OECD unveils plan to fix tax holes

US retailer Amazon is accused of saving billions of pounds from taxews on sales to UK customers, merely by using tax structures that allowed it to bill sales through Luxembourg, paying peanuts in tax to the UK government.

Such loopholes may become things of the past, thanks to a programme of reforms supported by G20 nations which aims to plug the holes.

The "once-in-a-century" move to plug holes in international tax rules was announced in Moscow by George Osborne and fellow finance ministers from France and Germany. All three had been most insistent and vocal in demanding reforms.

According to France's Pierre Moscovici the 15-point action plan, which had been produced by the Organisation for Economic Co-operation and Development (OECD) club of industrialised nations, was a "major breakthrough" and was "at the heart of the social contract".

"It is clear multinational companies have developed an unprecedented know-how for minimising their worldwide tax pressure," he said. "These situations are literally impossible to explain to our fellow citizens."

Osborne agreed: "People and companies have to pay the taxes that are due, it's the only way to operate in a fair and competitive society … Our message is clear: everyone must pay their fair share of tax."

Existing tax rules needed to be updated as they could be "abused" by multinational companies, according to the OECD.

The OECD has drawn up a plan at the request of the G20 group of leading nations to address the taxation issue.

According to OECD secretary-general Angel Gurria international tax rules, many of them dating from the 1920s, ensured that businesses did not pay taxes in two countries - double taxation.

According to commentators, the OECD had to come up with the detailed proposals and then governments would have to choose to implement them.

They say while some countries would probably will be co-operative others may not and the OECD had no power to compel countries not in favour.

According to the OECD, tax income needed to reflect the economic activity it generated.

Starbucks had been questioned for the transfer of money to a Dutch sister company in royalty payments, while Apple's chief executive Tim Cook was questioned by US lawmakers about the billions of dollars his company kept in its Irish divisions.

The companies pointed out that the schemes were legal and they had a duty to their shareholders to minimise their tax bills.

According to British prime minister David Cameron who welcomed the report, taxpayers, governments and businesses all suffered when some companies manipulated the tax system to avoid paying their fair share of taxes.