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G-8 likely to unite against corporate tax evaders

JIJI

The leaders of the Group of Eight major industrialized nations are expected to unite on tackling tax avoidance by multinational firms when their summit kicks off in Northern Ireland on Monday, sources said.

At the two-day event at the lakeside resort of Lough Erne, the G-8 leaders are expected to agree to draft new rules through the Organization for Economic Cooperation and Development to rein in tax avoidance, although the process will take around two or three years to complete, the sources said.

Prime Minister Shinzo Abe meanwhile will seek help from the other G-8 members in resolving the abductions of Japanese nationals by North Korean agents decades ago and in countering the communist country’s nuclear and missile programs, the sources said.

The G-8 members are anxious to move on the taxation issue amid mounting international criticism of such companies as Apple Inc., Amazon.com Inc. and Starbucks Corp. regarding their alleged tax avoidance schemes at a time when many countries in Europe and elsewhere are being challenged by severe fiscal conditions, Japan among them.

A popular method employed by multinational businesses to reduce tax liability is to set up subsidiaries in countries with low corporate tax rates and shift intellectual property, including patents and trademarks, to these units.

Even if the parent company sells intellectual properties to such subsidiaries at bargain-basement prices to reduce taxation on the proceeds, it is hard to determine whether the transactions are fraudulent because of difficulties in assessing the value of such property.

To close this loophole, the G-8 leaders are also likely to concur on the need to enhance the sharing of information on global firms’ assets among their national tax authorities, the sources said.

“If foreign firms engaged in tax avoidance pay more taxes, the competitiveness of Japanese firms that have honestly paid taxes will increase,” a senior Finance Ministry official said in Tokyo.

Still, it won’t be easy to map out effective global measures to crack down on the practice, given that taxation systems vary substantially from country to country and that such scams are intricately designed.

Meanwhile, the chiefs of the G-8, which comprises Britain, Canada, France, Germany, Italy, Japan, Russia and the United States, are expected to welcome recent moves toward trade liberalization, including negotiations on the Trans-Pacific Partnership agreement, while agreeing to aim for progress in the Doha trade negotiations under the World Trade Organization, the sources said.

Also high on the agenda will be the civil war in Syria and Iran’s nuclear program. The leaders will wrap up the summit with a joint statement Tuesday.