avoidance and tax evasion,” he said. “And that’s the problem.”

He thinks the agreement should guarantee that there will be a multilateral information exchange, whereby worldwide tax authorities automatically share information. But it does not, only stating that they “should” implement such a measure. “It does not commit anyone to having a public registry of beneficial ownership, which is what we hoped we were going to get,” said Murphy.

The declaration also says that developing countries “should have the information and capacity to collect the taxes owed them” — but that’s no guarantee that they will have automatic access to the information. Emma Seery, Oxfam’s head of development finance and public services, earlier told TIME that developing countries lose $160 billion every year through companies playing around with tax rules to shift around where they are officially making their profits. And in a statement after details of the G-8’s agreement were released, Oxfam Ireland’s executive director Jim Clarken said that although the G-8 had asked all the right questions, it was severely lacking in answers. “The G-8 has woken up and smelled the coffee but has failed to agree a tax deal that helps the poorest countries. Until this happens lives are on the line,” he wrote. “This year has been a warning to tax dodgers that their days of ripping off rich and poor countries alike are numbered. But tax dodging is a dark stain that needs more than a quick wash, and the G-8 must agree a plan to get the global tax system whiter than white this year.”

— With reporting by Qhelile Nyathi / London

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