Simple but ineffective? G8 tax deal skips the details

G8 countries have agreed to seek "increased transparency" from tax-dodging multinational firms, in a stripped-back 'declaration' signed by leaders at Lough Erne.

The minimalistic ten-point document provides a shopping list of moves to improve the status quo, begun with a call on tax authorities to "automatically share information to fight the scourge of tax evasion".

"We've commissioned a new international mechanism that will identify where multinational companies are earning their profits and paying their taxes so we can track and expose those who aren't paying their fair share," David Cameron said in his post-summit press conference on the shores of Lough Erne.

"It may not be the catchiest name in the world but this international tax tool is going to be a real feature of making sure we get… proper tax justice in our world."

Downing Street has talked up the benefits of shorter end-of-summit documents for months, but campaigners were surprised – and some disappointed – by the brevity of the final declaration emerging from Northern Ireland today.

"Private enterprise drives growth, reduces poverty, and creates jobs and prosperity for people around the world," the declaration's preamble notes.

"Governments have a special responsibility to make proper rules and promote good governance. Fair taxes, increased transparency and open trade are vital drivers of this."

The document calls on countries to change rules allowing companies to "shift their profits  across borders to avoid taxes" and demands that companies report to tax authorities what tax they pay where.

It acknowledges that developed countries need help on tax issues from "other countries", calls on 'extractive companies' to report their payments to all governments and demands legitimate sourcing of minerals and transparent land transactions.

The European Commission's president Jose Manuel Barroso accepted there had been disagreement on the details, with US and Canada especially concerned.

He said it remained to be seen how the proposals would be "translated" into actual legislation.

"We have different situations among the eight members of this group and also in the European Union, but I really believe the final declaration translates a broad consensus on that," he said afterwards.

Campaigners expressed concern the document phrased its commitments using "should" rather than "will".

And the lack of deadlines also triggered concern. War On Want's Murray Worth said "the devil will be in the detail, and there is no detail here".

Tax campaigner Richard Murphy said the G8 declaration was "all vague commitment and almost nothing of any consequence".

And Sally Copley, spokesperson for the Enough Food For Everyone IF campaign, said the declaration left "major unfinished business".

"Although the G8 has set out the right ambition on information exchange, poor countries battling hunger can’t afford to wait to be included," she said.

"It’s progress that more tax authorities will know who owns phantom firms so they can crackdown on them, but a summit focussed on transparency can’t justify keeping this information secret.

"The public argument for a crackdown on tax dodging has been won, but the political battle remains. Future G8s and G20s must urgently finish the job."

The UK government has published a ten-point action plan of steps "to prevent misuse of companies and legal arrangements" in Britain.

Its proposals prompted instant criticism from campaigners, however, who claimed the plan showed limited technical knowledge and underlined the fact previous attempts to improve the system have not succeeded.

"What we are using this summit to do is to provide new rules and update the existing rules so that they are fit for the 21st century," chancellor George Osborne, who presented the UK's proposals at this morning's meeting on the issue, told the Today programme.

"I think we've probably made more progress in the last 24 hours than people have made in at least 24 years."

The agreement covers the broad principle that more action needs to be taken in updating rules designed in the 1920s by the League of Nations.

It follows a report from the Organisation for Economic Cooperation and Development on the issue, prepared at the request of the G8, which develops proposals for the automatic exchange of information for tax purposes as the expected new standard.

The OECD report examines how greater tax transparency would work in practice. It calls for a shopping list of detailed reforms, including choosing the legal basis for the exchange of information, developing common or compatible IT standards and defining exactly what reporting and due diligence requirements are needed by multinational firms.

"I congratulate the G8 for putting its full force behind international efforts to bolster sustainable growth through global solutions to tax evasion and avoidance," the OECD's secretary-general Angel Gurria said.

"Tax systems must be fair and be seen to be fair. The OECD is helping countries work together to put an end to offshore tax evasion by delivering a secure and cost effective system of a single global standard for automatic exchange of information."

Work is already underway. The G20 finance ministers' meeting in April this year saw an endorsement of information exchanges on tax issues and the OECD is studying the best ways of countering multinational firms' base erosion and profit shifting techniques.

Today's summit on tax was the culmination of months of campaigning by activists on an issue which has angered voters across the western world.

Archbishop of York Dr John Sentamu went so far as to suggest multinational firms which avoid paying their taxes were "robbing God" in a service on the eve of the summit.

"They're dodging millions of pounds every day," the Church Times quoted him as saying in a service held at St Martin's Cathedral in Enniskillen.

"Indirectly robbing the poor of education, health, food, employment and sustainable development… They are not only robbing people but God himself, who calls us all to love mercy, do justice and walk humbly before him."