G20 countries endorse plan to stop international corporate tax evasion

G20 ministers on Friday unanimously agreed to support a plan that tries to stop multinational companies from avoiding taxes by shifting profits to destinations with lower corporate tax requirements.

In a conference during the annual meetings of the World Bank Group and the International Monetary Fund in Lima, Peru, finance ministers from the Group of 20 approved the Base Erosion and Profit Shifting plan (BEPS).

The plan will see the 20 economies close numerous loopholes within international and national taxation systems, which allow international companies, such as Google and Starbucks, to avoid paying 100 billion to 240 billion U.S. dollars in taxes a year.

The plan applies to companies with revenues of at least 750 million euros (851 million dollars) and seeks to force them to pay taxes in each country where business activities generate taxes.

Companies will also no longer be able to declare no-tax status in more than one jurisdiction and will be required to make a full report of their business activities to tax authorities in each country where they have operations. This will not impact tax breaks offered by countries to attract foreign investment, as BEPS only targets evasion of owed taxes.

While the plan is not legally binding, the Organization for Economic Cooperation and Development (OECD), which was instrumental in putting it together, states in its briefing that "there is an expectation that they will be implemented accordingly by countries that are part of the consensus."

"Minimum standards were agreed in particular to tackle issues in cases where no action by some countries would have created negative spill-overs (including adverse impacts of competitiveness) on other countries," said the OECD.

Furthermore, while signatory countries will change their tax policies in accordance with BEPS, steps have been taken to avoid issues such as double taxation.

Speaking at the announcement of the plan, OECD Secretary-General Angel Gurria stated that "base erosion and profit shifting is sapping our economies of the resources needed to jump-start growth, tackle the effects of the global economic crisis and create better opportunities for all."

Turkish Deputy Prime Minister Ceydet Vilmaz said the plan addressed "profit-shifting across borders, corporations' use of no-tax status in multiple countries and the digital economy." Endi