G-20 moves to plug loopholes

LIMA - Major advanced and emerging nations on Thursday evening agreed on a set of new rules aimed at curbing tax avoidance by multinational corporations.

The Group of 20, as well as the broader Organisation for Economic Cooperation and Development, have long sought to make it harder for big corporations to minimise their tax bills. G-20 finance ministers and central bank governors, meeting in the Peruvian capital of Lima, signed off on the new international framework. The OECD had released the final draft to the public on Monday.

The next step is for G-20 and OECD members - 44 countries in total - to establish domestic regulations in line with that framework.

Many businesses go out of their way to save on taxes, including by exploiting gaps in tax rates between countries. US coffee chain Starbucks, for example, has paid minimal taxes in the UK since it set up shop there in 1998. It reduced its profits in the country by purchasing beans from an affiliate in Switzerland, where taxes are lower.

Google and Apple have also taken flak for their tax strategies.

The new rules are meant to narrow loopholes by enhancing individual countries' authority on taxation. Profits of a subsidiary incorporated in a tax haven will be added to those of the parent company, which will then pay taxes on the total.

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