Davos 2013: David Cameron calls for action on tax avoidance

UK Prime Minister David Cameron has said that countries must work together to clamp down on tax avoidance.

"Individuals and businesses must pay their fair share," he told leaders at the World Economic Forum in Davos.

He said that "trade, tax and transparency" were the UK's economic priorities.

It comes a day after he called for negotiations on the UK's place in the European Union, followed by a referendum.

Those that avoid tax "need to wake up and smell the coffee" - an apparent reference to US coffee giant Starbucks, which was widely castigated for paying little tax in the UK but then pledged to pay millions of pounds in corporation tax after a backlash.

However, several heads of major UK businesses have expressed concerns at the idea, which is thought to have the prime minister's backing, that they should be required to provide much greater details of how much tax they pay in each country.

Conservative MP Stephen McPartland wrote to the chief executives of all of the companies in the FTSE 100 index in November, asking their views.

Of the 52 responses he received - which have been published by the Daily Telegraph - 32 opposed the introduction of any new regular tax disclosure requirement.

Europe debate

The prime minister also defended his choice to offer a referendum on EU membership after 2015, if the Conservatives win the next election, and said that the 27-member bloc needed to change.

"Europe is being out-competed, out-invested and out-innovated," Mr Cameron said.

And Irish Prime Minister Enda Kenny - speaking in Davos in another session after Mr Cameron - said that with "Britain a driving force for the European market, Europe would be stronger", adding that he would like the UK to stay in the bloc.

On the issue of renegotiating terms with the rest of Europe, the prime minister said: "This is not about turning our backs on Europe - quite the opposite. It's about how we make the case for a more competitive, open and flexible Europe - and secure the UK's place within it.

"When you have a single currency you move inexorably towards a banking union and forms of fiscal union and that has huge implications for countries like the UK who are not in the euro and never will be."

Mr Cameron is also meeting German Chancellor Angela Merkel in Davos. Mrs Merkel said that Germany would be prepared to discuss new terms with the UK within a framework of "compromise".

'Travelling caravan'

Mr Cameron said that cutting down on tax avoidance was one of the UK's main priorities for its presidency of the G8 group of richest nations this year.

"There are some forms of tax avoidance that have become so aggressive" that it is time for international co-operation to make sure that global companies pay their fair share of tax, he said.

"This is a problem for all countries, not just for Britain," he said.

"Acting alone has its limits. Clamp down in one country and the travelling caravan of lawyers, accountants and financial gurus just moves on elsewhere. So we need to act together at the G8."

Multinationals such as Amazon and Google have also come under fire for paying little UK tax.

Tax evasion is illegal, whereas tax avoidance is legal but has been put under the microscope by politicians and campaigners in recent months.

Much of the debate about what is fair to pay is over "transfer pricing", which involves payments from companies to each other within the same corporate structure. For example, a French subsidiary offering services to a Luxembourg unit.

What often happens is that the taxable profit is shifted somewhere else - where taxes are usually much lower.

In the UK, the government announced in last year's Autumn Statement that it was giving HM Revenue & Customs more funds to tackle tax avoidance and evasion, with the aim to get an additional £9bn in tax revenues per year.

And last month, the European Commission announced a series of proposals designed to tackle the "scandalous loss of much-needed revenue" by EU members because of tax evasion and tax avoidance.

Mr Cameron also said he planned to push hard to tackle "trade bureaucracy" at a World Trade Organization conference in Bali later this year, saying this would be worth an extra £70bn to world trade.

The UK heads the G8 for the whole of 2013.