Britain will lead international efforts to bring global tax rules ‘into the 21st century’, George Osborne will announce today.
The Chancellor will tell a meeting of G20 finance ministers in Moscow that the UK wants ‘fundamental reform’ of rules that allow companies to move profits into low tax jurisdictions.
Britain will take the lead on tackling these so-called ‘transfer pricing’ laws, he will say.
Osborne said: ‘We need strong international standards to make sure that global companies, like anyone else, pay the taxes they owe.’
At the same meeting in Russia, the Organisation for Economic Co-operation and Development will present a hard-hitting report which said the current system is ‘not fit for purpose’ and has ‘not kept pace’ with the changing nature of the business world.
Failing to reform the 1920s-era rules could lead to a total breakdown of the tax system, it warned.
Osborne said: ‘The global economy has changed massively over the last decade, but global tax rules have stood still for almost a century, and Britain will lead the international effort to bring them into the 21st century.’
It came as a poll of big companies from KPMG showed Britain jumping ahead of lower-tax rivals including Switzerland, Ireland and Luxembourg as the favourite destination for big global businesses. The poll found 63 per cent of respondents warned the debate over corporate tax avoidance was damaging the UK’s competitiveness.
Ahead of the meeting, G20 officials clashed over the so-called currency wars amid concern that Japan is deliberately weakening the yen to give its exporters an unfair advantage.
It is feared that skirmishes in the foreign exchange markets could lead to a disastrous new wave of protectionist trade policies like those that exacerbated the Great Depression.
The G7 – the US, Britain, France, Germany, Japan, Canada and Italy – this week sought to play down fears of an all-out currency war. But the show of unity was swiftly undermined by off-the-record briefings against Japan as new prime minister Shinzo Abe battles to end two decades of inflation.
Mario Draghi, president of the European Central Bank, said the recent sparring over currencies was ‘inappropriate, fruitless and self-defeating’. International Monetary Fund chief Christine Lagarde added: ‘The current talk of currency wars is overblown.’
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