Pay up

British Prime Minister David Cameron,
British Prime Minister David Cameron,

LONDON — UK Prime Minister David Cameron has said that countries must work together to clamp down on tax avoidance.

“Individuals and businesses must pay their fair share,” he told leaders at the World Economic Forum in Davos.

He said that “trade, tax and transparency” were the UK’s economic priorities.

It comes a day after he called for negotiations on the UK’s place in the European Union, followed by a referendum.

Those that avoid tax “need to wake up and smell the coffee” – an apparent reference to US coffee giant Starbucks, which was widely castigated for paying little tax in the UK but then pledged to pay millions of pounds in corporation tax after a backlash.

Referendum coming

The prime minister also defended his choice to offer a referendum on the EU after 2015, if the Conservatives win the next election, and said that the 27-member bloc needed to change.

Cameron said that cutting down on tax avoidance was one of the UK’s main priorities for its presidency of the G8 group of richest nations this year.

“There are some forms of tax avoidance that have become so aggressive” that it is time for international co-operation to make sure that global companies pay their fair share of tax, he said.

“This is a problem for all countries, not just for Britain,” he said.

“Acting alone has its limits. Clamp down in one country and the travelling caravan of lawyers, accountants and financial gurus just moves on elsewhere. So we need to act together at the G8.”

Multinationals such as Amazon and Google have also come under fire for paying little UK tax.

Tax avoidance legal

Tax evasion is illegal, whereas tax avoidance is legal but has been put under the microscope by politicians and campaigners in recent months.

Much of the debate about what is fair to pay is over “transfer pricing”, which involves payments from companies to each other within the same corporate structure. For example, a French subsidiary offering services to a Luxembourg unit.

What often happens is that the taxable profit is shifted somewhere else – where taxes are usually much lower.

In the UK, the government announced in last year’s Autumn Statement that it was giving HM Revenue & Customs more funds to tackle tax avoidance and evasion, with the aim to get an additional 9 billion in tax revenues per year. (BBC)

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