THE G7 group of industrialised nations has agreed that there must be collective action against tax evasion and avoidance, George Osborne has said.
Speaking after the talks in Aylesbury, Buckinghamshire, between the United States, Germany, the UK, Japan, Italy, France and Canada, the Chancellor said it was “incredibly important” that firms and individuals paid the tax they owed.
Earlier this year countries including Britain and Germany asked the Organisation for Economic Co-operation and Development – which advises wealthy nations on tax policy – to consider ways of tackling the problem of multinational companies using transfer pricing rules to shift profits into tax havens.
The UK is currently signed up to a pilot scheme where tax authorities share information with each other.
Britain is keen to see all EU countries join the scheme, including low-tax countries such as Luxembourg and Austria. Luxembourg has said it will join but Austria has yet to confirm whether it will take part.
Osborne said British territories, including the tax havens Jersey and the Cayman Islands, also need to play more of a part in trying to put a stop to tax evasion.
He said he had already been “very tough” in his message to them but wanted to see more action. “Of course we would like these jurisdictions to do more,” he said.
“We want them to commit to some of the existing agreements that are in place on tax information and transparency, and we have these initiatives which we are pursuing, for example around beneficial ownership, which we would also expect all jurisdictions to be able to sign up to.
“Of course, you have to respect that many of these territories have important industries and we don’t want to unnecessarily damage them.
“But it is necessary to collect tax that is owed and it is necessary to reduce tax avoidance and the crown dependencies and the overseas territories need to play their part in that drive and they need to do more.”
Addressing journalists beside Bank of England governor Sir Mervyn King, Osborne said the G7 countries agreed it was important to ensure that no bank was “too big to fail”.
He added: “We must put regimes in place... to deal with failing banks and to protect taxpayers and to do so in a globally consistent manner. He said the discussions had “reaffirmed that there are still many challenges to securing sustainable global recovery, and we can’t take it for granted”.
But he added: “We are committed as the advanced economies in playing our part in nurturing that recovery and ensuring a lasting recovery so that we have prosperity in all our countries.”
Sir Mervyn said the meeting had been “the most productive” of the 25 he had attended during his term at the helm.
Joking about his impending departure, he said: “In a week in which retirement came to Sir Alex Ferguson, it is pretty clear it has to come to everyone. I am looking forward to a new life.”
Also at the talks was Christine Lagarde, the managing director of the International Monetary Fund (IMF) as the body undertakes its annual health check of the UK.
The IMF, which will deliver its verdict later this month, has already suggested Osborne must be more flexible with his deficit-reduction plans.
Shadow Treasury minister Catherine McKinnell said: “It’s disappointing that this G7 meeting has failed to set out any concrete steps to promote economic growth or tackle tax avoidance.
“George Osborne should reflect on why Britain is experiencing the slowest economic recovery of any G7 country other than Italy.”